Britain's fiscal watchdog will reportedly downgrade its economic growth forecasts for every year of the rest of this parliament when the chancellor announces her Budget this week.
The news will come as a major blow to the Labour government, which has put economic growth at the centre of its plan for Britain.
Rachel Reeves will deliver her Budget on Wednesday after a whirlwind of speculation about which taxes she will hike to help balance the books, including the expectation - and then apparent U-turn on - an increase to income tax.
The OBR will publish its latest forecasts following the chancellor’s Budget speech, with sources telling Sky News that it will downgrade its growth predictions for 2026 and for the remaining years of the current parliament.
The OBR is an independent body which provides analysis of the nation's public finances.
Twice a year, it publishes detailed five-year forecasts alongside the Budget and spring statement to assess the impact of any tax and spending measures and analyse whether the government is meeting its fiscal targets.
Earlier this year it was reported that the OBR had planned to downgrade its official productivity forecasts, leaving a gap in the public finances of around £20bn and prompting fears of widespread tax rises to fill the gap and rescue Britain’s ailing public finances.
But as Ms Reeves gears up to announce a swathe of tax rises this week, CBI boss Rain Newton-Smith will tell ministers and business leaders on Monday that firms are concerned the UK could “risk getting locked in a stop-start economy”.
She is also set to encourage the government to make “hard choices” and avoid “death by a thousand taxes”.
Overnight on Sunday, it was revealed that Rachel Reeves could hit more than 100,000 high-value properties with a mansion tax as she seeks to raise money to fill the financial black hole, having reportedly scaled back plans for a property tax.
She is now expected to apply a tax to homes worth more than £2m in a move which could raise between £400m and £450m for the Treasury.
An extension of the freeze on income tax thresholds is among rumoured measures and would see more people dragged into paying tax for the first time or shifted into a higher rate as their wages go up.
Among the “smorgasbord” of tax rises which are expected, Ms Reeves is also set to scrap the two-child benefit cap.
The latest reports about the OBR’s growth downgrade came just hours after business secretary Peter Kyle apologised for the speculation around the Budget and said that rumours have been “as frustrating for me and the chancellor as it has for everyone else”.
He told BBC Breakfast there is “intense pressure” on ministers to be “open about the direction of travel... while staying within the confines of what’s acceptable for a Budget”.
“I’m sorry that people have been anxious about all the speculation, it’s been as frustrating for me and the chancellor as it has for everyone else”, he said.
Asked whether he thought Ms Reeves had added to the uncertainty with her apparent laying the groundwork for an income tax rise earlier in the autumn, Mr Kyle said: “We do interviews like this and we are asked about measures and there is intense pressure on us to be open about the direction of travel.
“When we try to be as open as we possibly can while staying within the confines of what’s acceptable for a Budget, of course it just generates more speculation, not less. We’re trying to get that balance right.”
The Treasury has been contacted for comment.
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