Delaying the fiscal statement is a wise move

The date of the fiscal statement has changed again. The Treasury has announced that the update – now being billed as an ‘Autumn Statement’ – will be pushed back from 31 October to 17 November, just six days earlier than the original date planned by Kwasi Kwarteng. Chancellor Jeremy Hunt said the delay means it will be based on the 'most accurate possible' economic forecasts.

A hold-up was expected once it became clear that Rishi Sunak was going to emerge as the next Tory leader and Prime Minister. Penny Mordaunt was thought to have told chancellor Jeremy Hunt that his statement would go ahead as normal if she won the leadership race. But it was always assumed that Sunak (not only a former chancellor, but chosen by his fellow MPs to lead because of his credibility with the economy) would want to put his own stamp on whatever was announced.

Those announcements are expected to be big. Hunt has already warned of further tax rises and spending cuts to fill the remaining £30 billion to £40 billion black hole in the public finances post-mini-Budget. Sunak hinted at this in his Downing Street speech yesterday, when he said 'difficult decisions' would be needed to to restore ‘economic stability and confidence’ in the government. Sunak’s selling point is that he will play an active role in what this looks like. 

‘You saw me during Covid,’ he said in Downing Street, ‘doing everything I could, to protect people and businesses, with schemes like furlough. There are always limits, more so now than ever, but I promise you this I will bring that same compassion to the challenges we face today.’

This promise to voters – a ‘compassionate’ approach to those tough decisions – is what he needs to balance with doing enough to restore credibility with the markets. But with the markets already much calmer under Sunak than Truss (ten-year gilt yields have fallen back down to where they were roughly before the mini-Budget), he is almost certainly going to be given the benefit of the doubt to push the statement back by a few weeks.

Market expectations for interest rates are now peaking a percentage point lower than they were projected to under Truss. The cost of government borrowing is also falling rapidly. This should mean the projections for how much government will need to pay to service its debt will lower. Whisper it, but this could potentially reduce what government needs to find to account for the black hole by billions of pounds. No. 10 and the Treasury still need to make difficult decisions, but these won't be as painful as Hunt thought they would be just last week. Both the delay to the statement and changes in market reaction should add up to more thoughtful and sustainable decision-making. No doubt Hunt could have found the cuts by next Monday, but such a short window of time is not conducive to crafting the best fiscal policy. The few weeks Hunt originally gave himself to draw up an entire fiscal statement was out of necessity: the Chancellor needed to send a message that Liz Truss’s government was fiscally competent and give the markets clarity and confidence as quickly as possible. Now that the markets are calmer, the delay of an additional few weeks announced this morning gives him longer to work on – and improve – his plans.

MPs will also be relieved that the statement no longer coincides with Halloween, which guaranteed 'spooky' and 'horrifying' headlines. These are words they've heard too often recently, linking the Tory party's turbulent relationship with the markets. But by rebranding from a ‘fiscal statement’ to an ‘Autumn Statement’, it’s clear No. 10 and the Treasury are  already working together to restore some kind of normality. They are trying to change the narrative around this statement from being an emergency one to a (somewhat) normal update about the state of the public finances. Those updates are unlikely to be pretty, but once again it just slows things down slightly: a change in pace that a lot of the Tory party has been craving.