A flurry of activity from the UK’s finance and business ministries will begin tomorrow as the UK exits 10 days of national mourning following the death of Queen Elizabeth II.
In the face of roaring inflation, a flatlining economy tipping into recession and a cost of living crisis so intense that even middle-income households are teetering on the brink of financial viability, the new government will announce measures aimed at capping energy prices and boosting economic growth.
Tomorrow, Business Secretary Jacob Rees-Mogg will reveal how he plans to buffer British businesses from soaring energy prices during the winter. On Thursday, Andrew Bailey and the Bank of England will announce a hike in interest rates, before Chancellor Kwasi Kwarteng announces tax cuts and support for consumers on Friday.
Here's how we expect the week to pan out:
Wednesday: Business support details announced
On Wednesday, Business Secretary Jacob Rees-Mogg is expected to set out the details of legislation that will help companies deal with soaring energy costs.
Officials are examining a potential scheme in which companies will get a fixed reduction to the rate they currently pay per kilowatt hour on their bills - a different mechanism to the one used for households, where the maximum that energy companies can charge is capped instead.
A Whitehall source told The Telegraph that a discount would be the simplest and most effective way of delivering support, but cautioned it is just one of a number of mechanisms being looked at by ministers.
A spokesman for the Department for Business, Energy and Industrial Strategy declined to comment on the reports.
Thursday: Bank of England Monetary Policy Committee
The Bank of England is facing calls to drastically raise interest rates this week in the face of expected higher inflation caused by emergency fiscal spending and to help prop up the value of the collapsing pound.
The Bank’s nine-strong monetary policy committee (MPC) meets this Thursday for a delayed interest rate decision following the death of the Queen.
Last week the pound slumped to its weakest level against the dollar since 1985. Sterling’s slump coincides with the 30-year anniversary of Black Wednesday, when the UK was forced out of the Exchange Rate Mechanism on the back of the currency’s collapse.
The Bank has raised rates at its last six meetings, lifting the base rate to 1.75%. Economists and money markets are split over whether the MPC will vote to stick with a 50-basis-point rise this month, taking rates to 2.25%, or choose a more aggressive 75-basis-point tightening, to 2.5%, after fresh inflation data for August pointed to growing price pressures in the economy.
Friday: Chancellor's 'fiscal event'
After a period of unity in mourning of Queen Elizabeth II, the usual business of divisive British politics will resume with Friday’s unveiling of the new government’s emergency budget or — as it prefers to describe it — its “fiscal event”.
Kwasi Kwarteng, the chancellor, is due to announce tax cuts worth an estimated £30billion, and spending worth upwards of £100billion to fund an emergency energy price cap freeze.
Writing in yesterday's Times, commentator Mark Littlewood said Kwarteng’s fiscal event "needs to be the most radical since Thatcher era".
Unlike a Budget, there is no requirement for the Office for Budget Responsibility (OBR) to produce forecasts of how the plans will affect public spending and borrowing.
That's important because the government is thought to be planning a borrowing bonanza - as much as £100billion or £150billion - to fund her plan to cap average energy bills at £2,500 a year for two years.
Despite ruling out a windfall tax on oil and gas giants to help fund the package, the Prime Minister declined to set out how the policy will be funded, but the government has said it will set out some of the costing at the "fiscal event".
The Chancellor is also expected to set out a series of tax measures, including a reversal of April's 1.25 percentage point increase in national insurance. Reports suggest this could be done quicker than expected and take effect in people's pay packets this November.
Businesses need action
Aberdeen & Grampian Chamber of Commerce has called on the government to ensure that any help reaches businesses fast.
Ryan Crighton, Policy Director at AGCC, said: “This is a crisis on a similar scale to the CV19 pandemic – and we believe the response from government needs to at least match what happened in the summer of 2020 – and may need to go further.
“This situation has been getting worse day-by-day and the new government needs to make up for lost time this week by announcing immediate action and aid.
“The alternative is perfectly viable businesses going to the wall, which will further fuel the economic crisis we see escalating day-by-day.”
Prime Minister Liz Truss previously suggested that support form businesses will last for an initial six months.
Mr Crighton added: "Failure to provide clarity beyond the next six months is a mistake and will provide little comfort to firms facing an onslaught of rising costs today.
"Businesses need the same two-year clarity that has been given to consumers."