THE threat of future tax rises was raised today as Rachel Reeves’ growth gamble was dealt a hammer blow.
Official GDP forecasts were slashed in half in a gloomy outlook on the state of Britain’s finances.
Rachel Reeves has been hit with gloomy growth forecasts[/caption]
The Office for Budget Responsibility downgraded its annual growth projections from 2 per cent to a paltry 1 per cent.
It means Ms Reeves will have less money coming into the Treasury to fund her spending plans.
Her “non-negotiable” fiscal rules means she is unable to hike borrowing to fund day-to-day spending, and today she already delivered deep cuts to save cash.
It heightens the prospect the Chancellor will use the next autumn Budget to raise taxes to pay for her plans.
During the election she promised that returning Britain to strong growth would fund her spending ambitions – rather than tax rises and cuts.
But Labour have struggled to revive the nation’s flatlining economy, with the OBR today confirming UK PLC will continue to flag.
Critics blame Ms Reeves £40billion tax rises last year, as well as a raft of employer red tape they claim is hurting firms.
Bosses have also warned the £25billion National Insurance hike that kicks in next week will reduce their ability to hire new staff and invest.
There are fears Ms Reeves could use her next Budget to increase “stealth taxes” on workers despite pledging to end them last year.
Tax thresholds are currently frozen until 2028, meaning they will not rise with inflation every year as should be the norm.
Economists now warn she could keep the threshold freeze beyond 2028, meaning millions more will be dragged into paying higher rates.
What is the Office for Budget for Responsibility?
By JACK ELSOM, Chief Political Correspondent
THE Office for Budget Responsibility is an independent watchdog that analyses the government’s spending plans.
Among other things, it makes projections on how much taxes will raise, how much policies will cost, and how much growth will go up or down.
These forecasts have become central to Budgets and Statements in recent years.
George Osborne set up the OBR when Chancellor to avoid accusations the Treasury was “marking its own homework” with its own forecast.
But critics say it has become too powerful by forcing ministers to perpetuate the “tax and spend” doom loop to satisfy the OBR.
Liz Truss famously did not commission an OBR forecast for her notorious mini-Budget, which spooked the markets into meltdown.
