Chancellor Rachel Reeves is set to deliver a deliberately uneventful spring forecast on Tuesday, aiming to project calm and competence after 18 months of policy U-turns and political turmoil. With Labour's electoral prospects under scrutiny following a catastrophic byelection result, Reeves will resist the temptation to announce new policies, with Treasury sources insisting that “the era of rabbits is over.”
The chancellor plans to spend less than half an hour at the dispatch box, welcoming the latest forecasts from the independent Office for Budget Responsibility (OBR). She is expected to highlight progress on the cost of living, including cuts to household energy bills from April, and reiterate that Labour has “the right plan” for fixing the economy.
Last autumn’s budget set Reeves on track to meet her self-imposed tax and spending rules with a £22bn margin for error, known as “headroom.” Since then, economic growth has been slightly weaker than expected, but lower gilt yields, reflecting anticipated interest rate cuts by the Bank of England, have made it cheaper for the Treasury to finance national debt. Andrew Wishart of Berenberg says: “Given the moves in interest rates lately and the monthly borrowing numbers coming in on track, I think there will be plenty of headroom.”
The OBR will have to account for additional spending, including £3.5bn for special educational needs and the costs of post-budget policy reversals on inheritance tax for farmers and business rates. Lower net migration than forecast could also dent public finances. However, the watchdog may be reluctant to make judgment calls while it is without a permanent director, following Richard Hughes’s resignation.
