Hunt's spending plans worse than fiction, budget watchdog suggests
Jeremy Hunt's budget forecasts have been savaged by Richard Hughes, giving evidence before the Treasury Select Committee this month. The chairman of the Office for Budget Responsibility (OBR) has essentially called the government's post 2025 plans, or the conspicuous lack thereof, a flight of fiscal fantasy. In a striking attack on the government Richard Hughes, chairman of the Office for Budget Responsibility, said ministers were not being honest with voters about the probable scale of public sector cuts because they had failed to publish detailed spending plans for the period after April 2025. 'Beyond 2025 we know virtually nothing," Hughes told the Lords economic affairs committee. "It is just two numbers one for total current spending and one for total capital spending. I think some people have referred to that as a work of fiction. I think that's probably generous, given that someone has bothered to write a work of fiction whereas the government hasn't even bothered to write down what its spending plans are." Despite the government's borrowing being lower than the OBR's autumn statement projection, the fiscal future is fraught with challenges, including the need to finance healthcare for an ageing population. Hughes suggests that without a fundamental rethink, the path could lead to unsustainable debt. That budgets are akin to "a work of fiction" is a message rammed home relentlessly by economists. Jeremy Hunt's rule to get debt falling by year five of his forecast, they say, is possible only because spending cuts for public services and spending cuts, few believe are plausible, are penciled in far down the line. It is reminiscent of the magic asterisk by President Reagan's budget director David Stockman. The "magic asterisk" was a method to identify future deficit problems that were to be addressed with additional reductions to be announced at a later date. "Cuts as yet to be identified", the concept. Procrastination and a way for politicians to avoid making difficult decisions, the process. The OBR's Chairman Richard Hughes is waving a red flag, cautioning that the government's fiscal fiction and the use of a magic asterisk, could lead to a non-fictional crisis if not addressed with greater transparency and prudence. Meanwhile ... The Bond Market Vigilantes Are Watching ... Bill Clinton's chief strategist James Carville famously said: "I used to think that if there was reincarnation, I wanted to come back as the President or the Pope. But now I would want to come back as the bond market. You can intimidate everybody." The Conservatives risk reigniting the debt crisis that brought down Liz Truss with reckless tax cuts or spending plans, a top bond investor has warned. Pictet, a Swiss bank that manages almost £600bn of assets, said concerns over British stability have not gone away and the markets will be quick to punish financial recklessness. Cesar Perez Ruiz, the company's chief investment officer, warned Labour not to launch a spending spree if it wins the election. He also cautioned Rishi Sunak against unaffordable tax cuts in his attempt to remain in Number Ten. Pictet said he will avoid buying government debt and sterling amid concerns over the general election later this year. He said he was worried about the run-up to the election, warning that "if Sunak wants to get any chance of reelection, maybe he will overspend ahead of it". Debt Issuance is Huge ... According to the OBR, the level of borrowing is set to exceed £400 billion over the next five years. According to the Debt Management Office, the level of redemption, due to be refinanced, is over £600 billion over the next five years. That's a trillion pound funding task for the Debt Management Office. Fortunately, the Bank of England will be on standby, as the Buyer of Last Resort, should the DMO have trouble at the pump. For Jeremy Hunt the caution prevails ... Beware The Ides of March ... The Bond Market Vigilantes are watching ...
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