Rachel Reeves is expected to announce on Wednesday that the Office for Budget Responsibility (OBR) has downgraded its growth forecasts for each of the next five years, according to reports. The downgrade, part of a pre-budget review, blames a lack of investment under previous Conservative governments for undermining the UK's potential economic expansion.
The chancellor's efforts to boost growth will not be enough to offset the annual downgrades, which could reduce future tax receipts by £10bn to £20bn each year. The OBR has revised its assumptions about productivity, with senior executives including chair Richard Hughes agreeing that previous growth rates were overly optimistic.
The Treasury declined to comment on the leak but stated: 'We know there is more to do. That’s why we are investing £120bn more than the previous government in national infrastructure, cutting red tape and unnecessary regulation for businesses, introducing a new planning bill and securing new trade deals across the globe.'
To raise additional revenue, Reeves is considering a levy on properties worth over £2m, potentially affecting more than 100,000 homes and raising £400m to £450m. She is also expected to freeze income tax thresholds until 2030, dragging more people into higher tax bands as wages rise. Other measures may include a pay-per-mile scheme for electric cars and changes to salary sacrifice schemes, including pension contributions.
The chancellor is also expected to lift the two-child limit for universal credit, while the government has already announced freezes on rail fares and prescription fees to ease the cost of living crisis.
