‘Bad news continues’ for Rachel Reeves as UK’s January budget surplus misses forecasts – business live
Although January’s budget surplus was a record, at £15.4bn, it’s £5.1bn less than expected, which may lead to tax rises or spending cutsUK hiring on the rise as confidence lifts, research suggestsCity consultancy Capital Economics have a blunt verdict on January’s record budget surplus – the “bad news continues for the chancellor”.That’s because January’s budget surplus, of over £15bn, is more than £5bn less than the Office for Budget Responsibility had forecast – which means Rachel Reeves’s headroom to keep within her fiscal rules has narrowed.While January’s disappointing public finances figures may not be as bad as they first appear, they continue the run of bad news for the Chancellor in 2025 and underline the difficult choices she faces.While there is increasing pressure on the government to commit to higher defence spending, the OBR is likely to conclude that the Chancellor’s headroom against her fiscal rules has been wiped out and she will probably need to tighten fiscal policy as a result.Higher market interest rate expectations and gilt yields than at the time of October’s Budget alone suggest the Chancellor’s headroom against her fiscal mandate has been whittled down from £9.9bn to £2.8bn.Combined with the recent weakness of productivity and GDP growth, it may have been wiped out completely. So in order to meet her fiscal rules, the Chancellor will need to raise taxes and/or cut spending in the fiscal update on 26th March. Continue reading...
Although January’s budget surplus was a record, at £15.4bn, it’s £5.1bn less than expected, which may lead to tax rises or spending cuts
City consultancy Capital Economics have a blunt verdict on January’s record budget surplus – the “bad news continues for the chancellor”.
That’s because January’s budget surplus, of over £15bn, is more than £5bn less than the Office for Budget Responsibility had forecast – which means Rachel Reeves’s headroom to keep within her fiscal rules has narrowed.
While January’s disappointing public finances figures may not be as bad as they first appear, they continue the run of bad news for the Chancellor in 2025 and underline the difficult choices she faces.
While there is increasing pressure on the government to commit to higher defence spending, the OBR is likely to conclude that the Chancellor’s headroom against her fiscal rules has been wiped out and she will probably need to tighten fiscal policy as a result.
Higher market interest rate expectations and gilt yields than at the time of October’s Budget alone suggest the Chancellor’s headroom against her fiscal mandate has been whittled down from £9.9bn to £2.8bn.
Combined with the recent weakness of productivity and GDP growth, it may have been wiped out completely. So in order to meet her fiscal rules, the Chancellor will need to raise taxes and/or cut spending in the fiscal update on 26th March. Continue reading...
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