BRITAIN will face further tax increases within months after Chancellor Rachel Reeves’s Spring Statement left the economy precariously balanced, according to the Office for Budget Responsibility (OBR).
The fiscal watchdog warned there is an equal chance Reeves may force additional tax hikes to comply with her fiscal rules, after already projecting that Britain’s tax burden will hit a historic peak of 37.7 per cent of GDP by 2027-28, remaining near that level until at least 2030.
The Chancellor currently has less than £10 billion of leeway heading into this autumn’s Budget, due largely to restricted welfare spending and departmental cutbacks.
However, the OBR cautioned that fresh tariffs planned by Donald Trump and increased regulation from Labour’s proposed Employment Rights Bill could further diminish this limited breathing space, compelling Reeves to impose additional taxes.
The OBR specifically highlighted Trump’s impending tariffs, expected to be announced next week, as particularly damaging, suggesting they could reduce UK economic output by up to 1 per cent – effectively eliminating the Chancellor’s fiscal headroom entirely.
When directly questioned on the prospect of future tax increases during her recent Budget statement, Reeves notably avoided ruling them out, stating: ‘I’m not going to write four years’ worth of Budgets.’
Alongside these challenges, economic growth predictions for this year were halved by the OBR from 2 per cent down to 1 per cent, largely driven by increased interest rates and declining consumer and business confidence linked to recent tax hikes and the escalating trade tensions with the US.
While growth forecasts for subsequent years saw slight upward revisions, overall projections remain lower compared to those made in October.
Significantly, the OBR indicated that the Labour government will fail to achieve annual economic growth of 2 per cent throughout the current decade – a notable setback given that Labour leader Sir Keir Starmer has repeatedly declared reaching this growth rate his ‘number one priority’.
