UK Institute for Fiscal Studies suggested the Treasury was at times ‘making up the numbers’

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Rachel Reeves Faces Tax Hike Warnings Amid Economic Turbulence

 

Chancellor Rachel Reeves has come under intense scrutiny from the Institute for Fiscal Studies (IFS), which issued a blunt warning that further economic downturns will almost certainly trigger new tax hikes. In a biting critique of Reeves' recent spending review, the IFS questioned the credibility of the Treasury’s figures and expressed alarm at the fragile state of the public finances.

 

Paul Johnson, the outgoing director of the IFS, did not hold back in his assessment. “If you were baffled by the chancellor’s speech yesterday, so were we. It did not appear to be a serious effort to provide any useful information to anybody,” he said. He went on to accuse the Treasury of at times “making up the numbers” and described Reeves’ statement in the Commons as “baffling.”

 

The warnings from the IFS come as the UK economy registered a 0.3 per cent contraction, sparking fears of a looming recession. Reeves entered office promising to prioritize economic growth, but her first year has been marked by sluggish performance. The IFS cautioned that the government now has very limited room to manoeuvre, especially under the pressure of its own fiscal rules, which Johnson said are being met by “a gnat’s whisker.”

 

Council tax, according to Johnson, is on course to rise at its fastest rate in two decades. He cited the mounting financial strain on local governments as a key factor, with many councils likely to increase rates by as much as five per cent annually in a bid to plug funding gaps. Without relief, the IFS warned that more local authorities could hit a “tipping point,” jeopardizing essential services unless demands on their resources ease.

 

Another concern raised was the quiet but potent impact of fiscal drag. As inflation drives up wages but income tax thresholds remain frozen, more people are being pulled into higher tax brackets. Johnson described this tactic as “the most politically straightforward thing to do,” estimating it would raise around £10 billion annually by 2029.

 

Government sources did not rule out extending the threshold freeze, offering only that decisions on tax and spending would be made at future Budgets.

 

The IFS also spotlighted Labour’s flagship free childcare policy, warning that its cost could overshoot projections by £1 billion by 2029 due to greater-than-anticipated demand. While some within the Labour Party have branded Reeves’ spending plans as a return to austerity, Johnson dismissed that claim, saying the review didn’t represent austerity. Still, he acknowledged that Reeves faces formidable economic headwinds.

 

Despite his criticisms, Johnson conceded that Reeves' overarching priorities were “reasonable,” and recognized that she was operating in a challenging fiscal environment. However, he concluded with a stark outlook: “Ms Reeves is now going to have all her fingers and all her toes crossed, hoping that the OBR will not be downgrading their forecasts in the Autumn. With spending plans set, and ‘ironclad’ fiscal rules being met by gnat’s whisker, any move in the wrong direction will almost certainly spark more tax rises.”

 

  Adapted by ASEAN Now from The Independent  2025-06-14

 

 

[koolkarl]

All governments do.  No regular independent audits ever.

[blazes]

Don't worry: Nigel will fix it all when he becomes P.M.....

[Srikcir]

3 hours ago, blazes said:

Don't worry: Nigel will fix it all when he becomes P.M.....

In a day!

[The Cyclist]

The Treasury and Reeves would never lie 😀😀

 

So they got Dianne Abbott to do the sums instead. The £2.2 Trillion over the course of this Parliament started of as eleventy million, which seemed reasonable 😀😀