Budget 2023

On 15 March 2023, chancellor Jeremy Hunt presented his first budget, setting out the government’s plans for tax and spending policy. Alongside it, the Office for Budget Responsibility (OBR) published updated economic and fiscal forecasts for the next five years – running up to and beyond the next election. This page includes all IfG content in response to the budget.

 The forecast from the OBR presented some cautious good news: the economy is expected to hold up better this year as a result of falling energy prices. Output is expected to be higher over the full five-year forecast horizon too, boosted modestly by several measures the chancellor set out to increase labour market participation covering pensions, benefits and childcare.

Inflation is expected to be less persistent and fall more quickly due to those lower energy prices. However, while the OBR expects the UK to avoid a technical recession this year, it is set to be another difficult one for household incomes with a second consecutive year of real-terms falls expected. 

An improving growth forecast means borrowing is expected to be lower in the medium-term too, and the chancellor is now meeting his deficit target (for borrowing to be below 3% of GDP in the 2027/28) with almost £40 billion of headroom. However, he has only £6.5 billion of headroom against his debt target (for it to be falling as a share of GDP in the fifth year of the forecast), which helped explain why Hunt was willing to be more generous with tax giveaways in the short-term than the medium-term.