Chancellor to announce details of FSA overhaul

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The Independent Online

The Chancellor, George Osborne, will tomorrow find out the extent of the job needed to knock Britain's finances into shape, when the newly created Office for Budget Responsibility publishes its initial findings.

And in the most important week of the Chancellor's brief time in office, Mr Osborne will on Wednesday deliver his first Mansion House speech to an expectant City, with his planned reform of the Financial Services Authority likely to be set out in detail.

On Monday, Sir Alan Budd, the former Bank of England policymaker, is likely to say that government borrowing figures are better than expected, while growth projections formulated under Labour are likely to be trashed as overly optimistic. Gordon Brown's government forecast growth of 3.25 per cent for 2011, compared to City estimates of around 2.2 per cent.

In a change to previous convention, Sir Alan is likely to deliver a central forecast for growth up until 2015. Quarterly GDP forecasts will also be instigated under the new office.

"We are going to get a lot more information from the office – in particular, as to how forecasts are constructed," said a source close to the coalition government. "We want the veil of secrecy, which descended under Labour, to be lifted. The office will establish a new trust baseline from which we can move forward."

Last week the former chancellor, Alistair Darling, said he would be "due a very big apology" if borrowing figures are much less than the Prime Minister, David Cameron, had led the country to believe since he swept to power in May.

Meanwhile, on Wednesday, the Chancellor's attention will move from Westminster to the City, where he is expected to detail how aspects of banking supervision will be taken from the FSA back to the Bank of England.

In his first speech to a Mansion House audience, City sources expect Mr Osborne could sound the starting gun on review of whether retail and investment banks should be separated. However, it is thought that the Chancellor will choose not to unveil details of a planned levy on bank activities. The Government is likely to wait until the following week's emergency Budget on the 22 June to spell out any moves.