The announcement of a much-anticipated strategy for restoring the nation's public finances was postponed by Britain's new Prime Minister Rishi Sunak on Wednesday until Nov. 17, two and a half weeks later than originally anticipated.

The postponement, Sunak's first major policy move since taking over for Liz Truss on Tuesday, increased borrowing costs for the United Kingdom on the financial markets, though much less than the panicked bond selling sparked by Truss's tax-cutting plan in September.

In a televised statement, finance minister Jeremy Hunt explained the delay and said it would take more time to ensure the new plan took into account the most recent economic forecasts. View More

The statement will be made on November 17th, the prime minister and I have decided, Hunt said.

The strategy is anticipated to outline how the government will close a potential $46 billion budget gap. It will undergo a thorough audit by Britain's fiscal watchdog, unlike Truss' plan from last month.

Sunak told his newly assembled cabinet that it was "important to reach the right decisions and there is time for those decisions to be confirmed with cabinet," according to a statement from Sunak's office.

When Truss announced her unfunded tax cuts last month, the bond market crashed so badly that the Bank of England had to step in. Truss was eventually forced to resign after being forced to make a U-turn.

The medium-term fiscal plan is crucial for this reason, according to Hunt: "Our top priority is economic stability and restoring confidence that the United Kingdom is a country that pays its way."

I want to reaffirm that it will show declining debt over the medium term.

MARKET REACTION


Previously, Sunak oversaw significant spending and borrowing to maintain the economy during the COVID-19 pandemic. He resigned in July in protest at the leadership of the then-prime minister, Boris Johnson, and what he perceived as a reluctance to make decisions to cover the cost of the pandemic.

Investors generally welcomed his election to lead the Conservative Party after Truss' brief tenure because they believe he and Hunt are better suited to plug the gaping hole in the UK's public finances.

With the confirmation of the budget plan delay, the price of British government bonds continued to decline. Long-dated gilt yields increased by 12–13 basis points on the day, setting new session highs, before slightly declining.

The news barely made a dent in sterling.

Compared to the massive sell-off that Truss instigated in September, the bond market's movements were relatively small.

The delay in the budget plan will make it more difficult for the BoE to do its job next week when it must publish economic forecasts without knowing the specifics of the government's fiscal plans and make its most recent monetary policy decision.

The BoE is anticipated to increase interest rates once more on November 3, most likely to 3.0% from 2.25%, despite the fact that after the announcement of the budget plan delay, investors increased their bets by a full percentage point to a chance of more than one in three.

Earlier on Wednesday, Kristalina Georgieva, the head of the International Monetary Fund, told Reuters that she anticipated Sunak would guide Britain toward fiscal sustainability and that he was correct to forewarn of impending difficult choices.

"I paid close attention to him as he spoke to the British people, and his message ought to be heard all over the world. These are trying times, and trying times call for trying decisions "said Georgieva.