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UK to publish fiscal plan and OBR forecasts on 31 October – business live | Business

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UK to publish fiscal plan and OBR forecasts on 31 October

Just in: Kwasi Kwarteng has brought forward the date of his medium-term fiscal plan, in which he will lay out the government’s debt-cutting plans, to 31 October.

The chancellor announced the change in a letter to parliament’s Treasury Select committee.

The Office for Budget Responsibility’s independent economic forecasts will also be published that day.

The medium-term plan had been scheduled for 23rd November, but Kwarteng has faced growing pressure to present his plan sooner.

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Nobel economics prize awarded to Bernanke, Diamond and Dybvig

Just in: A former top US central banker has won a share of the biggest prize in economics.

U.S.-based economists Ben Bernanke, Douglas Diamond and Philip Dybvig have been awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, for their research on banks and financial crises.

They will share 10 million Swedish kronor (£800,000).

Diamond and Dybvig have been recognised for their work on how banks are vulnerable to rumours about their imminent collapse.

The Royal Swedish Academy of Sciences says:

If a large number of savers simultaneously run to the bank to withdraw their money, the rumour may become a self-fulfilling prophecy – a bank run occurs and the bank collapses. These dangerous dynamics can be prevented through the government providing deposit insurance and acting as a lender of last resort to banks.

Ben Bernanke shares the prize, for his academid work analysing the Great Depression of the 1930s, the worst economic crisis in modern history. That expertise helped Bernanke through the 2008 financial crisis, when he was leading the US Federal Reserve.

The citation explains:

Among other things, he showed how bank runs were a decisive factor in the crisis becoming so deep and prolonged. When the banks collapsed, valuable information about borrowers was lost and could not be recreated quickly.

Society’s ability to channel savings to productive investments was thus severely diminished.

BREAKING NEWS:
The Royal Swedish Academy of Sciences has decided to award the 2022 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Ben S. Bernanke, Douglas W. Diamond and Philip H. Dybvig “for research on banks and financial crises.”#NobelPrize pic.twitter.com/cW0sLFh2sj

— The Nobel Prize (@NobelPrize) October 10, 2022

The pound has recovered some of its earlier losses, after Kwasi Kwarteng brought forward the date of his debt-reduction plan.

Sterling is now almost flat on the day, at $1.107.

There’s not much financial reaction, as the chancellor had been expected to present the medium-term fiscal plan earlier….

…although there was confusion after he told GB News last week it would still be on 23 November.

Kwasi Kwarteng confirms fiscal plan will be announced on 23 November – video

Politics Live: Truss set for benefits climbdown, DWP minister hints

Kwarteng’s decision to bring forward the medium-term fiscal plan by over three weeks follows pressure from MPs, as well as the financial market.

Having forced a u-turn on the abolition of the 45p top rate of tax, some Conservative MPs have also been resisting the idea that benefits might only rise in line with earnings, not rising prices.

Earlier this morning, Victoria Prentis, a Department for Work and Pensions minister, gave a strong hint that Truss is backing down and giving into the demands of Tories from all wings of the party who want benefits to be uprated in line with inflation.

That would mean a larger increase for households in need (as wages are not keeping up with inflation).

In an interview with Sky News, Prentis said:

It’s really important that we make sure that we target the government resources at the most vulnerable.

Andrew Sparrow’s Politics Live blog has all the details:

Kwasi Kwarteng told the Treasury Committee in his letter that:

“Upon my arrival in office, I received preliminary analysis from the OBR, but I have since made significant policy announcements including the Growth Plan.

“It is important that a forecast includes a full and final assessment of the impact of policy measures on the economy and public finances and, as such, it would not be appropriate to publish the initial analysis that the OBR provided.

“The new forecast date on 31 October will allow the OBR to capture data releases, such as the recent Quarterly National Accounts and Blue Book revisions.

“It will allow for a full forecast process to take place to a standard that satisfies the legal requirements of the Charter for Budget Responsibility enacted by Parliament and that also provides an in-depth assessment of the economy and public finances.

“And it will provide time for the Medium-Term Fiscal Plan to be finalised. In the meantime, the Prime Minister and I met with the OBR’s Budget Responsibility Committee on Friday 30 September to discuss the economic and fiscal outlook, and we will continue to work closely together throughout the forecast process and beyond.”

Mel Stride: This could keep interest rate rises lower

Mel Stride MP, chair of the Treasury Committee, has welcomed the decision to bring forward the medium-term fiscal plan to 31 October.

Stride points out that the Bank of England is due to set interest rates three days later – if Kwasi Kwarteng calms the markets, then interest rates may not need to rise as quickly.

BREAKING: Having pressed so hard on this I strongly welcome decision by @KwasiKwarteng to bring forward @OBR_UK forecast MTFP to 31st Oct. If this lands well with markets then MPC meeting on 3rd Nov may result in smaller rise in int rates. Critical to millions of mortgage holders pic.twitter.com/sgn7mB4ovf

— Mel Stride (@MelJStride) October 10, 2022

The market turmoil caused by the unfunded tax cuts in the mini-budget (totalling over £40bn) and the lack of accompanying independent forecasts, heaped pressure on the chancellor to act faster to set out how the government would pay for the plan, and what their long-term impact would be.

UK to publish fiscal plan and OBR forecasts on 31 October

Just in: Kwasi Kwarteng has brought forward the date of his medium-term fiscal plan, in which he will lay out the government’s debt-cutting plans, to 31 October.

The chancellor announced the change in a letter to parliament’s Treasury Select committee.

The Office for Budget Responsibility’s independent economic forecasts will also be published that day.

The medium-term plan had been scheduled for 23rd November, but Kwarteng has faced growing pressure to present his plan sooner.

Investor morale in the euro zone has fallen the third month running, to levels that signal a deep recession.

The Sentix index for the eurozone confidence has tumbled to -38.3 points this month, from -31.8 in September, the weakest since May 2020, early in the pandemic.

Sentix’s expectations index dropped to -41.0 from -37.0, hitting its lowest value since December 2008, during the financial crisis.

Sentix Managing Director Manfred Huebner said:

At the beginning of October, the sentix economic indices signal an unchanged difficult economic situation – in Europe, but also globally. At -38.3 points, the overall Eurozone index sinks to its lowest level since May 2020.

The ongoing uncertainties about the gas and energy situation in winter have not diminished due to the attack on the Nordstream pipelines. In addition to the economic worries, there is now also an increasing probability of an esca-lation of the military conflict in Ukraine. Globally, there is little reason for hope. Only China seems to be stabilis-ing somewhat at present.

With the dollar strengthening, the pound has dropped to its lowest level since the end of September.

Sterling is down 0.5% at $1.103, below its levels before the mini-budget (but still above the record low of $1.035 set two weeks ago).

A graph showing the pound vs the US dollar over the last three months
The pound vs the US dollar over the last three months Photograph: Refinitiv

The Russian rouble has hit a three-month low as fears grow that Moscow could escalate the Ukraine war, following the attack on Kyiv this morning.

The rouble has dropped to 63 roubles to the US dollar for the first time since early July, before a small recovery.

Russian stocks have also dropped, as geopolitical tensions rise, exacerbated by energy giant Gazprom’s shares starting to trade ex-dividend. The dollar-denominated RTS index has tumbled 6%, while the rouble-based MOEX is down 4%.

The UK government bond selloff is gathering pace, with the 30-year gilt now over 4.5% – up 16 basis points (0.16 percentage points) today.





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