The Office for Budget Responsibility (OBR) lowered its near-term growth forecasts but the government still expects to meet its fiscal rules, with £15 billion of headroom at the end of the forecast period.
The headline growth revisions: 2026 GDP: 1.2% vs 1.1% in March 2027 GDP: 1.0% vs 1.6% in March 2028 GDP: 1.6% vs 1.6% in March 2029 GDP: 1.8% vs 1.5% in March 2030 GDP: 1.7% vs 1.5% in March 2031 GDP: 1.6% The sharp downgrade to 2027 is the standout number, with growth now expected at just 1.0%
The revisions further out are more constructive but that’s the usual tactic. On the fiscal side, the numbers show a deterioration in the debt outlook: 2026/27 public sector net financial liabilities: 83.2% of GDP vs 82.6% previously 2027/28: 83.8% vs 82.9% 2028/29: 83.8% vs 82.9% 2029/30: 83.1% vs 82.2% 2030/31: 82.3% vs 81.1% 2031/32: 81.7% The OBR also forecasts a budget deficit of 4.2% of GDP this year, narrowing to 3.4% next year. Public sector net borrowing is projected at 1.8% of GDP in 2030/31, compared with 1.6% in the March forecast.
Healey said the government will spend an additional £14 billion on debt interest this year, underscoring the damage from higher global borrowing costs. The chancellor ruled out broad-based tax increases and deep cuts to public services, while pledging to maintain the government’s fiscal rules. Some of the remaining fiscal headroom will be used to absorb the impact of the Iran war.