Forecaster set to lower UK growth predictions

THE UK’s official forecaster is expected to slightly downgrade its short-term growth predictions for the sluggish UK economy, according to leading economists.

The lower growth predictions are set to result in reduced tax revenues which could have an impact on the prospect of potential Government tax cuts.

It comes as the Chancellor is expected to cut “some spending” and shrink his fiscal headroom in order to finance any tax cuts in today’s spring Budget.

Jeremy Hunt said this week he wanted to move towards a “lower tax economy” in a hint at a preelection giveaway to voters in the form of a national insurance or income tax cut. Economists have said the changing economic conditions since Mr Hunt’s autumn statement have done little to improve his financial firepower ahead of a key budget.

In November, the Office for Budget Responsibility (OBR), the Government’s official forecaster, said the Chancellor had £13bn of headroom to meet fiscal rules.

Economists have said ahead of the latest budget that this may have increased slightly, to around £18bn, ahead of any new policies, due to a reduction in inflation and improved interest rate projections. However, this headroom is less than predicted a few weeks ago.

Today, the OBR will also reveal its latest economic growth projections. In its previous forecast in November, the OBR had predicted 0.6% growth in GDP for 2023, with 0.7% growth in 2024.

However, last year the UK economy ultimately fell short, with 0.1% growth in GDP, according to the Office for National Statistics.