Kwasi Kwarteng did not fully brief the Bank of England before he unveiled sweeping tax cuts in his mini-budget, the deputy governor has said. Sir Jon Cunliffe told the Treasury Committee that the Bank would have advised the Government of the effect on financial markets, which were plunged into weeks of chaos.
Sir Jon said: “We did not have a full briefing of the package the night before.
“Had they asked us what the market reaction would be, we would have interacted with them.
“But it is not our responsibility to give the Government advice on fiscal policy, it is the role of the Treasury.”
Sir Jon also described the mini-budget and the fallout as an “out-of-historical experience event”.
He said he expects the Bank of England to be briefed on the medium-term fiscal plan which new Chancellor Jeremy Hunt – who was parachuted into Number 11 after Mr Kwarteng was sacked – will set out on October 31 after tearing up the mini-budget.
Sir Jon said it would be “important” ahead of the next decision on raising interest rates, as the Bank looks to put a lid on inflation which has hit 10.1 percent fuelled by rising food and energy prices.
The fiscal plan on Halloween will be accompanied by an Office for Budget Responsibility (OBR) forecast after financial markets were spooked by the prospect of unfunded tax cuts in the mini-budget.
Sir Jon said: “I haven’t heard from the Treasury but I would expect particularly as there is an OBR forecast and the Chancellor has underlined the importance of working with the Bank so I would expect that to happen.
“The Chancellor has said it would effectively be a budget and if it is a budget I would expect the normal processes to apply.
“It’s important for the Monetary Policy Committee because we will have to take a decision on interest rates for control of inflation.”
Mr Hunt on Monday drove a coach and horses through the mini-budget in a bid to restore economic stability after weeks of turmoil on the financial markets.
The move has left Liz Truss’s credibility in tatters as she battles to save her premiership.
Ms Truss became Prime Minister after winning the Tory leadership contest on the back of promises to dramatically cut tax.
But the ditching of her policies have left her fighting to stay in No 10 after just six weeks in the job.
Embattled Ms Truss, who today pulled out of a scheduled visit where she would face media questions, made a grovelling public apology in the Commons as she faced a bruising Prime Minister’s Questions for the first time since her economic plan was ripped up by the Chancellor.
The Prime Minister told MPs: “I have been very clear that I am sorry and that I have made mistakes.
“The right thing to do in those circumstances is to make changes, which I have made, and to get on with the job and deliver for the British people.”
It comes as it is understood most MPs believe it is inevitable that she will go, but have not united around a replacement.