Britain’s new finance minister, Kwasi Kwarteng, will deliver an emergency mini-budget on September 23 to give more details about support to help ease the country’s cost-of-living crisis, government sources said on Thursday.
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Prime Minister Liz Truss took office last week after winning the contest to lead the governing Conservative Party with a promise to immediately cut taxes and redouble efforts to promote economic growth.
Hours before Queen Elizabeth’s death last week, Truss outlined a plan to cap consumer energy bills for two years and funnel billions into propping up power companies.
Truss told parliament that Kwarteng would make a formal fiscal statement about the expected cost of her plans before the end of the month.
The period of national mourning following the queen’s death has left ministers with little room to fit it in, making a date at the end of next week the only option.
Investors are keen to hear details about the vast cost of the plans, with estimates ranging between £100 billion and £200 billion ($115-230 billion). But they may be disappointed: the Office for Budget Responsibility will not be publishing detailed forecasts next Friday, one source said.
British government bond prices have fallen sharply over the last month in anticipation of Truss’s tax and spending plans, because they imply a sharp increase in government borrowing and with it issuance of gilts.
Truss said average household energy bills would be held at around 2,500 pounds a year for two years, staving off a major price leap expected next month that threatened the finances of millions of households and businesses.
While that should stop headline inflation surging towards 20 percent in the coming months - as some economists expected in the absence of a freeze in energy bills - the Bank of England may need to keep interest rates higher for longer, given the improvement to the outlook for households’ spending.
Britain’s response to the cost-of-living crisis has differed from its European peers, notably in Truss’s rejection of a windfall tax on energy companies’ profits.
On Wednesday the European Union’s executive outlined plans to raise more than $140 billion from energy firms to help shield households and businesses from spiraling prices.
France will cap power and gas price increases for households at 15 percent next year, Prime Minister Elisabeth Borne said on Wednesday, to ease the pain for consumers of Europe's worst energy crisis in decades.