Britain Braces for Painful Tax Hikes as Rachel Reeves Set to Break Her Own Economic Rules, Experts Warn”
Chancellor Rachel Reeves is facing strong criticism over her economic strategy, as a major economic research group now believes she will likely break her own financial rules. The National Institute of Economic and Social Research (NIESR) says weak economic growth means the government may have to raise taxes later this year.
According to NIESR, the UK economy isn’t growing as much as expected. They’ve lowered their prediction for next year’s growth from 1.5% to just 1.2%. This drop is blamed on people spending less at home and global uncertainty, which are making it harder for businesses to grow.
Because of this slower growth, the government will likely collect less money in taxes than originally thought. That puts Reeves at risk of failing to meet her goal of reducing national debt as a share of the economy and reaching a budget surplus in the coming years.
Earlier this year, Reeves said the government was on track to have almost £10 billion in spare funds by 2030. But now, NIESR thinks the government might fall short by nearly £63 billion instead. That could force the Treasury to either cut spending further or raise taxes to make up the difference.
Stephen Millard, a director at NIESR, criticized the government’s financial rules, calling them unrealistic. He said that sticking to these rigid rules means the Chancellor keeps having to choose between cutting public services or announcing unpopular tax hikes — neither of which encourages businesses to invest. He believes the entire financial approach needs to be reconsidered.
NIESR also warns that inflation is expected to be higher than previously thought, averaging 3.3% in 2025. That’s up from their earlier forecast of 2.4%. Rising prices, especially with international issues like U.S. trade policies, are making things even harder for the UK economy.
Other global bodies agree with this bleak outlook. The International Monetary Fund (IMF) recently reduced its UK growth forecast to 1.1% for this year, also citing economic pressures.
Adrian Pabst from NIESR said the government hasn’t yet presented a solid plan to grow the economy or improve living standards across the country. While some investments in London and the South East may help, he said more support is needed in smaller cities and poorer areas to truly boost business activity and long-term growth.
Meanwhile, the Conservative Party is accusing Reeves of being reckless with the country’s finances. Shadow Chancellor Mel Stride warned that she’s again close to breaking her own budget rules, which could lead to more tax increases later this year. He also said that during a time when both businesses and families are struggling with uncertainty and high bills, this kind of instability only makes things worse.
