UK Expands Fiscal Buffer, OBR Says in Shock Release

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00:00Chancellor of the Exchequer, Rachel Reeves, has been able to expand her fiscal buffer to £22 billion.

00:06This is according to an early release of the Office for Budget Responsibilities forecast.

00:11That compares to expectations of £15 billion.

00:14So this number was much better than anticipated.

00:17It sent yields down when it initially hit the Bloomberg terminal just some minutes ago.

00:22The document appears to be, well it is genuine, it was published in error though by the OBR

00:28ahead of the expected release, which is usually given to the markets after the Chancellor, Rachel

00:34Reeves, finishes delivering her budget speech.

00:36So instead of the OBR's headlines dropping after Rachel Reeves had already spoken, we

00:42ended up with getting the OBR's reaction to it before we've heard the speech itself.

00:47So the OBR has already apologised for that.

00:49It said that it is, it is a product choice for the technical error and it's launched an

00:54investigation.

00:54So that means that markets have had to catch up pretty quickly in a sort of back to front

01:00fashion, taking the OBR's word for it first before we've got the obvious budget delivered.

01:05But that does mean that we can tell you a few things about what are a few things that are

01:09in the budget.

01:10So we started out with that headroom news and that was the thing that when it dropped around

01:1315 minutes ago, we saw yields drop here in the UK.

01:16And in just a moment, we'll put up a chart, a session chart that shows you the session chart

01:21for the 10-year yield.

01:22And we saw a drop in the yield because this was a confirmation that we got more headroom.

01:27That was what the Chancellor had told us she wanted.

01:29But that didn't last, as you can see.

01:31So we saw that drop in yields.

01:33And then there were a series of other headlines that then sent yields higher.

01:37So we got confirmation of some more negative news around growth.

01:40So the UK official growth forecast has been cut to 1.4% from 1.9%.

01:45Now, this is for the year 2026.

01:48Of course, there'll be other estimates, other data to get on other years.

01:52We usually get a full suite of renewed data from the OBR.

01:55But that's the one that seems to have moved markets.

01:58And also keeping in mind what we saw there on that V-shape in government debt yields, there

02:04are a host of other headlines that crossed as well, highlighting really where some of the

02:08money is going to come from to create this headroom.

02:11So we're seeing a very long period of hold on tax thresholds.

02:14So we've had confirmation on income tax thresholds.

02:17And certain of those are going to be maintained throughout the parliament.

02:19So perhaps that is one way that she is managing to get in some of this money for creating the

02:25headroom.

02:25Gambling duties, they're going to be reformed.

02:28Taxes on property.

02:29So this is properties above £2 million, often dubbed in the media a wealth tax.

02:34That seems to be what we are talking about there.

02:36But we'll wait to hear Rachel Reeves with the details about how exactly that's going

02:39to be applied, because there were various versions of that kind of policy doing the

02:43rounds beforehand.

02:44An increased tax on dividends by two percentage points.

02:47So that's something to watch when it comes to stock trading.

02:50And there was news on pension contributions above £20,000, NICs, national insurance contributions

02:57being applied to those.

02:59So we've seen plenty of headlines dropping on the Bloomberg Terminal in a real flurry.

03:03There's been some, I guess, an apology from the OBR about this technical error.

03:09In other news, slightly away from the financial markets, but certainly of relevance because

03:13it has to do with welfare spending, the UK is to remove the two-child limit within universal

03:18credit, according to the OBR.

03:20And of course, this has been something that had been very contentious within the Labour Party.

03:24And perhaps this is the type of policy that is designed to go down well with backbenchers.

03:28So that's some of the headlines that we have right now.

03:32They'll continue to drop as everybody works their way through this OBR statement.

03:36So the UK budget watchdog apologising, as I mentioned earlier on, for the fiscal reports

03:40arriving earlier.

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