LIVE: Keir Starmer Grilled at Prime Minister's Questions

Sir Keir Starmer is set to take questions in Parliament as Rachel Reeves faces an even bigger hole in the public finances than expected after a significant downgrade to Britain’s productivity forecasts. Every 0.1 percentage point reduction in the Office for Budget Responsibility’s medium-term forecast adds between £7 billion and £9 billion to the level of government borrowing in five years, economists say. The forecast was previously expected to be reduced by between 0.1 and 0.2 percentage points but the OBR is now believed to have told the chancellor it will be cut by about 0.3 percentage points, the Financial Times reported.

READ MORE: https://www.thetimes.com/uk/politics/...

The move could mean Reeves resorts to bigger tax rises at the budget next month. There is also growing speculation that income tax could be targeted, in breach of Labour’s manifesto.

The OBR will send Reeves the final draft of its economic forecast on Friday, including an assessment of Britain’s output per hour worked. The downgrade could expand the total hole in the public finances, which is estimated at between £20 billion and £30 billion, although an improvement to forecasts for wage growth and inflation could help soften the blow.

Reeves said on Monday that the watchdog will downgrade its forecast “based not on anything this government has done but on our past productivity numbers, which, to be honest, since the financial crisis and Brexit, have been very poor”.

The timing of the downgrade has caused fury in the Treasury and No 10, after years of over-optimism from the forecaster. The lack of a downgrade allowed Jeremy Hunt to cut taxes twice as Conservative chancellor before the general election last year.

Read the best of our journalism: https://www.thetimes.com/
Subscribe to The Times and The Sunday Times YouTube channel: https://www.youtube.com/subscription_...
Find us on Facebook:   / timesandsundaytimes  
Find us on X: https://x.com/thetimes
Find us on Instagram:   / thetimes  

#livestream #keirstarmer #uk