The Office for Budget Responsibility (OBR) unexpectedly published on its website the economic and fiscal outlook for November 2025 before the official budget announcement by Finance Minister Rachel Reeves, causing market confusion. The key assumptions presented in the report:
OBR assumptions: now vs earlier
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The British OBR forecasts government borrowing of £138.3 billion in 2025–26 and £117.7 billion in 2026–27.
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The medium-term productivity growth forecast was lowered to 1.0% from 1.3% earlier, which is a structurally negative signal for the economy’s long-term growth potential.
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The freeze on income tax thresholds will be extended from 2028–29 to 2030–31. According to the OBR, this is expected to generate about £8 billion in additional revenue in 2029–30, one year more than previously assumed, gradually pushing more taxpayers into higher brackets as wages rise.
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Revenue gains from tax increases and fiscal changes are projected to reach £26.1 billion annually in 2029–30, compared with a lower tax-burden path in the March outlook.
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The forecast for average real GDP growth was cut to about 1.5% per year, which is 0.3 percentage points less than the OBR’s March projection.
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The public sector current budget surplus for 2029–30 was raised to £21.7 billion from £9.9 billion forecast in March. This may look “positive”, but is achieved mainly through higher taxes and threshold freezes.
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A mileage tax for electric cars will be introduced from 2028: 3 pence per mile for BEVs and 1.5 pence for PHEVs, indexed to CPI, expected to become a significant new revenue source.
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A restriction on “salary sacrifice” benefits: pension contributions above £2,000 per year will be subject to NIC from April 2029, effectively increasing the tax burden on higher contributions.
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A new tax on expensive properties: an additional council tax charge for homes valued above £2 million starting in 2028, projected to generate about £0.4 billion per year.
The British pound fell and UK gilt yields rose after markets reacted to the budget information and the expected increase in government borrowing. GBPUSD pair surges today.
Source: xStation5
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