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January 25, 2023
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The government’s economic forecaster has cut its prediction for UK growth this year, limiting the Treasury’s spending firepower in the forthcoming budget, according to a report.

In a move that will set the baseline for Treasury’s calculations before the budget in March, the Office for Budget Responsibility (OBR) is understood to have provided a preliminary outlook that shows a weaker rebound this year from a period of high inflation and falling living standards.

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According to a report in the Times, the OBR has told the chancellor he will have £9bn less income after a fall in tax receipts compared with a forecast made in November.

OBR staff provide Jeremy Hunt with two independent assessments of the economy each year and how this will affect the government’s finances based on the Treasury’s spending plans. In a longstanding arrangement, the OBR gives an initial view to Treasury officials for them to begin the process of drafting budget proposals.

In November, the OBR forecast that while the economy would shrink by 1.4% this year it would pick up next year, with GDP averaging about 2.6% over the rest of the forecast period. However, the OBR intends to reduce its forecasts by between 0.2% and 0.5% due to weakness in the economy and labour shortages, the report said.

“There seems to be a view out there that Hunt suddenly has all this money to play with for tax cuts,” one government figure told the Times. “But that is not the view internally. The OBR figures suggest that the prospects for medium-term economic growth will actually be worse than they were in November.”

Inflation is expected to fall during the summer, taking the pressure off the Bank of England to continue raising the cost of borrowing.

There have been increasing signs of economic optimism globally, with the head of the International Monetary Fund telling the World Economic Forum in Davos last week that the global economic outlook is “less bad” than feared.

Rishi Sunak has pledged

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