A modest upgrade to the OBR's wage growth forecasts at the 28 October Budget could add up to £9bn to the Chancellor's fiscal buffer, according to economists cited by Bloomberg. That could ease the pressure on John Healey for large tax rises or spending curbs.
Ruth Gregory of Capital Economics estimates that headroom would be £8bn larger if the OBR adopted her firm's pay profile. The IFS says a realistic scenario would raise income tax receipts by £9bn compared with March.
In March the OBR put pay growth at 3.4% this year, 2.4% in 2027 and 2.1% in 2028.
Nick Ridpath, an IFS research economist, said, as quoted by Briefs:
"The OBR has been pretty pessimistic in recent years about earnings, but we would expect higher inflation to feed through to some degree to higher nominal earnings."
Dan Hanson of Bloomberg Economics says a modest tweak would likely ease the pressure to "course correct" the deficit.
These are outside estimates, first reported on 15 October. Whether the OBR revises its pay forecasts, and by how much, will not be known until it publishes its Economic and Fiscal Outlook alongside the Budget.