British households should prepare for additional tax increases, a leading think tank has cautioned.
Paul Johnson, director of the Institute for Fiscal Studies (IFS), stated that Labour’s spending plans “may not be as generous as they initially appear.” On Wednesday, Rachel Reeves announced a “significant and sustained increase in public spending,” including £25 billion for the NHS and nearly £12 billion for schools over the next two years.
The Chancellor also committed to “restore stability” to the British economy, introducing £40 billion in tax hikes in Labour’s first Budget in 14 years.
Mr. Johnson noted that, while the Chancellor has planned for a “remarkable amount of additional spending” this year and into the next, the growth of spending slows “implausibly” from 2026-27 onward. He suggested that Labour may need to implement further tax increases as early as next year.
Speaking on the BBC’s Today programme, he commented: “It’s possible to argue that we’ll see such significant spending increases this year and next that additional funds won’t be necessary for the following three years of this Parliament. But I would bet heavily against that outcome, especially given the challenges the Chancellor has faced within her Cabinet to secure this plan.
“I suspect we’ll end up with even more spending, potentially significantly more than currently planned, and that will likely mean, unless we see a boost in growth, further tax hikes either next year or the following.”
