Rachel Reeves’ first budget wont achieve her aim for the U.K. to have the best economic growth in the G7, the boss of the influential Institute for Fiscal Studies said.
Speaking at a budget debrief event today, the think tank’s chair Paul Johnson said the chancellor got a “hospital pass” from the last government, but her high-tax, high-spend and big-borrowing budget has little in it to boost growth over this parliament.
“Set against the ambition to achieve the fastest economic growth of the G7 this parliament, there was little in the budget itself [to achieve this],” he said. “What we didn’t see in this budget is anything to increase growth in this parliament.”
Reeves hiked taxes by £40 billion in her maiden budget Wednesday and borrowed billions to ramp up spending on struggling government departments. Spending will grow in real terms by 4.8 per cent this year, 3.1 per cent next year, and only by an average of 1.3 per cent between 2025-26 and 2029-30.
But the Office for Budget Responsibility, the U.K.’s spending watchdog, expects growth to remain anemic over the next five years, with projections at 2 percent or below every year until 2029.
Johnson said he would bet a “substantial sum” that the chancellor will need to boost day-to-day public spending after next year — and that means finding more revenue.
“I am willing to bet a substantial sum that day-to-day public service spending will in fact increase more quickly than supposedly planned after next year. It would be odd to increase spending rapidly only to start cutting back again in subsequent years,” he said. “This is not going to feel like Christmas has come for the public realm.”
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