The UK economy may end up growing a bit faster by the end of this decade than the Office for Budget Responsibility expects – but if it does that will be no thanks to Rachel Reeves’s Budget.
The OBR’s projections are unambitious. This is their summary: ‘Having stagnated last year, the economy is expected to grow by just over 1 per cent this year, rising to 2 per cent in 2025, before falling to around 1½ per cent, slightly below its estimated potential growth rate of 1⅔ per cent, over the remainder of the forecast. Budget policies temporarily boost output in the near term, but leave GDP largely unchanged in five years.’
It does add that if the increase in public investment were sustained it ‘would raise supply in the long-term’, but the huge question remains: is the OBR’s estimate of the potential growth rate of 1⅔ per cent right? That’s higher than some other projections.
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