Britain’s Borrowing Outlook Darkens as Energy Shock Deepens

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Chancellor Rachel Reeves has been warned that government borrowing is set to spike as a result of the Iran war, as the Office for Budget Responsibility admitted it had underestimated the effects of the last energy price shock.

In a review of its forecasting models, the OBR suggested it had learned lessons from Russia's full-scale invasion of Ukraine, which led to gas prices rising by around five times.

It said the overall impact on public finances "was to significantly increase government borrowing and debt" despite some government revenue being raised by taxes on energy companies' profits and higher wage growth.

The surge in government borrowing was driven by a rise in debt interest costs, welfare benefits, and the maintenance of real-terms increases to departmental budgets, according to analysis.

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The analysis suggests that the OBR could take a more pessimistic view on government borrowing, with oil prices jumping by around 40 per cent since the beginning of the war in March and wholesale European gas prices doubling.

Economists have warned that stalled peace negotiations will lead to prolonged disruption across the Strait of Hormuz, a critical global trading route for oil tankers and large ships.

The Bank of England warned in a worst-case scenario analysis that continued disruption would push inflation above six per cent and force it to undo all interest rate cuts made in the last two years.

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Poor Great Britain. Between allowing anti-fossil fuel loons overrun their government and Islamic extremist/Sharia Law advocates overrunning their communities, the Brits seem to be having a rough past five years or so.