Dearbail Jordan
Business reporter

We’ve been hearing a lot about the Office for Budget Responsibility (OBR) and its forecasts for economic growth – but what does that actually mean?

At the very basic level, you want the economy to be growing. Theoretically, it means people are spending money, extra jobs are being created, more tax is being paid and workers get decent pay rises.

The key measure is gross domestic product (GDP) which looks at all the economic activity of companies, governments and people in a country.

Part of the OBR’s job is to look at the government’s plans for taxes, spending and borrowing and work out what impact this will have on the wider economy.

In March, after assessing the then Conservative Chancellor Jeremy Hunt’s plans, the OBR forecast that the UK economy would grow by 0.8% this year and 1.8% next year. In the next three years, it predicted GDP would rise by 2%, 1.8% and 1.7%.

Now, after crunching through Rachel Reeves’ numbers, the OBR reckons that the economy will grow by 1.1% this year and 2% next year. That’s better than it thought in March.

But it then forecasts that GDP will grow by 1.8% in 2026, by 1.5% in 2027 and 1.5% the following year. That’s less than the earlier forecast.