OBR to ‘downgrade growth forecasts for every year of this parliament’
Britain’s financial watchdog will reportedly cut its economic growth forecasts for each year of the remainder of this parliament when the chancellor delivers his Budget this week.
This news will be a major blow to the Labor government, which has put economic growth at the center of its plan for Britain.
Rachel Reeves will unveil her Budget on Wednesday after a flurry of speculation about what taxes she would raise to balance the budget; This includes the expectation of an income tax increase followed by an apparent U-turn.
The OBR will publish its latest forecasts after the Chancellor’s Budget speech and sources have told Sky News it will cut its growth forecasts for 2026 and the remaining years of the current parliament.
The OBR is an independent body that provides analysis of the country’s public finances.
Twice a year it publishes detailed five-year forecasts alongside the Budget and spring statement to assess the impact of any tax and spending measures and analyze whether the government is meeting its fiscal targets.
It was reported earlier this year that the OBR was planning to cut official productivity forecasts, leaving a gap of around £20bn in the public finances and sparking fears of widespread tax rises to fill the gap and rescue Britain’s struggling public finances.
But as Ms Reeves prepares to announce a series of tax increases this week, CBI boss Rain Newton-Smith will tell ministers and business leaders on Monday she is concerned firms could risk being locked into the UK’s “stop-start economy”.
It will also encourage the government to make “hard choices” and avoid “death by a thousand taxes”.
It was revealed on Sunday that more than 100,000 high-value properties could be hit with a mansion tax by Rachel Reeves, who is trying to raise money to fill the fiscal black hole reported to be shrinking property tax plans.
It is now expected to impose a tax on homes worth more than £2 million, in a move that could generate between £400 million and £450 million for the Treasury.
An extension of the freeze on income tax thresholds is also rumored, with more people being dragged into paying tax for the first time or being moved to a higher rate as their wages increase.
Among the expected tax increases, Ms Reeves is also expected to remove the two-child benefit cap.
The latest reports of the OBR’s growth rating downgrade came just hours after Business Secretary Peter Kyle apologized for speculation over the Budget and said the rumors were “as frustrating for me and the chancellor as they are for everyone else”.
He told BBC Breakfast there was “intense pressure” on ministers to “be clear about the direction of travel but also stay within acceptable bounds for the Budget”.
“I’m sorry that people are concerned about this speculation, which has been frustrating for me and the chancellor as much as it has been for everyone else,” he said.
Asked whether Ms Reeves was increasing uncertainty by paving the way for an income tax increase in the early autumn, Mr Kyle said: “We have conversations like this and we’re being asked about precautions and there’s intense pressure on us to be clear about the direction of travel.
“When we try to be as open as possible while staying within the bounds of what is acceptable for a Budget, of course that creates more speculation, not less. We’re trying to get that balance right.”
The Treasury was contacted to get an opinion on the issue.
