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Labour’s budget hopes rest on overly optimistic UK forecasts, say economists

“The OBR would clearly need to make a big upward revision to its view on labour market participation or productivity growth in the medium term to deliver this kind of potential growth, and the related uplift to the public finances,” said Ruth Gregory, deputy chief UK economist at Capital Economics. 

Capital Economics said that if the OBR upgraded its 2024-25 GDP forecast to 1.4 per cent, and then predicted growth rates of 2 per cent until the end of the forecast period, it would generate more than £12bn of extra capacity in the budget.  Added to the existing budgetary headroom of about £9bn, that would be enough firepower to avoid the need for the spending cuts to unprotected departments, said Gregory. 

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