Has Rachel Reeves broken her fiscal rules? It’s been speculated for some time now that the Chancellor lost her headroom when borrowing costs surged last month. Capital Economics forecast at the start of the year that Reeves’s limited headroom (about £10 billion) had been wiped out by rising gilt yields. This left the Chancellor in the uncomfortable spot of having to weigh up more tax hikes or serious spending cuts just months after unveiling her first Budget – the kind of tax-hiking Budget she insisted would not be needed again.
Today, the news gets worse. The Office for Budget Responsibility has reportedly downgraded its growth forecast for the UK – squeezing the Chancellor’s headroom further. According to Bloomberg, the fiscal watchdog has handed the Treasury a more bleak economic outlook than its original assessment for the October Budget.
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