The OECD has downgraded its forecast for UK economic growth next year to 1 per cent, citing weaker global activity, higher energy prices and elevated interest rates. The outlook is a setback for Andy Burnham’s spending ambitions and comes shortly before the government’s important Budget, when funding must also be found for defence plans.

The UK economy is expected to grow by 1.1 per cent this year, up from the OECD’s previous 0.9 per cent estimate, helped by stronger domestic demand and support measures including removing VAT from household energy bills. Inflation is forecast at 3.1 per cent this year and 2.6 per cent next year, with the OECD warning that energy-price rises linked to the Middle East conflict could keep inflation above target for longer.