Economic growth forecast halved as Reeves blames global instability
Rachel Reeves blamed “increased global uncertainty” as the budget watchdog slashed its forecast for economic growth.
The Office for Budget Responsibility halved its forecast for growth in gross domestic product in 2025 from 2% to just 1%.
The watchdog’s assessment also indicated the Chancellor would have missed her goal of balancing the nation’s books without action.
“Non-negotiable”
Responding to the growth forecast, Ms Reeves said: “I am not satisfied with these numbers.
“That is why we on this side of the house are serious about taking the action needed to grow our economy. Backing the builders, not the blockers.”
Despite the dramatic downgrade in 2025, she said the OBR had upgraded its forecasts for subsequent years with GDP expected to increase by 1.9% in 2026, 1.8% in 2027, 1.7% in 2027 and 1.8% in 2029.
The watchdog also forecast that the Government’s planning reforms will increase GDP permanently by 0.2% in 2029/30, representing an additional £6.8 billion and pushing housebuilding to a “40-year high”.
She was forced to set out measures totalling around £14 billion, including a series of cuts, to ensure she met her “non-negotiable” goal of balancing day-to-day spending against tax receipts, rather than borrowing.
Benefits squeeze
Ms Reeves told MPs: “The increased global uncertainty has had two consequences.
“First, on our public finances. And second, on the economy.”
At her budget in October she set out plans which met that goal with £9.9 billion to spare in 2029/30.
But she said the updated forecast from the Office for Budget Responsibility indicated she would have missed the target by £4.1 billion without taking action to restore the £9.9 billion of headroom.
She confirmed a further squeeze on the welfare budget, building on cuts to the disability and incapacity bill set out earlier this month, with the package now expected to save £4.8 billion rather than the more than £5 billion in 2029/30 hoped for by ministers.
And she signalled cuts in Whitehall, with “voluntary exit schemes to reduce the size of the civil service”, taking advantage of technology to “make Government leaner, more productive and more efficient”, saving £3.5 billion by 2029/30.
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A silly meaningless target. While pursuing supposed economic rectitude (she isn’t), Rachel from Accounts cannot see the wood for the trees. Quite the wrong approach to running an economy. However, while it does seem that I will inadvertently get the degrowth I strongly recommend for our country (for climate stability, sustainability etc), the Reeves method of getting there is clumsy, ill-advised and without a theoretical underpinning. Worse, the collateral damage she is inflicting on lower-income families, their children, people with disabilities, older people, and other beneficiaries is life-threatening and immoral. An honest morality would dictate an ethical economic system. But… Read more »