Rachel Reeves’s budget is expected to announce tax increases worth £26bn to more than double her fiscal headroom, according to figures published before her speech to the commons.
In a highly unusual development triggering an immediate reaction in the financial markets, figures from the Office for Budget Responsibility (OBR) published on its website before the chancellor’s speech, showed her measures would leave £22bn of headroom in five year’s time.
The measures the chancellor is expected to announce include a three-year freeze on personal tax thresholds, alongside the lifting of the two-child limit on benefits.
In the spring, Reeves left £9.9bn in reserve as a buffer. But this is expected to have been more than erased by higher borrowing costs, welfare U-turns and an anticipated sharp OBR productivity downgrade.
The chancellor is expected to use her critical speech in the Commons, with the government under intense pressure, to plug the hole in the public finances through a wide-ranging package of tax measures.
The surprise early release of the OBR document initially sent government bond yields down, as investors were cheered by the apparent increase in headroom.
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