Rachel Reeves is likely to go back on one of her main promises within the next year according to economic experts.
The Chancellor followed up her record-breaking, tax-filled budget in October with a vow not to increase taxes for the remainder of the parliament – but faced with economic stagnation many analysts believe that she will be left with no choice.
In fact one has even predicted that more tax rises could come as early as her next budget in October.
Elliott Jordan-Doak, from Pantheon Macroeconomics, said: “The chancellor is already under pressure to clarify how the government will meet its new fiscal rules.
“We expect the government to outline spending reductions – backloaded towards the end of the forecast year – at the next fiscal event in March.
“Further tax increases at the next budget in October, is also a good bet.”
The rising cost of government debt and the falling value of the pound in the wake of Reeves’s budget leaves her with little breathing space as she attempts to fund her plans for growth.
Many experts believe that the poor health of the British economy will leave her with no alternative but to decrease public spending, raise taxes or enact a combination of the two.
Ex-Bank of England chief economist Andy Haldane said the UK is at risk of entering an economic “doom loop” if spending continues to be cut.
Mr Haldance predicted that the Office for Budget Responsibility’s March forecast could be the catalyst for the UK’s spending plans to be slashed.
He told Sky News’ Politics Hub with Sophy Ridge: “It would be deeply counterproductive to both growth and to the fiscal position if that led to a cutting back on investment and indeed in spending more generally.
“Then I think you really are into a doomed loop between debt and growth. And that’s a situation to avoid at all costs.”
He added: “For me, I think some of the gloom and doom about both the economy and in bond markets is slightly overdone.
“I think once we get to the second half of the year, the underlying fiscal picture may look somewhat better as might be the underlying growth picture.
“So anything precipitating now, I think, is best avoided.”
