Good morning from the City AM liveblog team.
At long last, we are just one day away from the Budget, in which Rachel Reeves is expected to unveil tens of billions of pounds in tax rises. This despite the fact that she promised taxes wouldn’t go up after last year’s hikes.
Who is to blame? Reeves might want to argue that the circumstances have changed – the world has become more uncertain, and she couldn’t have predicted OBR downgrades.
Not so fast, say a number of senior economists who spoke to City AM.
Sir Charlie Bean, who sat on the OBR’s Budget Responsibility Committee (BRC) between 2017 and late 2021, said expected productivity downgrades, which are believed to cost the Treasury some £20bn, should not have come as a surprise to Reeves given repeated warnings about the uncertainty around previous predictions.
“The government cannot claim that this is something that’s come out of the blue,” Bean, who was also formerly the Bank of England’s chief economist, said.
“This is not an unusual forecast re-evaluation, given what’s happened and also where other forecasters are.
“The real issue here, to be honest, is that Rachel Reeves was unwise to leave herself such a small amount of fiscal headroom, knowing the substantial range of uncertainty around the forecast.
“You’re asking for trouble if you leave yourself a small margin of error.”
The former Bank interest rate-setter Jonathan Haskel said this year’s review was “fair” adding the government should focus on boosting output levels in the public sector, with recent data showing a fall in productivity across healthcare in the three months to June.
“Our current poor labour productivity is a choice,” Haskel said.
“Falling labour productivity in the health and care sector over the last six years is a major drag on labour productivity. If we just had zero productivity growth in that sector, overall labour productivity would nearly double.”
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Here’s a summary of our top headlines from yesterday:
Advertising giants’ share prices tumble as Big Tech swallows up ad spend
Nvidia invests in Revolut as $75bn valuation secured
The FTSE 100’s good year masks a much deeper problem
Stricken giant collapses as 650 jobs put at risk
Here’s what to expect on Budget day