Chancellor Rachel Reeves announced the OBR had ‘upgraded growth forecasts’ despite the watchdog halving them since the previous Conservative administration, prompting ridicule in a raucous House of Commons’ chamber this afternoon.
It came as the Chancellor announced her Spring Statement in which she announced £4.5 billion of welfare cuts, a defence spending increase of £2.2billion and a restoration of her fiscal headroom.
The Labour Chancellor is scrambling to get the nation’s finances back on track after her bombshell budget failed to spark growth.
One of the loudest moments of the fiscal event was when Reeves announced the latest OBR growth forecasts for 2025.
Rachel Reeves delivering the opening lines of her Spring Statement
PARLIAMENTLIVE.TVDespite growth forecast being above 2 per cent before Labour came to power, Reeves announced that growth forecastshad been‘upgraded’ to 1 per cent in 2025, 1.9 per cent in 2026, 1.8 per cent in 2027, 1.7 per cent in 2028 and finally 1.8 per cent in 2029.
The Chancellor, who was comparing the growth figures with October forecasts and not the last government’s, spun the announcement as though it was a success, prompting an explosion of noise as laughter and fury rang around the House.
Shadow Chancellor Mel Stride was quick to point out Labour inherited the fastest growing economy in the G7, before tearing into Labour for squandering the advantage with an anti-business, anti-wealth budget.
Stride, who repeatedly referred to the Spring Statement as an ‘emergency budget’, accused Reeves of tanking the economy, fabricating the £22billion black hole and crippling UK taxpayers who now face the highest burden in history.
The OBR downgraded growth forecasts compared with the previous government's
GETTYTo the jeers, 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.”
Reeves’ announcements come after the Chancellor’s £40billion tax-raising budget sparked an exodus of wealth, spooked the markets and crashed business confidence in Britain.
The OBR had found the budget was going to eliminate Reeves’ fiscal headroom - how much leeway the government has to cut taxes or increase spending while still sticking to its self-imposed rules.
The £9.9bn headroom Reeves built into the autumn Budget would have been more than wiped out by interest payments on government debt, leading to a £4.1bn deficit by 2029/30, said the OBR.
However, policy changes announced today, including welfare reforms and cuts to day-to-day departmental spending, will “restore it to the £10bn surplus the chancellor had in October”, Britain’s financial watchdog says.
That said, borrowing and debt are expected to be higher than previously forecast, and Donald Trump’s tariffs and the war in Ukraine still could torpedo Reeves’ budget.
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Rachel Reeves’ tight fiscal margin has left her vulnerable to Donald Trump's 'Liberation Day' tariffsGetty ImagesReform UK’s Richard Tice reacted angrily, asking whether the OBR economists were ‘taking magic mushrooms’ and accused them of being 'completely delusional.'
He said: “[The OBR has] magic-ed an increase in growth - where have they found that from in a more challenging world?”
Shadow Chancellor Mel Stride told the Commons: “How can we believe this chancellor? She is the chancellor [who said] she would not increase borrowing, but she did; she said she would not break her rules, but she did.
“We are poorer, we are weaker. To govern is to choose and this chancellor has made all the wrong choices.”
But Reeves said that households in Britain would be £500 better off, arguing her planning reforms would add £15billion to the UK’s economy within the decade.
