Rachel Reeves is expected to undertake a major communications effort at the Labour conference in Liverpool, as she prepares the ground for November’s Budget. The Chancellor will attempt to convince the public that forthcoming tax rises are the result of external circumstances rather than her own decisions.
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The challenge stems from the Office for Budget Responsibility (OBR), which is set to downgrade its forecasts for productivity growth over the coming years. Lower projected growth will mean reduced tax revenues, leaving the government with little choice but to raise taxes or cut spending to remain within borrowing limits. Labour argues this revision is not linked to its policies, but rather a correction of overly optimistic forecasts under the previous Conservative administration.
This is not the first time the OBR has faced political criticism. Supporters of Liz Truss complained the body was obstructing tax cuts, when in reality its generous assumptions gave her government more room than was justified. By ignoring the OBR in 2022, Ms Truss triggered a financial market crisis, a reminder that lenders rather than forecasters ultimately constrain borrowing. Some Labour voices now risk repeating this mistake, though Ms Reeves is understood to accept the fiscal realities, however unpopular they may prove.
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Yet she is not entirely free from responsibility. In last year’s Budget, Ms Reeves claimed to have fixed a £22bn shortfall, but the longer-term gap has since grown. Her choice of tax increases, including a rise in employers’ national insurance, has drawn criticism for penalising jobs. Recent U-turns on winter fuel payments and disability benefits have further complicated the fiscal picture. With commitments such as lifting the two-child benefit cap still to be funded, the Chancellor now faces a difficult balancing act. Unless she opts for the more equitable step of raising income tax, she risks relying on the wrong mix of tax measures, leaving herself open to renewed criticism.
