Chancellor Rachel Reeves and Prime Minister Sir Keir Starmer (Image: Getty)
The official growth forecast for 2025 is set to be halved next week in an embarrassing blow to Sir Keir Starmer and Rachel Reeves. The Office for Budget Responsibility (OBR) will reportedly downgrade the expected growth rate for the financial year which runs to March 2026 from 2% to around 1%.
The Chancellor is expected to attempt to pin the blame on global turbulence caused by Donald Trump's tariffs in her spring statement next week. It is a humiliating blow to the Prime Minister and Ms Reeves who have insisted growth is their "number one priority".
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Tory shadow chancellor Mel Stride told The Telegraph: “Before the election, Labour promised ‘growth, growth, growth’ but their anti-business Budget has killed growth stone dead.
“The Chancellor has relentlessly talked Britain down, raised taxes to record highs and burdened businesses with extreme employment legislation.
“With just six days until Labour’s emergency Budget, the Chancellor must think again.”
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The Chancellor has faced an ongoing backlash for her autumn budget which featured ￡40 billion of tax hikes.
She is set to deliver her spring statement next Wednesday against the backdrop of a faltering economy and tighter headroom when it comes to the fiscal rules she set herself in October.
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She will be responding to new forecasts from the OBR, after the Bank of England reduced its forecasts for growth this year.
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The growth figures, combined with higher-than-expected borrowing, are expected to put pressure on Ms Reeves to increase taxes or slash spending in order to meet the financial rules she set at the budget.
Cuts to welfare that aim to save some ￡5 billion in 2029/30 were unveiled this week.
It is understood that changes to the tax regime are not expected next week.