Britain’s Treasury lashed out at the OBR hours after receiving forecasts that set the scene for tax rate increases in the upcoming budget. The Exchequer admitted that the growth of living standards was way below expectations, as it criticized government spending. The Treasury argued that stagnant productivity was responsible for holding back the working population […]Britain’s Treasury lashed out at the OBR hours after receiving forecasts that set the scene for tax rate increases in the upcoming budget. The Exchequer admitted that the growth of living standards was way below expectations, as it criticized government spending. The Treasury argued that stagnant productivity was responsible for holding back the working population […]

UK Treasury criticizes wasteful government spending and stagnant productivity

By: Cryptopolitan

2025/10/04 21:54

The Treasury argued that stagnant productivity was responsible for holding back the working population as the government spiraled into wasteful spending. Asylum services were at the top of government spending, and the Treasury is considering ways of tackling that problem ahead of November’s budget.

The Cryptopolitan reported in August that the UK Treasury is considering an income tax trap to fill a budget hole, raising £7 billion yearly until 2028. Rachel Reeves, Chancellor of the Exchequer, is preparing to launch even more tax rises in November. However, the OBR’s forecasts will set boundaries for the Chancellor as she balances the books.

Monks warns of perpetual annual tax rise cycles

Allan Monks, a Senior Economist at the European Commission’s Monetary Policy & International Relations Department, warned that the November budget will likely deal with part of the problem. He added that Britain could be trapped in an endless cycle of annual tax raises as Reeve’s fiscal plans barely meet the sustainability threshold.

Mr Monks’ warning came as the British tax and spending watchdog cautioned Reeves that next year’s growth could be lower and inflation higher than expected. The fiscal watchdog projected that growth is unlikely to be realized despite an optimistic outlook.

Meanwhile, Monks believes Labour will preside over the record tax-raising parliament if the budget’s £130 billion is raised primarily through taxes rather than by reducing expenditure.

Sir Stride stressed that Reeves had only herself to blame for the economy’s underperformance. The Chancellor is reportedly under pressure from Labour backbenchers to lift the two-child benefit cap, which could cost taxpayers more than £3 billion annually. Reeves is also expected to find £5 billion to fund winter fuel payments and the U-turn on the humiliating welfare reform.

Bailey says regulators are not to blame

The Bank of England’s Governor, Andrew Bailey, defended regulators, saying they were not to blame for the economy’s poor performance. He argued that over-regulation has not stymied growth, adding that restricting business investments through financial regulations did not cause the decline in productivity growth. However, Reeves believes that regulation acts like “a boot on the neck” of businesses.

Meanwhile, Bailey urged policymakers not to “throw the baby out with the bathwater” by staging deregulation drives. He pointed out that there is no trade-off between competitiveness, growth, and financial stability objectives.

The IMF also weighed in on the matter, suggesting that Labour’s pursuit of industrial policies risked pushing up public debt and prices. The fund noted that spending on tax breaks and other subsidies was, on average, higher in the UK than in the EU. It warned that UK policies lowered overall productivity by reducing competition.

The Treasury claimed that misinformation is circulating from individuals who claim to know what the budget includes before critical decisions are made by the relevant authorities. The Exchequer clarified that only the Chancellor will make those decisions, discouraging people from relying on rumors.

Reeves will reportedly try to convince the watchdog over the next seven weeks that Labour’s planned reforms, string of trade agreements, and deregulation drive are enough to offset the budgetary damage partially. Monks said Reeves could be forced to raise an extra £50 to £80 billion in taxes through parliament.

JPMorgan said tax raids will likely become the norm for the rest of parliament if Reeves wants to keep debt from spiraling out of control. The investment bank warned that Britain could face spending cuts or tax rises of up to £130 billion over the course of this parliament.

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