29th September 2022
Columbia Threadneedle: Is Sterling doomed?
Kwasi Kwarteng’s ‘budget in all but name’ has not been received warmly in financial markets. The energy price cap scheme likely means we’ve avoided a near term recession but the cost in terms of extra government borrowing is huge, with the Chancellor doubling down with tax cuts that raised borrowing even further. Just how far is anybody’s guess as he prevented the Office for Budget Responsibility (OBR) from working out the numbers properly. My guess is that the OBR would have forecast even bigger budget deficits. For example, the direct cost of the higher rate tax cuts is £6bn but the new Chancellor has assumed that ‘behavioural changes’ would reduce that to £2bn. This seems unlikely.
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