Key facts
- Fiscal headroom has halved to an estimated 10-12 billion pounds from 23.6 billion pounds in March.
- Some economists surveyed put headroom as low as 5 billion pounds.
- The Institute for Fiscal Studies said headroom could fall modestly to around 20 billion pounds from 24 billion pounds in March.
- Britain's 10-year government bond yields are the highest in the Group of Seven.
British finance minister John Healey should rebuild his depleted headroom against the fiscal rules to about 15-16 billion pounds at his upcoming budget to keep bond investors onside, a Reuters poll of economists showed on Thursday. The buffer, which measures how government's current tax and spending plans meet its fiscal rules, has halved since the March fiscal update to around 10-12 billion pounds from 23.6 billion pounds. Some economists surveyed put headroom as low as 5 billion pounds. The government's stability rule requires it to balance the current budget by 2029/30. Healey presents his budget on October 28 and said he wanted it to give households some breathing space, with economists expecting modest cost-of-living measures offset by increases to some smaller taxes. Britain's 10-year government bond yields are the highest in the Group of Seven, a gap analysts attribute mainly to interest rate and inflation expectations rather than renewed investor nerves over the budget.