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The OECD has warned tax hikes and reduced spending will act as a ‘headwind’ to the UK economy over the next two years.
David LynchWednesday 03 December 2025 00:01 GMT
open image in galleryPrime Minister Sir Keir Starmer will face MPs in the House of Commons (Gareth Fuller/PA) (PA Wire)
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Sir Keir Starmer is to face MPs’ questions about the consequences of the Budget after a report warned of the impact of tax hikes on the British economy over the next two years.
The Prime Minister will appear in the House of Commons on Wednesday for his weekly clash with Conservative leader Kemi Badenoch, a week after Chancellor Rachel Reeves set out the Budget.
Sir Keir faces continued scrutiny over the Government’s fiscal plans, including from the Organisation of Economic Co-operation and Development (OECD), which has warned that tax hikes and reduced spending will act as a “headwind” to the UK economy over the next two years.
The OECD, a major international organisation, also warned in its latest report that inflation in Britain will be highest of all the G7 advanced economies this year.
Growth will slow this year and next it added, with “substantial” downside risks of the Government’s fiscal plans.
Ms Reeves continues to face accusations that she “misled” voters over the state of the public finances before the Budget.
But the Office for Budget Responsibility (OBR) on Tuesday suggested the Chancellor’s messaging in the weeks before the statement was “not inconsistent” with analysis it shared with her.
The Government and the OBR have appeared at odds after the Budget.
This is partly because the watchdog released a timetable for its pre-Budget forecasting which undermined Ms Reeves’ suggestion that she needed to raise taxes to plug a hole in the public finances.
Professor David Miles, a member of the Budget watchdog’s committee, told MPs on Tuesday: “My interpretation was – and others might interpret differently – that the Chancellor was saying that this was a very difficult Budget and very difficult choices needed to be made.”
Prof Miles denied the OBR was “at war” with the Treasury after the resignation of watchdog’s boss Richard Hughes.
Mr Hughes quit as chairman of the OBR on Monday after its assessment of the Chancellor’s plans was inadvertently made available online before she delivered her speech last Wednesday.
Former Labour prime minister Gordon Brown has hit out at critics of Ms Reeves’ major intervention to tackle child poverty by lifting the two-child benefit cap.
Writing for the Daily Mirror, Mr Brown said supporters of the move needed to expose “this week’s Tory lie that abolition does not help children out of poverty, but simply subsidises the workshy, the indolent and the feckless parents on benefits”.
Conservative leader Kemi Badenoch had branded Ms Reeves’ decision to raise taxes while scrapping the cap as a “Budget for Benefits Street”.
