LONDON (Reuters) – Britain’s budget watchdog is expected to cut a key productivity growth forecast by 0.3 percentage points more than expected, the Financial Times reported, signaling increased pressure on the government ahead of next month’s budget.
The Financial Times report, which cited people familiar with the matter, added on Monday that analysts believe the Office for Budget Responsibility cut could mean a shortfall of more than 20 billion pounds ($26.84 billion) in the 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. He called it “one of the most important and uncertain forecast judgments” in his March economic and fiscal outlook.
A Treasury spokesman declined to comment on the speculation ahead of the OBR forecast, which will be published on November 26, when Finance Minister Rachel Reeves will present the government’s budget. The OBR did not immediately respond to a Reuters request for comment.
Reeves acknowledged the expected downgrade from the OBR and said it related to the period before Labor came into government.
The cut would increase fiscal pressures ahead of the budget, which is expected to raise tens of billions of pounds in taxes to stay on track to meet its 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, financed 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)