The Office for Budget Responsibility (OBR) has handed Rachel Reeves a £1.7bn lifeline to balance the books after it changed a crucial window for its forecasts amid growing political pressure.

In a highly unusual move, the fiscal watchdog said it had changed the time frame to forecast moves in bond markets from the 10 days to Oct 10 to the 10 days to Oct 21.

The timing of the window is crucial because it helps set the boundaries for the Chancellor on taxes and spending ahead of the Budget. The change in the window means the OBR was able to take into account a sharp fall in gilt yields, which determine the cost of government borrowing.

Lower government borrowing costs help the Chancellor meet her fiscal rules by reducing the amount of money she needs to balance the public finances.

The OBR’s announcement came after it emerged that Ms Reeves had backtracked on plans to raise income tax, causing the pound to sink and gilts to sell off.

Ms Reeves and Sir Keir Starmer faced intense political pressure over the prospect of breaking a central promise in their manifesto to not raise income tax.

Shadow business secretary Andrew Griffith said: “Reeves clearly needs all the help she can get, but it shouldn’t come down to this.

“Far from balancing the books, we’ve had the most chaotic run-up to a budget imaginable.”

The yield on 10-year UK gilts, a benchmark for government borrowing costs, began to decline from around 4.67pc on Oct 10.

It fell more sharply after the Chancellor said she was “looking at tax and spending” on Oct 15. The 10-year yield had dropped to 4.48pc by the end of the OBR forecast period on Oct 21.

The 10-year benchmark climbed to 4.56pc on Friday after Ms Reeves abandoned a plan to increase income tax rates. Treasury insiders claimed she was told the raid would not raise as much money as expected.

Lower borrowing costs during the OBR’s delayed forecast window is expected to have saved the Chancellor £1.7bn, according to Oxford Economics.

The OBR said it reserved the right to change the forecast window “in exceptional circumstances”.

Both the OBR and Treasury sources rejected the unusual decision was the result of political pressure.

Treasury insiders pointed to the OBR making the decision before rapid falls in gilt yields.

Andrew Goodwin, at Oxford Economics, said: “I have some sympathy for the decision to adopt a closer window to try to better capture market pricing, but the impact of doing so is fairly limited. I estimate that it reduces debt servicing costs by around £1.7bn compared with the earlier window.

“While it helps the Government at the margin, it’s not going to have been a decisive factor in the decision over whether to increase income tax rates or not.”

In a statement on Friday, the OBR said: “Given the time between the closure of the pre-measures economy forecast and the publication of our EFO, we decided prior to beginning this forecast that we would take a later reading of market expectations for Bank Rate and gilt yields for our pre-measures fiscal forecast. This window for interest rates in the final pre-measures fiscal forecast was the 10 working days to Oct 21.

“In exceptional circumstances, we always reserve the ability to revisit the market determinants used in our final economy and fiscal forecasts at any time prior to the publication of our EFOs [economic and fiscal outlooks].”

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