Good morning and welcome back to the City AM liveblog.
It was quite the Budget week to end November and for many more questions were created than answered.
Whilst Labour might’ve hoped it would be be their rallying moment – with the lifting of the two-child benefit cap and doubling of the Chancellor’s fiscal buffer – theatrics clouded the Budget as a bubbling spat between the Treasury and fiscal watchdog boiled over.
The chair of the Office for Budget Responsibility published his letter to the Treasury Committee on Friday, revealing there was no ‘black hole’ in public finances and Rachel Reeves had in fact just over £4bn in headroom at the end of October.
This has created a batch of fresh questions and a brand new headache for Chancellor with increasingly loud calls for her to resign.
Here’s a timeline of the events so far:
- October 31: OBR’s last pre-measures forecasts reveal higher tax revenues have covered a £20bn productivity downgrade and the Treasury has a surplus of £4bn.
- November 4: Reeves gives a Budget ‘scene setter’ speech at Downing Street, warning of ‘consequences’ due to the state of public finances.
- November 10: The Chancellor doubles down and teases an income tax hike, warning the only way to avoid a manifesto break would be “deep cuts” to capital spending.
- November 14: The Financial Times reports plans for an income tax increase have been dropped sending panic across markets. Gilt yields rise dramatically over fears Reeves won’t be able to balance books. Following this, more journalists are briefed that the OBR’s forecasts were ‘better than expected’ leading to the government scrapping income tax plans.
- November 26: Reeves raises taxes to the tune of £26bn in the Budget, largely to fuel additional spending and the raising of the two-child benefit cap.
- November 28: A letter from the OBR chair is released showing there was no ‘black hole’ in public finances.
- Where are we now? – The Chancellor is facing calls to resign over “misleading” the British public. Shadow Chancellor Mel Stride has written to the Financial Conduct Authority calling for a full investigation into the rogue briefings.
We’ll be bringing you the latest on this – and all the market reaction – as it unfolds.
