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Hammond to lose ‘two-thirds’ of £26bn Budget breathing room

Hammond to lose ‘two-thirds’ of £26bn Budget breathing room

Chancellor Philip Hammond will find himself in a very tight spot at next month’s Budget as new analysis from the Office of Budget Responsibility (OBR) is expected to forecast a more pessimistic outlook for the UK, the Financial Times has reported.

According to the report, the OBR’s analysis will say UK productivity has been frequently over-estimated and will forecast slower growth.

This forecast could knock off two-thirds from the Chancellor’s £26 billion breathing room in public finances which was set aside to protect the economy against Brexit.

With the Treasury targeting a deficit of less than 2% of national income by 2020-21, Treasury officials told the Financial Times the OBR’s forecast cut would leave him with less than £10 billion to play with at the Budget.

Such a position would be very difficult politically for the Chancellor as the government is under a lot of pressure to end the public sector pay cap.

It also comes at a time when prime minister Theresa May is under intense pressure over her own position after the Conservative Party Conference this week was marred by a calamitous closing speech by May.

This morning Grant Shapps, a former Conservative Party chairman, told the BBC around 30 MPs support a move to call another leadership race and he is one of leaders of the group.

Shapps told the BBC Conservative MPs are justified in seeking to replace May after the summer’s disappointing election result.

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