Chancellor Rachel Reeves faces intense criticism after the head of Britain's budget watchdog declared that none of her £26 billion tax-raising measures will materially boost economic growth. The damning assessment came as the Office for Budget Responsibility (OBR) accidentally leaked its report 40 minutes before her Wednesday speech.
Richard Hughes, chair of the OBR, told The Independent: «In this particular Budget, none of the measures either positive or negative... would have a material affect on our forecast.» He later apologized for the unprecedented leak, describing it as a «technical error» and launching a full investigation.
Growth Forecasts Downgraded
The OBR revised down medium-term growth projections across the board. Growth forecasts now stand at 1.4% for 2026, 1.5% for 2027, 1.5% for 2028, and 1.5% for 2029 – significantly lower than previous estimates of 1.9%, 1.8%, 1.7%, and 1.8% respectively.
Helen Miller, director of the Institute for Fiscal Studies, delivered a scathing critique in the IFS's detailed Budget analysis. «Growth not only makes us richer, it makes almost every problem easier to solve,» she said. «At the last Budget the Chancellor said: 'Every Budget I deliver will be focused on our mission to growth the economy.' That wasn't on show yesterday.»
She added: «The Chancellor, like her predecessors, continues to shy away from meaningful tax reform that could move the dial. This felt mostly like the Budget of a Government trying to scrape through.»
Tax Threshold Freeze Hits Workers
The Budget's largest revenue raiser comes from freezing income tax and national insurance thresholds for three additional years from 2028 until 2030/31. This measure alone will raise £12.7 billion annually by 2030/31 and drag approximately 1.7 million workers into higher tax brackets.
More than 500,000 people in London and the South East face being pushed into the 40% tax rate by 2030/31. The Resolution Foundation warned that working people would have been «better off» if Reeves had raised income tax rates by 1p rather than freezing thresholds.
Ruth Curtice, chief executive of the Resolution Foundation, said: «Appearances can be deceiving. Debt is up and most of the fiscal repair job has been put on hold for three years.»
Mansion Tax and Welfare Spending
The Budget introduced a new levy on properties valued over £2 million – £2,500 annually for properties at the threshold, rising to £7,500 for a £5 million house. This «mansion tax» is expected to generate £431 million in 2031.
The abolition of the two-child benefit cap will cost £3 billion annually. The OBR warned this would lead to 25,000 more large families claiming benefits, at an additional cost of £300 million. Overall welfare spending is forecast to rise from £333 billion in 2025-26 to £389.4 billion in 2029-30.
Reeves Defends Her Position
Reeves mounted a vigorous defense across multiple broadcast interviews. She told GB News: «I am in charge of economic policy. This was my Budget focused on my priorities, cutting the cost of living, cutting NHS waiting lists and cutting debt and borrowing.»
On accusations of breaking Labour's manifesto pledge not to raise taxes on working people, she told Sky News: «We were very specific in the manifesto that we wouldn't increase the rates of income tax, national insurance or VAT.» She acknowledged: «I do recognise that yesterday I have asked working people to contribute a bit more by freezing those thresholds for a further three years from 2028.»
Reeves told Times Radio: «Lots of people have tried to write me off over the last 16 months. And you're not going to write my obituary today. There's plenty more that I'm going to do to grow our economy and make working people better off.»
Political Fallout
Conservative leader Kemi Badenoch called the Budget a «total humiliation» and demanded Reeves' resignation. She told the House of Commons on Wednesday: «Last year, the Chancellor put up taxes by £40 billion – the biggest tax raid in British history. She promised that she would not be back for more. Today, she has broken every single one of those promises.»
The Institute for Fiscal Studies rejected Reeves' claims of keeping manifesto promises, stating: «Because it includes a freeze in National Insurance thresholds, it also breaches the government's manifesto tax promise not to increase National Insurance. As the Chancellor acknowledged, it clearly represents a tax rise on working people.»
Reeves refused to rule out further tax rises next year when questioned by BBC Radio 4's Today programme, saying: «I'm not going to write future budgets.»
Note: This article was created with Artificial Intelligence (AI).
