British finance minister Jeremy Hunt has left himself and his successors "historically modest" room to put public debt on a downward path, the Office for Budget Responsibility said after he presented his annual budget on Wednesday.
The OBR said Hunt's budget had "just enough to meet the government's fiscal rules on our central forecast with underlying debt falling as a share of GDP in 2028-29 by a historically modest margin of 8.9 billion pounds ($11.3 billion)".
In November, after Hunt's mid-year fiscal update, the OBR had forecast he had 13 billion pounds of headroom.
"This margin is a small fraction of the risks," the OBR said, highlighting potential inflation pressures from conflict in the Middle East as well as uncertainty about medium-term interest rates, net immigration and workers' productivity.
The centrepiece of Hunt's budget was a 2 percentage point cut in payroll taxes for employees and the self-employed, a bid to boost the Conservative Party's fortunes as it trails the opposition Labour Party ahead of a national election expected later this year.
The OBR repeated its warning that its forecasts were based on government spending plans that looked hard to meet for whichever party is in power.
These plans "imply no real growth in public spending per person over the next five years, despite committing to increase spending on some major public services in line with or faster than," it said.
Overall, the OBR said the outlook for the public finances over the next five years was similar to November, as was its estimate of the future level of output.
However, upward revisions to the size of Britain's population since its last forecast, combined with higher rates of inactivity, meant output per head would be lower.
($1 = 0.7861 pounds)
