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Chancellor Rachel Reeves faces the prospect of lowering public spending or increasing taxes as fiscal supervisor in the UK warned privately about a poorer economic view.
Preliminary forecasts from the Budget Liability Office show that the Fiscal House of Fiscal House had in October against its main budget rule has been deleted by factors including poor economic data, according to people familiar with the issue.
The forecasts, which were sent to the treasure last week, may force the Chancellor to have a stronger expense by government departments or find additional tax revenue in its spring statement on March 26th.
It comes after a period of flat growth in the United Kingdom, along with an increase in government borrowing costs that has whitewashed the margin against the Reeves rule, which stipulates that current excluded costs are financed by tax bills.
The first draft of the OBR forecasts, which will be published along with the spring statement, reflects developments in the economy since the October Reeves’ budget, but not the impact of any possible change of politics by it.
In October, OBR forecasts showed that Reeves had 9,9 billion pounds against its rule for the current budget to be in balance by 2029-30-leaving it “almost no clash room”, according to the Institute for Fiscal Studies, one thought- reserved
The new preliminary forecasts of the OBR suggest that the head room has been deleted, people familiar with the issue said. The landing was first reported by Bloomberg.
Forecasts from the fiscal guards are decided to change as there will be four more draftings before the view appears in parliament on March 26th.
Reeves will have the opportunity to rebuild a buffer against the current budget rule through tax decisions and expenses it receives before the spring statement.
But forecasts from other bodies including the Bank of England already show a severe economic prognosis for the chancellor.
Boe has halved her 2025 growth rating last week, saying she expected the economy to expand with just three-quarters of one percentage point this year-to-date under 2 percent OBR forecast.
Ernst & Young Article Club, another predictor, has predicted only 1 percent growth in 2025.
Boe predicted a 1.5 percent increase to 2026, which is also under the latest OBR forecast of 1.8 percent.
OBR estimates for possible growth – the speed at which the economy can expand without causing inflation, and a major contribution to its predictions – are also more optimistic than those of other analysts.
While the OBR expects the potential growth to be more than 1.6 percent by the end of its forecasting period, the BOE’s own estimate is lower, by 1.5 percent.
Moreover, the increases of yields gilded since the October budget have further painted the Reeves’ head room, although a recovery in the bond market has mitigated some of the impacts.
Analysts at Oxford Economyics, a consultancy last week estimated that Reeves’ 9,9 billion £ head of the head were halved by bond pricing movements.
An HM treasure spokesman said: “The government’s commitment to fiscal rules and healthy public finances is non -negotiable.
“As previously announced, the other OBR forecast will be presented to Parliament on March 26, along with a statement from the Chancellor. We do not comment on the speculation about OBR forecasts.”
A OBR spokesman refused to comment.
