Latest updates: chancellor to pledge ‘stronger economy’ despite cost of living crisis as improved forecasts provide a short-term windfall
- Rishi Sunak will use budget to declare ‘age of optimism’
- What will be in the chancellor’s budget and spending review?
Rishi Sunak should have received a short-term windfall as he drew up his budget plans, thanks to a better-than-expected economic performance since March.
The independent Office for Budget Responsibility is likely to upgrade its growth forecasts for the UK this year, and cut its estimate for borrowing.
First, after the combination of plunging GDP over the pandemic and the huge fiscal support given to the economy, borrowing and outstanding debt have risen sharply. He must continue to endeavour to direct the public finances towards longer-term sustainability. Second, we presume that the Chancellor will aim to create some space for pre-election tax cuts.
On both of these objectives he faces constraints such as; higher inflation, which pushes up the cost of index linked debt; a risk of stalling growth from (for example) component shortages; and the political need to provide near-term, targeted assistance to see households and firms through a period of higher energy bills. Under these circumstances he will also continue to be under huge pressure to backtrack official policy to reverse the temporary relief via Universal Credit.
