The OBR is set to downgrade UK productivity forecasts — leaving Rachel Reeves facing a £20bn dilemma. Here’s what it could mean for your taxes.
The Office for Budget Responsibility (OBR) is about to hand Rachel Reeves a fresh headache — and it could hit all of us in the pocket. Here’s why the watchdog’s latest forecast matters more than you think.
OBR Set to Slash Productivity Outlook
According to Treasury insiders, the OBR will downgrade its productivity forecast this autumn. That sounds dry, but the impact is huge: weaker productivity means weaker growth — and that leaves Reeves at risk of breaking her own fiscal rules. Oxford Economics says aligning with more cautious projections could wipe 1.4% off GDP over five years.
What It Means for Your Taxes
If those gloomy forecasts play out, the Chancellor may need to find an extra £20bn. That’s roughly the same as raising income tax by 2p across both the basic and higher bands. Reeves insists she won’t hit workers’ payslips, but speculation is mounting about where she’ll turn. Businesses fear more windfall-style taxes, while Labour’s manifesto pledges rule out rises in VAT, national insurance, or income tax.
The Clock Is Ticking to November Budget
With the budget set for 26 November, Reeves has little time to convince the OBR that her growth plans — like planning reforms — will shift the numbers. But Treasury U-turns on welfare and fuel allowances already add extra pressure. For now, the UK’s productivity puzzle remains the stumbling block no Chancellor has cracked.
Bottom line
Reeves is walking a fiscal tightrope — and the OBR’s verdict could decide whether tax hikes or spending cuts come next. Would you rather see higher taxes or leaner public services?
