UK borrowing costs fell and sterling gained ground on Wednesday after the government’s independent fiscal watchdog accidentally published its full budget forecasts before the chancellor had begun her statement, revealing a bigger-than-expected fiscal buffer and substantial tax rises later in the decade.
The Office for Budget Responsibility (OBR) admitted it had made a “technical error” when its November Economic and Fiscal Outlook appeared on its website shortly before midday, around forty minutes before Rachel Reeves was due to present her Budget to MPs. The document showed that Reeves’ plans would more than double her fiscal “headroom” to £21.7bn by 2029‑30, largely funded by tax increases worth about £26bn a year by the end of the forecast period.
Bond traders reacted within minutes of the leak, first reported by Reuters at 11.41 GMT. Yields on benchmark ten‑year gilts dropped from around 4.5 per cent to roughly 4.44 per cent as investors digested projections pointing to tighter fiscal policy and higher tax revenues, before recovering some ground as the scale of weaker growth and back‑loaded measures became clearer. Sterling jumped from about $1.316 to near $1.32 on the initial headlines and later traded around $1.323 in volatile dealings.
By the close of the London session, ten‑year gilt yields were about seven basis points lower on the day, at roughly 4.43 per cent, with traders saying the combination of extra fiscal headroom and an explicit commitment to Reeves’ fiscal rules had made UK government debt a relative outperformer against US Treasuries and German Bunds.
The episode is highly unusual in the tightly choreographed world of UK Budgets, where the contents of the chancellor’s statement and the OBR’s supporting analysis are normally kept strictly under wraps until the moment the speech begins. The watchdog said the report had been uploaded to a live but unadvertised link on its website “too early” and was removed once the error was identified. An internal investigation has been launched.
Reeves, who discovered the leak shortly before entering the Commons, told MPs the publication was “deeply disappointing and a serious error” by the OBR, though she stressed she retained full confidence in its chair, Richard Hughes. Opposition MPs heckled that they had “already read” the Budget as she rose to speak.
The leaked OBR document confirmed that Reeves’ tax‑heavy Budget will raise an additional £0.7bn in 2026‑27, rising steeply to just over £26bn a year by 2029‑30 – the third‑largest medium‑term tax rise package since the OBR was created in 2010. Much of the additional revenue comes from extending existing freezes to income tax and National Insurance thresholds by a further three years, to April 2031, a move often described by economists as a “stealth tax” because it pulls more workers into higher bands as wages rise.
According to the OBR, those threshold freezes alone will raise about £8bn in 2029‑30 and result in around 780,000 more basic‑rate taxpayers, 920,000 more higher‑rate taxpayers and 4,000 more additional‑rate taxpayers than previously forecast. Other significant measures include charging National Insurance on salary‑sacrifice pension contributions, expected to raise £4.7bn a year by 2029‑30, and a two‑percentage‑point increase in tax rates on dividends, property and savings income, together adding just over £2bn a year.
Wealth‑related and sector‑specific changes are also baked into the plans. A council tax surcharge on high‑value properties – widely dubbed a “mansion tax” – will apply to homes worth more than £2m from the late 2020s, while higher gambling duties, including a sharp rise in remote gaming duty, are forecast to bring in around £1.1bn a year by 2029‑30. A future mileage‑based charge for electric vehicles is intended to replace some of the fuel duty revenue lost as petrol and diesel cars are phased out.
Reeves used her Commons statement to frame the tax rises as a deliberate choice to rebuild the public finances and fund social priorities, arguing that the alternative would be a return to what she called 2010s‑style austerity. She confirmed that the controversial two‑child limit on child benefit will be scrapped, at an annual cost of roughly £3bn. The OBR estimates that around 560,000 families will gain by an average of £5,310 a year and that as many as 450,000 children could be lifted out of poverty.
The Budget also contained a package of near‑term cost‑of‑living measures, including a £150 reduction in annual household energy bills through the removal of green levies from electricity prices, and freezes on rail fares, fuel duty and prescription charges. The OBR said these steps would shave around 0.3 percentage points off headline inflation next year, though they do not change its view that price rises will be “stickier” than previously assumed in the short term.
