Deutsche Bank expects the Chancellor, John Healey, to leave £15.7bn of headroom against the main fiscal rule in a 'low-key' Budget, according to a note reported by Investing.com. That would be down from £23.6bn at the Spring Statement.
The bank estimates that headroom has slipped to £10.4bn before any new measures. It says modest tax rises and efficiency savings would lift it to £15.7bn. It expects headroom against the debt rule to narrow to £18.3bn from £27bn.
Those figures are in line with other forecasts. The £10.4bn falls within the £10bn to £12bn median estimate of current headroom in last week's Reuters poll. The £15.7bn is just above the £15bn that UBS expects Healey to target.
Deutsche Bank also expects:
- borrowing this fiscal year to be revised up to £126bn (3.9% of GDP), £12bn above Spring Statement projections. The bank says much of the rise is due to temporary one-off policy measures.
- borrowing to fall to £115bn (3.4% of GDP) next year and to £61bn (1.6% of GDP) by the end of the forecast period.
- the gilt sales plan for this fiscal year to rise by £5.5bn to £251.8bn, with Treasury bills covering part of the gap.
The bank flags more than £40bn of later pressures over the medium term. These include about £15bn from the Spending Review, about £8bn to lift defence spending to 3% of GDP from 2.7%, and about £18bn for a national social care service. It says the risk of an early election "shouldn't be discounted".
These are Deutsche Bank forecasts. The official figures will come from the OBR on Budget day.