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27/10/2021 13:36:25  

Stick with Guido for live updates of Rishi’s budget announcements. Stay tuned…

Inflation

  • Rishi says the house will recognise the “challenging backdrop” of inflation.
  • OBR expects inflation to hit 4% next year, up from 3.1% currently
  • Rishi blames this on a global rise in demand for goods, supply chains can’t keep up
  • He also cites the surge in demand for energy, with oil coal and gas more than doubling
  • Will take months to ease”
  • Rishi has written to BoE reaffirming their remit to keep inflation low & stable

State of the finances

  • OBR expect economy to return to pre-Covid level at the turn of the year
  • Growth expected to be 6.5% this year followed by 6% in 2022
    • 2022: 6%
    • 2023: 2.1%
    • 2024: 1.3%
    • 2025: 1.6%
  • Unemployment to peak at 5.2%, way down on the 12% originally forecast
  • OBR upgrades forecast for business investment
  • OBR revised down their scarring assumption from 3% to 2%
  • OBR describe Rishi’s plan as “remarkably successful” 

New charter for budget responsibility 

  • Two new fiscal rules:
    • Underline public sector net debt must be falling
    • In normal times the state should only borrow to invest in future growth and prosperity – day-to-day spending must be met by taxation
    • Supplemented by targets to spend 3% of GDP on capital spending
  • The house will vote on Rishi’s new charter
  • OBR report today that all Rishi’s fiscal rules have been met

Fiscal judgments

  1. Will meet fiscal rules with a margin to protect against external economic risk
  2. Continue supporting working families
  3. Will meet obligations to the world’s poorest – 0.7% overseas aid will return from 2024/25
  4. Increases total department spending by £150 billion – the largest increase this century with spending growing 3.8% a year in real terms.
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