Kwasi Kwarteng is paving the way for the postponement of his first full budget until next year amid growing fears he will avoid scrutiny of a sweeping tax cut package that could breach existing government fiscal rules.
The Chancellor will reveal his plans for £30billion tax cuts on Friday and more details of the energy price cap announced by Liz Truss as part of a ‘mini budget’. It is likely to frame political debate for some time. However, it is preparing to revise existing budget rules in the coming months to ensure the program can meet them.
The tax cuts are expected to breach an existing rule that debt should decline as a share of GDP by 2024/25. Proposals to reverse an increase in National Insurance are expected to cost £13billion a year, while reversing a rise in corporation tax is expected to cost £17billion a year.
There are already concerns about a lack of transparency in Friday’s announcement. The Observer understands that the Treasury select committee will demand clarification on the financing of the package and the impact on existing fiscal rules, as well as concerns that there is no independent cost estimate. Kwarteng did not commission the Office of Budget Responsibility (OBR) to produce an independent analysis alongside his announcement.
It has now emerged that Kwarteng could wait until spring to hold its first full budget, meaning it could be months before the OBR is able to publish its assessment of its plans. Kwarteng is expected to announce new fiscal rules at that time. “The chancellor has been clear that the government is committed to reducing our debt-to-GDP ratio over the medium term,” a source said. “However, as you would expect, given the severity of the economic shocks we are facing and the implementation of the energy price guarantee, we will assess whether the current fiscal rules are working for the economy. “
Economists from the Institute for Government, the Resolution Foundation and the Institute for Fiscal Studies (IFS) all wondered how the package could meet current fiscal rules. Paul Johnson, the director of the IFS, said: “If we get permanent tax cuts on top of the slowing economy, it’s hard to see how they play by the rules.”
Tory peer David Willetts has also urged ministers to consider paying for the energy price cap, estimated at between £100bn and £140bn, by raising property taxes. “Even if the government just says we’re going to borrow money, that means we have to pay later,” he said. “Given the government is so focused on growth and mobility, raising income taxes is less good than looking at how property – which is less heavily taxed – also makes a contribution.”
It also comes with another row over the NHS, with suggestions that Health Secretary Therese Coffey could abolish or change the four-hour target for patients to be seen at A&E. Sources close to Coffey said the measure would not be removed.
Patricia Marquis, director of the Royal College of Nursing for England, said: “But ministers must be careful with their words and reassure both nurses and the public that their first priority is to reduce waiting times. .”
Vishal Sharma, chairman of the BMA’s board of consultants, said removing the lens “must not just be a way to mask those long wait times and A&E congestion, especially since that is associated with poorer patient outcomes.
“The biggest challenge we face in improving patient care is the severe workforce crisis that is crippling the NHS,” he said. “While it is heartening that the new Health Secretary sees this as an important issue to address, it is essential that the Government act urgently to address it and implement the right solutions.
“They must start by reforming the punitive pension tax rules that are driving an exodus of highly qualified senior doctors. The BMA has been calling for this for years, but we have now reached crisis point and immediate action must be taken before it is too late.
Saffron Cordery, acting chief executive at NHS Providers, said: “The NHS has been working for some time on plans for new performance standards which will better map patient progress through emergency and emergency care. . However, trusted leaders are keen to ensure that any new measures are based on clinical review of NHS standards and are meaningful to the public.