JPMAM's Karen Ward: 'We have sleepwalked into a fiscal disaster'

Real root of problems lacks ownership

For Chancellor Rachel Reeves, waiting for the latest growth forecasts from the Office for Budget Responsibility (OBR) must have felt like waiting for the results of an exam she knew she had flunked.

Since the announcement last autumn to raise employers' National Insurance contributions, companies have indicated they will be reducing employment while, at the same time, raising prices to deal with higher costs. This leaves the Bank of England unable to do much to support growth by lowering interest rates. The OBR did indeed mark down growth, with the expectation for GDP growth this year reduced to 1% from 2% previously forecast. Lower growth and higher borrowing costs worsened the fiscal outlook to the point where the chancellor would have been breaking her fiscal rules. Spring ...