LONDON (Reuters) – Britain’s budget watchdog is expected to cut a key productivity growth forecast by a larger-than-expected 0.3 percentage points, the Financial Times reported, signalling further pressure on the government before next month’s budget.
The Financial Times report, which cited people familiar with the matter, on Monday added that analysts believe the cut by the Office for Budget Responsibility could spell a shortfall of more than 20 billion pounds ($26.84 billion) in public finances.
The OBR has described the outlook for trend productivity – measured as output per hour worked – as central to its economic projections which in turn underpin its fiscal estimates. It called it “one of the most important and uncertain forecast judgements” in its economic and fiscal outlook in March.
A Treasury spokesperson declined to comment on speculation ahead of the OBR’s forecast, which will be published on November 26 when finance minister Rachel Reeves is due to present the government’s budget. The OBR did not immediately respond to a Reuters request for comment.
Reeves has acknowledged the OBR’s expected downgrade and said it relates to the period before Labour came to government.
The cut would add to fiscal pressures ahead of the budget, in which she is expected to raise tens of billions of pounds in taxes to stay on track to meet her fiscal targets and avoid a loss of confidence in the bond market.
In the government’s first budget since coming to power last year, Reeves announced a big increase in public investment in infrastructure and energy, funded by increased borrowing and taxes on employers.
($1 = 0.7451 pounds)
(Reporting by Mrinmay Dey in Bengaluru and Alistair Smout in London; Writing by Muvija M; Editing by Sharon Singleton and Chizu Nomiyama)
