Chancellor Philip Hammond should receive a rare piece of good news on Budget Day as the Office for Budget Responsibility’s (OBR) forecast is expected to reveal lower borrowing projections and stronger GDP growth, according to the EY ITEM Club’s Budget Preview.
Stronger than expected tax receipts should push down the OBR’s borrowing forecast for the current fiscal year by £3 billion to £65 billion. At the same time, the EY ITEM Club report says that better-than-expected momentum in the UK economy is likely to lead the OBR to revise its GDP forecast for this year upwards from 1.4% to 1.6% or 1.7%.
However, the EY ITEM Club states that the OBR is unlikely to make any substantial changes to its forecast further out, suggesting that any effects of Brexit on GDP growth are likely to develop outside of its 2021 forecast horizon.
Martin Beck, senior economic advisor to the EY ITEM Club, commented: “The OBR will paint a marginally better picture of the UK economy and public finances in the short term, but fiscal policy faces major challenges on both the revenue and spending sides in the longer term. However, the continued robustness of the economy and lower-than-expected public sector borrowing mean that there’s little pressure on the Chancellor to use fiscal levers to support activity or fill any fiscal ‘black hole’.”