UK Fiscal Headroom Expands Amid Tax Hikes

The UK government is set to more than double its fiscal buffer, largely due to anticipated tax increases. The Office for Budget Responsibility revealed the headroom could reach 22 billion pounds, increasing from March's 9.9 billion pounds. Finance minister Rachel Reeves will outline these changes in her upcoming budget speech.

The United Kingdom is poised to significantly increase its fiscal buffer, thanks largely to proposed tax hikes, according to new estimates from the nation's fiscal watchdog. The Office for Budget Responsibility (OBR) announced ahead of Finance Minister Rachel Reeves' budget statement that the headroom – the extra spending or tax cuts feasible within the government's budget rules – could reach nearly 22 billion pounds in five years.

The updated figures mark a substantial increase from March's forecast of 9.9 billion pounds, which had been impacted by a downgrade in the country's economic outlook and rising borrowing costs. Reeves is expected to announce substantial tax increases in her budget speech, a move crucial for maintaining fiscal credibility amidst pressures for increased welfare spending.

The OBR's report highlighted several key tax strategies proposed by Reeves, including an extended freeze on income tax thresholds and a higher income tax rate. These measures are anticipated to raise an additional 26.1 billion pounds annually by 2029-30. Reeves' budget address in parliament is set to outline these fiscal measures further at approximately 1230 GMT.

(With inputs from agencies.)