Despite the improvement in Reeves’ headroom against her main fiscal rule – to have day‑to‑day spending balanced by revenues by 2029‑30 – the OBR warned that the UK’s public finances remain “relatively vulnerable to future shocks”. Public sector net borrowing is forecast to fall from 4.5 per cent of GDP in 2025‑26 to 1.9 per cent in 2030‑31, but the path is uneven, with higher borrowing in the next two to three years as spending is front‑loaded and tax rises build gradually.
Debt is expected to rise as a share of GDP in the near term before edging down towards the end of the forecast period. Debt interest will absorb about one pound in every ten spent by government this year. Overall tax receipts are projected to climb to just over 38 per cent of GDP by 2029‑30, up from 35 per cent in 2024‑25 and around five percentage points higher than before the pandemic, implying the UK will sustain one of the highest peacetime tax burdens on record.
The improved fiscal position is in part offset by a gloomier economic outlook. The OBR has cut its assumption for underlying productivity growth from 1.3 per cent a year to 1 per cent, creating what officials described as a £16bn hit to Reeves’ initial room for manoeuvre. Average real GDP growth is now expected to run at about 1.5 per cent a year across the forecast period, around 0.3 percentage points slower than in the watchdog’s March projections, with the 2026 growth forecast reduced from 1.9 per cent to 1.4 per cent.
Market strategists said the combination of weaker growth and higher, back‑loaded taxes would raise questions over the political and economic credibility of the plans, but that investors were reassured by the decision not to loosen policy in the face of those downgrades. One analyst described the Budget as “spend now, pay later”, with more generous welfare and support measures in the near term and a heavier tax burden pushed into the late 2020s.
Politically, the OBR leak overshadowed much of the government’s intended messaging. Mel Stride, the Conservative shadow chancellor, called the early publication “utterly outrageous” and suggested it might amount to a criminal breach of budget secrecy. Kemi Badenoch, the Conservative leader, branded the run‑up to the Budget “the most chaotic in living memory” and said the government looked like a “shambolic, laughing stock”, arguing that if Reeves did not resign over broken tax promises she should consider doing so over the leak.
The incident has also reignited debate over the OBR’s role. Some figures on the Labour left and in the trade union movement have long criticised the watchdog as a “cheerleader for austerity” and argue that its modelling systematically understates the benefits of higher public investment. Others within government stress that, after the market turmoil which followed Liz Truss’s unfunded mini‑Budget in 2022, maintaining a visibly independent fiscal watchdog is crucial to investor confidence.
Outside Westminster, protests underlined the political risks around the Budget’s tax measures. Farmers drove tractors into central London in defiance of police restrictions to oppose planned inheritance tax changes affecting large agricultural estates and to highlight rising costs. Anti‑austerity demonstrators gathered near Downing Street to condemn what they see as a further squeeze on living standards through frozen tax thresholds and constrained public spending.
Thinktanks including the Resolution Foundation and the Institute for Fiscal Studies argued that the government was relying heavily on “fiscal drag” and tax rises long after the current parliament to square its promises on public services, welfare and debt reduction. They warned that any future government would face difficult choices if slower‑than‑expected growth, higher interest rates or political resistance made those later‑dated measures hard to deliver.
For now, the immediate test of Reeves’ approach appears to have been passed: gilts rallied, the pound finished the day stronger and there was no sign of the kind of abrupt loss of confidence that toppled her Conservative predecessors. But the accidental early release of the OBR’s report has raised fresh questions about the handling of one of the Treasury’s most sensitive days, and about the sustainability of a strategy that leans on rising tax receipts, subdued spending growth and continued market patience.
The OBR’s investigation into how the document came to be published early is expected to report to the Treasury and MPs on the Commons Treasury committee in due course. Investors, meanwhile, will be watching whether ratings agencies and markets continue to give Reeves the benefit of the doubt as the implications of weaker growth, higher taxes and still‑elevated debt become clearer in the months ahead.