British households face a "pretty grim picture" for their living standards, according to the government's independent forecaster, the Office for Budget Responsibility (OBR). The war in the Middle East is dragging down growth and triggering a fresh cost of living crisis, the OBR said, and its outlook has been cut despite the measures announced by the chancellor, John Healey, in his first budget.
In its report, published as Healey set out his budget, the OBR issued a sharp downgrade for growth in 2027, for household disposable incomes and for the public finances. The forecaster's assessment means the measures in the budget have not been enough to offset the damage caused by the conflict and the higher costs it is feeding through to the economy.
Healey presented the budget as a response to what he described as "global economic storms". As part of his package he announced a £100 payment to households, intended to help them navigate the difficult months ahead. The OBR's findings suggest that such support will be set against a weaker backdrop for incomes and public spending than the government had hoped.
The downgrade matters because it reaches into everyday household budgets. Slower growth and weaker disposable incomes leave less room for families to absorb rising prices, while a deterioration in the public finances narrows the options available to the Treasury for further support. The OBR's warning that living standards are under pressure signals that the strain is likely to be felt well beyond the immediate budget period.
The report's emphasis on the Middle East conflict underlines how far events abroad are shaping domestic economic prospects. Describing a grim picture rather than a temporary dip, the forecaster points to a challenging period ahead for the chancellor as he seeks to balance support for households against the need to keep the public finances on a sustainable path.
The OBR's assessment also frames the budget as a test of how far targeted measures can cushion households when the wider economy is weakening. The forecaster's downgrades cover three linked areas, growth, incomes and public finances, and taken together they suggest that the pressures identified are structural to the current shock rather than confined to a single sector. For readers in the Caribbean, where energy and food prices are closely tied to global markets, the same pattern of external shocks feeding into household costs is a familiar one.
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