Chancellor Sajid Javid is eyeing a pre-election giveaway Budget in the week of 21 October if Britain can agree a Brexit deal with the EU and parliament votes for the accord.
Mr Javid cannot yet announce a date because the Budget plan is dependent on getting a deal so that any Office for Budget Responsibility forecasts are positive, allowing him to lower taxes or increase infrastructure spending.
The plan, which the FT has confirmed with four officials familiar with the issue, would also probably allow Mr Javid to borrow more money as it would coincide with a new and looser fiscal framework.
But the option of holding a snap Budget is far from guaranteed, officials say, because it is subject to so many moving parts outside the Treasury’s control — and success in the Brexit negotiations.
The chancellor has already increased public spending significantly for 2020-21 in his spending review earlier this month and is now looking for a generous Budget ahead of the likely election later this year.
The OBR, which did not produce a forecast for that spending review, has insisted it must be told what will happen with Brexit before it can produce a forecast to accompany a Budget this autumn.
In a letter to the Commons Treasury select committee, Robert Chote, chair of the OBR, wrote: “If the government wished to hold a Budget before or soon after the date on which the UK is due to leave the EU . . . we would need to know at the beginning of the process whether it intended to design the policy package for a ‘deal’ or ‘no deal’ Brexit.
“We cannot produce parallel forecasts on both bases. And ‘switching horses’ from one to the other would require more time,” he added.
Multiple officials have told the FT that the chancellor has instructed the OBR to prepare a forecast on a “deal” basis, not least because these forecasts would show stronger growth and improved public finances, allowing a giveaway Budget.
The Bank of England’s Monetary Policy Committee said this week that in the event of a Brexit deal, economic performance would improve rapidly and “a significant margin of excess demand was likely to build in the medium term”.
A recovery from this year’s slowdown would give Mr Javid more room for manoeuvre on the public finances. He made it clear in his spending review that the Budget would review the fiscal framework that underpins the public finances. “The first priority of our new economic plan will be to rebuild our national infrastructure,” he said.
Boris Johnson, the prime minister, promised many billions of pounds of income tax cuts in his campaign to become the leader of the Conservative party.
Any emergency Budget for a no-deal departure would be likely to come after the event, officials said, once there was an indication of the need for economic stimulus.
The chancellor’s pre-election Budget plan would be scuppered, however, if no agreement was reached with Brussels on Brexit, or if MPs rejected or delayed taking a decision on any deal.