British Prime Minister Liz Truss is facing growing pressure to resign.
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LONDON – Britain’s new government will introduce legislation on Thursday to prevent “significant, no-cost measures” from being announced without analyzing their impact on public finances.
The Labor government, which seized power from the Conservatives earlier this month, said the Budget Responsibility Bill would introduce a “fiscal lock” that would ensure any “significant and permanent tax and spending changes” announced by the government would be independently reviewed. office.
According to a description of the bill published on Wednesday, the OBR will be able to carry out the analysis at a time of its choosing.
The notes were an implicit reference to Britain’s “mini-budget crisis” under former Prime Minister Liz Truss and former Finance Minister Kwasi Quateng.
Shortly after taking office in early September 2022, Truss and Quarten announced a series of tax cuts in an unscheduled fiscal announcement that analysts called a “shocking” move.
Truss said the measures would revive the country’s flagging economic growth, but markets balked at the potential size of the increase in Britain’s deficit and the lack of announced measures to offset lower tax revenues.
this GBP After the measures were introduced, the pound fell to a record low against the dollar, British government bonds sold off severely, and the Bank of England intervened urgently.
Truss and Quarten resigned over the unrest after less than two months in each, and most of the measures were reversed.
The report said the new Labor bill would “enhance market credibility and public trust by preventing large-scale unfunded commitments” and “prevent significant unfunded measures from being announced without adequate scrutiny to mitigate the impact on public finances.”
Finance Minister Rachel Reeves linked the matter to Truss in a statement on Thursday.
Reeves said on social platform Responsibility.
CNBC has reached out to Truss for comment.
Lindsay James, investment strategist at Quilter Investors, told CNBC on the Budget Responsibility Act: “While this may be a useful signal for investors, who at one time thought that gilt yields were what the industry calls ‘Idiot premium’, but checks and balances such as these are not infallible.
James said the definition of a “significant” change was unclear and the OBR’s forecasts had been questioned in the past, such as its forecast for real GDP growth of 1.9% in 2025, higher than economists’ expectations of 1.3%. .
“Yet, despite its flaws, the signal is clear – this government is steadfast in adhering to fiscal guidance, recognizing the fragility of the gilt market. This, in turn, has put constraints on spending and on economic growth. This creates greater pressure to provide much-needed public funding,” she added.
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