Budget 2021 Spending Review summary
27 October 2021
Economic forecasts and fiscal rules
The OBR has delivered good news on the economic and borrowing outlook after a stronger-than-expected recovery from the Covid blow.
The fiscal watchdog said growth will come in stronger than expected in 2021 and 2022. GDP will rise 6.5pc this year (up from its prediction of 4pc in March) and climb 6pc in 2022 while unemployment will peak at 5.2pc. GDP will return to pre-Covid levels by the turn of the year.
It is also set to reduce its estimates for the economy’s longer-term scarring from 3pc to 2pc. That should give the Chancellor more wiggle room on spending in the future.
Borrowing will fall from 7.9pc of GDP this year to 3.3pc in 2022 and then 2.4pc in 2023, the OBR estimated.
The OBR expects CPI to average 4pc over the next year. Mr Sunak said the "majority of this rise in inflation can be explained by two global forces", such as demand for goods and energy. He warned it will take months for the problems.
The Chancellor also set out two new fiscal rules to stabilise the public finances following the Covid blow. Public debt must, as a percentage of GDP, be falling within three years, while day-to-day spending must be paid through revenue raised through taxation.
Total department spending will rise by 3.8pc a year in real terms over this Parliament, a £150bn boost.
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