Rachel Reeves is under immense pressure. She must not waste her chance to go big'

"Most pressing, yet out of the chancellor's hands, is the Office for Budget Responsibility's (OBR) summer supply stocktake of its economic model. As we reported in June, this looks likely to see the OBR move its key productivity forecast closer to the less-positive consensus. Given the crucial importance of productivity in determining economic growth, this shift could create a 20bn headache for the Treasury. The downgrade not anything Labour has actually done is likely to be the biggest factor pushing Reeves off track from her fiscal rules."

"Expect to hear much more of the kind of language Reeves used in her recent Guardian article, in which she argued that if renewal is our mission and productivity is our challenge, then investment and reform are our tools. She does have a story to tell here: changing the fiscal rules to prioritise investment has allowed the Treasury to give the green light to scores of pro-productivity infrastructure projects (with the next expected to be Northern Powerhouse Rail)."

The OBR's summer supply stocktake will likely lower the productivity forecast, reducing expected growth and creating an estimated £20bn fiscal gap for the Treasury. That downgrade, unrelated to Labour actions, is expected to push the chancellor off course from existing fiscal rules. The chancellor intends to prioritise investment and reform to boost productivity and justify infrastructure spending. Fiscal rules have been adjusted to prioritise investment, enabling numerous pro-productivity projects such as Northern Powerhouse Rail. Tax rises are likely to be presented as both efficiency-enhancing and revenue-raising. Budget preparations include involvement from Torsten Bell, indicating broader strategic input.

Read at www.theguardian.com