Treasury urged to reveal whether it’s preparing an emergency budget

It comes as leadership frontrunner Liz Truss has backtracked over plans to hold an emergency budget, instead holding an “emergency fiscal event” next month. The next likely prime minister has signalled she would not ask a watchdog to give its verdict on her package of tax cuts, worth a reported £30bn plus, which would come within weeks of her taking office. 

In a separate letter to the treasury, committee chairman Mel Stride is seeking assurance from the treasury it’s assisting the OBR on a forecast to be published alongside any significant fiscal event. It believes it should at least include all changes to government policy, and economic and fiscal data up to the date when the new prime minister assumes office. 

The committee also urges the treasury to assist the OBR in incorporating the impacts of any new policies announced after the prime minister has taken office. 

Alongside, the committee has written to the OBR to ask what forecasting would be possible in the time available, including the costing of any measures announced by the prime minister, and any new measures included in an emergency budget. 

Stride said: “OBR forecasts provide transparency and reassurance to the markets on the health of the nation’s finances. 

“As a committee, we expect the treasury to be supporting and enabling the OBR to publish an independent forecast at the time of any significant fiscal event, especially where, unlike other recent fiscal interventions, this might include significant permanent tax cuts. Whether such an event is actually called a budget or not is immaterial. 

“The reassurance of independent forecasting is vital in these economically turbulent times. To bring in significant tax cuts without a forecast would be ill advised. It is effectively ’flying blind’.”

Truss has backtracked on her plans for an emergency budget, preferring to call it a “fiscal event” - removing the need for an updated economic forecast. 

Her plans on forecasts project £30bn of possible extra spending in the economy, which had not accounted for current inflation levels and will be outdated come September. The swerving of OBR analysis was because the forecaster requires ten weeks to conduct its work. 

However, the OBR has said it could turn around forecasts within a few weeks in exceptional circumstances. 

The campaign team for her leadership opponent Rishi Sunak suggested Truss was downgrading the budget because they did not want to be faced with stark warnings she could not afford the tax cuts she’s promised. This includes a plan to reverse the National Insurance rise.