Mel Stride, chair of the Commons Treasury Select Committee, has warned chancellor Kwasi Kwarteng that he will need to win cross-party support if he is to get his mini-Budget measures through Parliament.
After outlining his plans on Tuesday ahead of the publication of the fiscal plan on October 31, Kwarteng said he’d “canvass opinion widely”.
The chancellor said: “We will and should canvass opinion widely ahead of the publication of the plan.”
Stride warned that failing to win over MPs on both sides of the Commons could “unsettle the markets” again, following the volatile reaction after the mini-Budget was first announced.
The reaction from the markets and pressure from MPs on both sides has already seen the government U-turn on one mini-Budget policy, abandoning plans to abolish the top band of income tax for the highest earners.
Stride also said that Kwarteng would have to be “brave” if the situation eventually boiled down to him pushing an economic plan that “the markets are just not going to buy” or “rowing back” on some of the tax-cutting measures.
Labour shadow chancellor Rachel Reeves has called on the chancellor to abandon the mini-Budget completely, labelling the ensuing market volatility a “crisis made in Downing Street” brought on by “trickle-down nonsense”.
Meanwhile, the International Monetary Fund has suggested that while the government’s tax-cutting measures could lead to short-term growth, it could also quicken the pace of inflation in the UK more than elsewhere.
On October 31, Kwarteng will also announce the government’s decision on whether it will increase benefits in line with inflation.
While government is under pressure to cut spending in a bid to reduce its deficit, any move to limit the rise in benefits during the current cost-of-living crisis will face stiff opposition on both sides of the Commons. Indeed, several senior Tories have already spoken out against the idea.
Elsewhere, the Bank of England has once again intervened by buying more government bonds in a bid to calm the markets. However, uncertainty remains as to whether the Bank will end its emergency strategy this week or whether help will continue as some pension funds hope.
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