Fiscal events and how to avoid them

In this slide pack we preview the upcoming Spring Forecast, assessing the economic and fiscal outlook based on news since the Autumn Budget.

Summary

Just three months after the Budget, there has been small and offsetting news:​

• GDP was 0.4% – and inflation 0.2ppts – lower than expected in Q4 2025​
• We estimate that this, combined with small U-turns and lower migration data, will add £6 billion to borrowing by 2029-30​
• But the cost of borrowing has fallen, leaving estimated ‘headroom’ just £1 billion lower at £20 billion in 2029-30​

There are big fiscal risks on both sides:​

• When the OBR takes on a lower path for migration, that could blow a £10+billion hole in the public finances​
• Defence and SEND pressures could add £18 billion to spending by 2029-30​
• Forecast assumes Fuel Duty will rise for the first time since 2011 later this year and broader tax rises are planned around the likely date of a General Election​
• The OBR’s wage forecast remains weak. Taking the Bank’s would reduce forecast borrowing by up to £20 billion​

Stepping back, growth remains weak, households cautious, and the labour market is loosening.​

Given high policy uncertainty, avoiding a fiscal event is understandable, but that doesn’t mean economic policy should ‘clock off’ until the Budget.​

As political pressures mount, the Government should double down on its growth agenda rather than change tack, and should work to strengthen the OBR rather than undermine it.​