In today’s Budget announcement, chancellor Rachel Reeves said the Office for Budget Responsibility expects inflation to remain above the Bank of England’s 2 per cent target for several years.
According to the chancellor, GDP growth will be higher than expected this year and next, opening her speech with pointed digs at the former Conservative government.
She said: "The party opposite broke our country ... The British people have inherited their [the Tories'] failure."
Reeves also claimed the latest OBR data is the correct data, alleging that the previous government "hid the true state of [our public finances] from the public".
The OBR expects the UK economy to grow by 1.1 per cent this year, up from the previous estimate of 0.8 per cent, and by 2 per cent next year, up from the previous estimate of 1.9 per cent. In 2026, it expects the growth to be 1.8 per cent, down from the previous 2.2 per cent.
On the inflation front, the expectation is for 2.5 per cent this year, and 2.6 per cent next year, and then fall to 2.3 per cent in 2026.
GDP figures can be seen in the context of a rising population, if the population rises by more than the level of GDP, a measure known as GDP per capita, then the average wealth of the population declines.
As part of the wider budget announcement, tax rises of £40bn were announced, up from the previously expected £35bn, with increases in employers' national insurance contributions accounting for around £25bn of the total.
Paul Johnson of the Institute for Fiscal Studies, estimated that around tw- thirds of the cost of the higher employer national insurance contributions would feed through to lower wages.
David.Thorpe@ft.com
