Chancellor Rachel Reeves is confronting a challenging economic landscape with rising borrowing costs, stubborn inflation, and a sluggish economy while needing to secure additional funding for defense. The upcoming verdict from the Office for Budget Responsibility (OBR) before her spring statement on March 26 will be crucial in assessing her fiscal rules' viability. Experts predict her budgetary headroom may drop dramatically from £9.9 billion to around £2.8 billion due to increased borrowing beyond forecasts and unfavorable economic conditions, including a significantly reduced growth outlook for 2025.
Rachel Reeves faces financial challenges as inflation, higher borrowing costs, and a sluggish economy threaten her ability to meet key fiscal rules as she prepares for the spring statement.
The OBR's pre-measures forecast is critical for Reeves, determining how much fiscal headroom remains amid rising debt servicing costs and weaker economic growth projections.
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