UK Budget Balancing Act Has to Be Credible to Markets
The government knows it can’t risk a repeat of the recent meltdown in gilts.
Prime Minister Rishi Sunak (centre) and Chancellor of the Exchequer Jeremy Hunt (center right).
Photographer: Stefan Rousseau/AFP via Getty Images
UK Chancellor of the Exchequer Jeremy Hunt has the unenviable task in Thursday’s Autumn statement of balancing the nation's books without plunging it into recession. The reaction of the bond market will tell us whether he got the equilibrium right.
The size of Britain’s fiscal hole, purportedly as deep as £50 billion ($59 billion), will be revealed with the concomitant release of the Office for Budgetary Responsibility's financial estimates. Satisfying the watchdog's basic requirement to balance government spending with income over a prescribed time period, so that the ratio of debt-to-gross domestic product doesn’t rise, is Hunt's primary aim. The OBR's verdict will make or break this latest iteration of a Conservative government, as riding roughshod over economic competency was what condemned the previous Truss administration. But there is another public body Hunt has to coordinate closely with to restore stability and prosperity: The Bank of England.