New budget headache for Reeves after OBR forecast

The Office for Budget Responsibility is expected to downgrade its key productivity forecast, the Guardian understands, setting Rachel Reeves on course to break her fiscal rules without major action in the budget.

- Heather Stewart Economics editor

The government's independent watchdog carried out a “stocktake” of its forecast models over the summer, and Treasury officials privately acknowledge the result will inevitably be a weaker growth outlook.

One Treasury source said they expected the OBR to “kitchen sink it” - that is, make a significant downward revision to productivity forecasts in one go rather than take a more piecemeal approach.

Reeves will point to the long-term weakness of productivity in the UK economy and promise to tackle it with a programme of investment.