OBR warns public finances remain vulnerable despite increased fiscal headroom

The Treasury's independent forecaster has warned that Rachel Reeves's tax-raising budget will still leave the public finances in a "vulnerable" position despite her more than doubling the UK's financial buffer.

- Phillip Inman Senior economics writer

The Office for Budget Responsibility (OBR) said the potential for damaging events - such as a global stock market crash or future pandemic - to knock the government's finances off course remained high, even while the chancellor increased her headroom from £9.9bn to £22bn.

After a wide-ranging review of the UK's economic health stretching back to the 2008 financial crash, the OBR also said the economy would grow at a slower rate over the next five years than previously estimated.

The forecaster said the economy would grow by 1.5% this year, an increase from its earlier 1% forecast. The OBR predicted it would expand by 1.4% next year, much lower than a forecast in March of 1.9%, and would also be lower than expected in the following three years, undermining the chancellor's drive for growth.

As Reeves prepared to announce £26bn of tax rises in her set-piece speech, the OBR gave its verdict on the impact of her tax and spending measures in a document accidentally released early. It quickly apologised for the error and launched an investigation, blaming a "mistake within the OBR".