Chancellor Rachel Reeves has been advised by the OECD about the inadequacy of the UK's fragile fiscal buffers in light of a downgraded growth forecast. The OECD has revised its GDP growth predictions for the UK downward for 2025 and 2026, now projecting only 1.3% and 1% growth respectively. This dim outlook stems from high interest rates and low consumer confidence. Reeves is urged to create a balanced autumn budget that combines spending cuts with tax reforms to address these economic challenges while maintaining control over her fiscal measures amidst pressure from various fronts.
"Currently very thin fiscal buffers could be insufficient to provide adequate support without breaching the fiscal rules in the event of renewed adverse shocks," the OECD said.
The OECD cited rising global trade uncertainty, persistently high interest rates, and declining household and business confidence as key factors behind the weaker outlook.
Reeves is facing mounting pressure to maintain control of ministerial budgets while honouring recent policy pledges, including a reversal on plans to limit winter fuel payments for pensioners.
The OECD urged the chancellor to deliver a 'balanced' autumn budget that includes both targeted spending cuts and tax reforms.
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