PRESS: UK Treasury weighs smaller fiscal buffer to limit tax rises
(Alliance News) - The UK Treasury is considering accepting a smaller fiscal buffer at next month's budget in an effort to limit tax rises and spending cuts, the Financial Times reported on Wednesday.
The newspaper said the Treasury and Number 10 are discussing whether Chancellor John Healey could target less headroom against the government's fiscal rules than the GBP23.6 billion forecast by the Office for Budget Responsibility in March.
Gilt investors surveyed by the FT indicated the buffer could fall to around GBP14 billion without triggering a significant market sell-off, although some investors argued that headroom below GBP20 billion could undermine confidence.
The discussions come as higher borrowing and energy costs following the Middle East conflict put pressure on the public finances ahead of the October 28 Budget. Final decisions are expected closer to budget day once the OBR's forecasts are finalised.
By Eva Castanedo, Alliance News senior economics reporter
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