OBR: Oops, Budget Released
Traders who might have been out grabbing a coffee ahead of the planned publication of the UK budget yesterday afternoon would have returned to chaos. Reuters, a popular financial news agency, revealed that although not directly discoverable via a link on their website, the OBR had published its report on Chancellor Reeves’ budget prematurely. The Office for Budgetary Responsibility is an independent agency responsible for scrutinising government spending plans. It contributes to the Treasury’s fiscal analysis and budgetary planning and should release a report updating the fiscal and economic outlook following every budget. Yes, that’s right: following every budget.
As Rachel Reeves’ muted head shake showed after being handed a phone in the House of Commons yesterday, the OBR had stolen her limelight. Cable shot higher upon the discovery of the OBR report. The reason why seemingly that the OBR’s projected fiscal headroom was as healthy as could have been reasonably expected. Any concerns of a rout in the bond market, as we’ve seen following many recent budgets, was therefore seen as much less likely this time around. However, as the premature report was digested further, GBP did not fare so well. Dropping nearly one cent on the Dollar, once the updated economic growth, productivity and inflation figures were considered, Sterling’s bid rapidly disappeared.
The volatility had all but subsided by the time Reeves stood in front of the dispatch box. After the OBR’s publication, there was very little left to the Chancellor to disclose. The lip service paid to foreign direct investment and incentives for companies to invest and operate in the UK had marginal impacts on GBP. However, as the OBR had already shown, any expected positive impact upon growth from this budget was to be immeasurably small. GBP has hung onto the majority of gains made following the budget, likely reflecting little more than a pricing out of the risk premium represented by the fiscal event. The OBR has said a full investigation into its blunder will take place. If irony isn’t lost on them, perhaps they’ll publish it before it’s ready.
Discussion and Analysis by Charles Porter
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