Kwarteng bringing forward debt plan could calm markets, says top Tory MP
Kwasi Kwarteng’s decision to bring forward his debt-cutting plan could help to calm markets and mean smaller future interest rate rises than would otherwise have been the case, according to the Tory chair of parliament’s influential Treasury watchdog.
Mel Stride, a Conservative MP and the chair of the Treasury committee, said moving the government’s fiscal statement to October from 23 November, could restore some confidence, depending on the content of the plan and the detail of the new forecasts from the Office of Budget Responsibility.
The pound rose to a two-week high above $1.14 on Tuesday as Kwarteng prepared to announce an earlier date to set out his plans to cut debts. Stride said that if the plans were well received, the Bank of England might opt for a smaller rate rise at its next meeting on 3 November.
The role of the fiscal statement is to “answer a critical question which is do all those proposals add up in terms of meeting some credible fiscal rules”, Stride said.
“If the forecast stacks up, then that will be critical in calming the markets, and the implications of that clearly are things like lower interest rate rises than would otherwise occur, which of course is going to matter to millions of people around the country when it comes to their mortgages,” Stride told BBC Radio 4’s Today programme.
The chancellor is bowing to pressure to bring forward his fiscal plan, after sweeping tax cutting plans in his mini-budget were uncosted, triggering market panic and widespread dismay within the Tory party. It is a second U-turn after he was forced to abandon plans to scrap the 45% top rate of income tax.
The price of UK government bonds also recovered on Monday, as the yield – or interest rate – on 10-year bond dropped
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