March’s figures showing borrowing overshooting what the OBR had predicted only a month ago cast “further doubt on the ability of the government to unveil big tax cuts at another pre-election fiscal event later this year”, said Ruth Gregory, economist at Capital Economics. “If the chancellor was hoping March’s figures would provide more scope for tax cuts at a fiscal event later this year, he will have been disappointed,” she added.
Gregory calculated that based on the larger than expected 2023-24 budget deficit and the recent increase in the market’s expectation for interest rates, the chancellor may have even less so-called fiscal headroom, perhaps about £5bn, for tax cuts rather than the £8.9bn left over in March.