Andrew Neil warned that Rachel Reeves “won’t be able to blame the Tories” for a fresh economic black hole. A major think tank said the Chancellor – who repeatedly blasted the Conservatives for leaving a £22 billion black hole, which they denied – will need to hike taxes in her upcoming autumn budget to plug a £51 billion gap in the public finances.
The National Institute of Economic and Social Research (Niesr) said Ms Reeves’s headroom of £9.9 billion had been wiped out and that she also needs to find a further £41.2 billion. In a post on X, veteran broadcaster Mr Neil said: “It just gets worse for Starmer/Reeves and the Labour government.
“Now the prestigious, left-leaning National Institute for Economic and Social Research (Niesr) says the Chancellor will have a £50 billion fiscal black hole to fill come the October Budget — and this time she won’t be able to blame the Tories.”
Niesr said weaker-than-expected recent economic activity, U-turns on welfare cuts and forecast-beating borrowing were to blame for the black hole.
The think tank warned Ms Reeves faces an “impossible trilemma” of trying to meet her fiscal rules while fulfilling spending commitments and upholding a manifesto pledge not to raise taxes.
Professor Stephen Millard, Niesr’s deputy director for macroeconomics, said: “Things are not looking good for the Chancellor, who will need to either raise taxes or reduce spending or both in the October budget if she is to meet her fiscal rules.”
To fill the £51 billion black hole would require a rise in the basic and higher rates of income tax by five percentage points, according to the group.
The Chancellor has set herself two fiscal rules – the “stability rule”, which ensures that day-to-day spending is matched by tax revenues so the Government only borrows to invest, and the “investment rule”, which requires the Government to reduce net financial debt as a share of the economy.
It comes amid speculation of more tax hikes in the autumn budget with rumours of a possible wealth tax.
Shadow chancellor Sir Mel Stride said: “Experts are warning Labour’s economic mismanagement has blown a black hole in the nation’s finances which will have to be filled with more tax rises – despite Rachel Reeves saying she wouldn’t be back for more taxes.
“Labour will always reach for the tax rise lever because they don’t understand the economy.”