The Chancellor is at risk of breaching her promise not to make another tax raid, experts have warned.
Rachel Reeves could be forced to raise further cash through higher taxes amid a sluggish economy, which would break her pledge.
That would be on top of the £40billion raid announced in her October Budget – including £25billion in employer National Insurance increases – which business leaders have said would lead to fewer jobs, lower pay and higher prices.
The warning comes after revised figures this week showed the UK saw zero growth in the three months from July to September, sparking fears that levies will be increased. Previously the economy was estimated to have grown by just 0.1 per cent.
Carl Emmerson, deputy director of the Institute for Fiscal Studies (IFS) think-tank, said the Chancellor did not have much ‘wiggle room against her fiscal targets and the spending plans’. It was only last month that Ms Reeves promised business leaders she was ‘not coming back with more taxes’.
But she has since repeatedly refused to reiterate the pledge, which some experts think she is increasingly unlikely to fulfil.
Mr Emmerson said: ‘The outlook is uncertain. She might get lucky. It’s possible growth will exceed the OBR’s [Office for Budget Responsibility] forecast, things could go very well. But, equally, she could get unlucky. And I guess we don’t have much of a sense of what she would do.
‘If she got unlucky, where would that leave their commitment to be delivering growth? Not very well. And what would she be doing on the public finances, given she seems to be unkeen on coming back for more taxes?
Rachel Reeves could be forced to raise further cash through higher taxes amid a sluggish economy, which would break her pledge
That would be on top of the £40billion raid announced in her October Budget – including £25billion in employer National Insurance increases – which business leaders have said would lead to fewer jobs, lower pay and higher prices. Picture: People walk across London Bridge during the morning rush hour, with the City of London’s financial district in the background
‘She’s not given herself huge wiggle room against her fiscal targets and the spending plans – while she topped up day-to-day spending a lot this year and next – from April 2026 onwards, the spending plans look pretty tight.’
Ms Reeves will enter 2025 with the economy flatlining, inflation rising and a looming Whitehall spending review which experts have warned will be ‘difficult’.
Tory business spokesman Andrew Griffith previously told the Mail that the revised Office for National Statistics (ONS) figures were proof that Labour had ‘killed, plucked and cooked the UK economic goose’.
And Paul Johnson, director of the IFS, told Times Radio: ‘It’s not impossible the Chancellor will feel she needs to come back for yet more money next autumn if the economy doesn’t pick up.’
The ONS figures represent the latest evidence of Labour’s dismal economic record since taking power in July.
UK gross domestic product (GDP) grew by 0.7 per cent in the first quarter of the year and
0.4 per cent in the second, putting it on a par with the US as the best performer among the G7 group of advanced economies.
Reeves has since repeatedly refused to reiterate the pledge she wouldn’t come back with more tax raids which some experts think she is increasingly unlikely to fulfil
But after Labour’s election victory, confidence drained away and growth stagnated in the third quarter, with GDP shrinking by 0.1 per cent in October.
The Bank of England has downgraded its growth outlook for the last three months of the year from 0.3 per cent to zero.
Some experts think that the UK is on ‘recession watch’. A recession would happen if the economy were to shrink for two quarters in a row.
The PM has insisted he has had to make ‘tough decisions’ as Labour has been accused of breaking its promises on a host of issues including payouts for the Waspi women, reforming business rates and scrapping pensioners’ winter fuel payments.