The Office for Budget Responsibility (OBR) has just put out its latest forecast. PSNB is expected to increase dramatically over the next five years, it maintains. The impact on borrowing is projected to upwards of £138.3 billion in 2025-26 and a slow tapering in borrowing is expected beyond then. The PSNB is expected to fall to £112.1 billion in 2026-27. It drops further to £98.5 billion in 2027-28 and then on a downward trajectory to reach £86.9 billion in 2028-29. By 2029-30, the near-term forecast predicts borrowing will fall to £67.9 billion.
The fiscal landscape is changing with unprecedented speed. To fund its election manifesto commitments the government will need to increase public spending by £11 billion in 2029-30 already. Welcoming the rise of profilers, the OBR flagged up an important trend. Almost three quarters of the projected cut in borrowing over the next five years will be achieved through tax increases. As a result, the total amount of tax revenue is expected to hit an all-time high of 38.3% of GDP by 2030-31.
The OBR’s report raises a number of concerns about the direction of the UK economy as we approach an unpredictable global environment – especially regarding climate change. The agency acknowledged ongoing risks, including “significant uncertainty about the future direction of the US and global trade policy, with threats of higher tariffs on many trading partners.”
Unsurprisingly, the government’s latest budget makes official that their fiscal mandate is to return to a balanced budget by 2029-30. Under our central forecast this mandate will be easily exceeded by £22 billion. This points to a relatively low bar for a prudent course of future fiscal policy.
It heavily increases tax burdens on New Jersey residents. In real terms it is indeed the third largest medium-term tax rise since the OBR was created in 2010. This enormous increase will have far-reaching, detrimental impacts on everyday Americans and American businesses. It’s all great news, but it leaves one to ask really important questions about the broader economic impact and public acceptance of these changes.