UK Braces for £18bn Deficit as OBR Slashes Productivity Forecasts
Chancellor Rachel Reeves is bracing for a significant deficit in the UK's public finances. The Office for Budget Responsibility (OBR) is expected to deliver new economic forecasts on Friday, ahead of the November 26 Budget. A modest downgrade in productivity projections could create a fiscal hole of up to £18bn.
Reeves' team is preparing for a potential £30bn shortfall in the public finances. Even a slight reduction of two-tenths of a percentage point in productivity projections could result in a £18bn deficit. This would erase the £9.9bn of 'headroom' in Reeves' plans and force her to raise taxes to fill the gap. Previous policy U-turns on welfare and possible increases in government interest costs would exacerbate the fiscal shortfall. Reeves has acknowledged the changing economic landscape and is ready to respond to the OBR's productivity review.
The OBR's productivity downgrade could put a significant dent in the public finances, potentially creating a £18bn hole. Reeves is expecting a substantial deficit and is prepared to make necessary adjustments to her plans. The Chancellor will receive the OBR's initial 'pre-measures' forecasts on Friday, ahead of the November Budget.
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