Rachel Reeves is expected to raise taxes to fund an expected £20-30 billion hole in public finances.
Nightmare for Rachel Reeves as OBR deals huge budget blow (Image: Getty)
The UK’s fiscal watchdog is set to slash its economic growth forecasts for 2026 and the rest of parliament when Rachel Reeves delivers Wednesday’s Autumn Budget.
The Office for Budget Responsibility’s (OBR) numbers shape every major Budget call. The Chancellor is expected to turn to tax hikes to plug a £20-30billion hit to public finances from the OBR’s weaker growth outlook and rising debt costs, Sky News reported on Monday. The OBR will publish its revised forecasts for the economy and public finances on the same day as the Budget statement on November 26.
Rachel Reeves is expected to raise taxes to fund an expected £20-30 billion hole in public finances. (Image: Getty)
The UK economy has been expanding at an annual rate of around 1.5% on average since mid-2024, with gross domestic product (GDP) growth slowing throughout 2025.
While GDP is 5.3% higher than it was before the COVID-19 pandemic, GDP per head is only 0.8% higher over the same period – a sign of sluggish performance. According to the Commons Library, the modest growth has been partly due to weakness in consumer spending.
Quarterly data from the Office for National Statistics (ONS) shows that in 2025, the economy grew by 0.7% in January-March, by 0.3% in April-June and by just 0.1% in July-September.
The economy is estimated to have contracted by 0.1% in September, driven by a decline in motor manufacturing, partly due to the cyberattack on Jaguar Land Rover.
This slowdown comes against a backdrop of rising inflation,which has climbed from a low of 1.7% in September 2024 to 3.6% in October 2025, much higher than the Bank of England’s 2% target.
In March, the OBR forecasted 1.0% growth in 2025, rising to 1.9% in 2026, but those forecasts are now set to be revised.
Speaking on BBC Breakfast this morning, Business Secretary Peter Kyle insisted that “things are getting better in our country”.
He said: “We’re trying to make sure that we reassure people that we are going to get a grip on the basics. We understand where people are at the moment.
“Things are getting better in our country. We are investing in our public services. We are laying the foundations for economic growth, and that matters to people, because economic growth in our country means that people can do more next year than they could this year – better holidays, they can spend more with their families and on their families, life will get better.
“That’s why growth is so important. We know it means a lot to people, so we are doubling down on those measures.”
He added: “We need to do more of it so we can break out of this cycle of high tax and low growth.”
