Budget 2026: Four OBR forecasts lay bare Britain’s fiscal vulnerability

If you’re in a good mood, why not consider ruining it by reading this week’s OBR report. The fiscal watchdog paints a bleak picture of the health of the British economy and the public finances over the rest of this Parliament – one in which the UK is in a steady state of decline, funding a level of public spending that looks increasingly unsustainable. Four of the OBR’s projections lay bare the scale of the challenge ahead. First of all, net migration has been revised down.

The 100,000 projection for 2027 is almost half that the OBR forecast earlier in the year. That may be politically expedient for Andy Burnham ahead of the next election, but given it means the overall UK adult population is now expected to fall from 2029 onwards, it means our shrinking population will become a drag on the economy and the tax receipts the exchequer is able to collect. Second, following the above-target levels of inflation the UK has seen this year, average earnings are now set to fall in real terms next year.

For families who are already feeling the pinch now, things could well get worse before they get better. Third, Labour is now all but certain to fail to meet its housebuilding target. The OBR says net additions will fall next year, and continue to be below this year’s level for at least the next three years. Less homes coming online means an ageing, deteriorating housing stock, as well as further difficulty for young people seeking to get on the housing ladder.

There is one thing the OBR has revised up: welfare. Thanks to big hikes in the state pension and a more than fifty percent jump in spending on health-related benefits to £70bn by 2031/2, welfare is projected to steadily increase as a share of GDP.