Inflation and unemployment are set to be higher than expected in 2025 and 2026, according to leaked forecasts by the Office for Budget Responsibility.
It came as the UK’s official forecaster also reported that economic growth will be weaker than expected from 2026 to the end of the current Labour government, as the tax burden on the economy continues to rise.
Nevertheless, the OBR said the UK economy is set to grow by 1.5% in 2025, in an upgrade from its previous prediction of 1% from its March outlook.
However, this is set to slow to 1.4% next year. The forecaster had previously predicted a reading of 1.9% for the year.
Meanwhile, the OBR said UK inflation is set to be 3.5% for this year, up from a previous projection of 3.2%.
It also increased its inflation prediction for next year to 2.5% from 2.1%, although it still expects this to slow to the 2% target level by 2027.
The OBR also highlighted that the tax burden on the economy will hit record levels by the end of the Labour government.
The UK’s tax-to-GDP ration is on track to strike a record high of 38.3% of GDP by 2030-31.
