Britain’s fiscal watchdog is expected to deliver a £20billion hit to Chancellor Rachel Reeves by downgrading its economic forecasts ahead of next month’s Budget - raising fears of further tax rises.
The Office for Budget Responsibility (OBR) will on Friday share its initial outlook with the Treasury, underpinning the Chancellor’s autumn tax and spending plans due on 26 November.
The downgrade is expected to centre on productivity growth, a key driver of economic output and real wages. The OBR has long faced scrutiny for being overly optimistic in this area.
Andrew Goodwin, chief UK economist at Oxford Economics, told The Telegraph: “They’re almost certainly going to downgrade it. [Some] £15bn to £20bn is a reasonable ballpark. If your role is to be the sober judge of economic policy, then you can’t be the most optimistic forecaster.”
Andrew Wishart, senior economist at Berenberg, warned the OBR’s lower assumptions could deliver an £18billion blow to the Budget, with the Chancellor facing an overall fiscal black hole of £35–£40 billion.
This comes just a year after Reeves delivered a record £40 billion tax-raising Budget, which she described at the time as a “one-off”.
A Treasury spokesperson said: “We don’t comment on speculation. The OBR have been commissioned for a full economic and fiscal forecast that will be published on Nov 26. As the Chancellor has made clear, Britain’s economy isn’t broken, but it does feel stuck. That’s why we will continue to invest in Britain’s renewal, to build an economy that works for working people.”
FTSE100
The UK's flagship share index, the FTSE 100, was down 12-points at 9,456 shortly after opening this morning.
Brent crude oil futures were up 0.50% at $64.59 a barrel.
Companies reporting today
- J D Wetherspoon - full year results