By Andy Bruce and David Milliken
LONDON (Reuters) – Britain’s government is set to borrow 47.6 billion pounds ($61.4 billion) more between now and the end of the decade than expected five months ago, according to forecasts from the country’s fiscal watchdog published on Wednesday.
As finance minister Rachel Reeves began a half-yearly budget update speech to parliament, the Office for Budget Responsibility said the public finances outlook had deteriorated since its last report along with the prospects for the economy.
The OBR said borrowing in the financial year about to end would be almost 10 billion pounds higher than it expected previously and forecasts for each of the following five years were also raised.
The OBR also said it was halving its forecast for Britain’s economic growth this year to 1.0%. Although it slightly increased its projections for three of the four following years, cumulative growth between 2023 and 2029 would be half a percentage point lower than it projected in October, it said.
Reeves sought to cast the downgrade as a result of “a changing world,” citing the war in Ukraine and the uncertainty overhanging the world economy, which has been hit by U.S. President Donald Trump’s plans for import tariffs.
“The threat facing our continent was transformed when Putin invaded Ukraine. It has since escalated further and continues to evolve rapidly,” she told lawmakers.
“At the same time, the global economy has become more uncertain, bringing insecurity at home as trading patterns become more unstable and borrowing costs rise for many major economies,” Reeves said.
She pledged to stick to her borrowing rules and said she had rebuilt a 9.9 billion-pound fiscal buffer that was wiped out by the weaker economic forecasts and higher borrowing costs.
“As a result of the steps that I am taking today I can confirm that I have restored in full our headroom,” she said.
Reeves is aiming to balance day-to-day public spending with tax revenues by 2030.
She said day-to-day public spending would grow by 1.2% a year in real terms, slightly slower than her previous plan.
British government bond prices fell as the OBR forecasts were published before recovering their losses after the government’s debt office announced its plans for bond sales that were slightly below expectations in financial markets.
($1 = 0.7759 pounds)
(Writing by William Schomberg; Editing by Catherine Evans and Hugh Lawson)
