It can be seen here (subscription may be necessary), stating that Rachel Reeves’ recent Budget has faced swift and severe criticism, particularly from the Office for Budget Responsibility (OBR), which has undermined many of her central arguments regarding growth and financial stability. Despite having the parliamentary majority to push through her policies, the economic forecasts and analyses from the OBR have presented a stark reality that challenges her claims.

A critical point raised by the OBR is that the increase in employers’ National Insurance will ultimately burden workers through lower wages and increased prices, a perspective that is now gaining mainstream traction. This revelation has forced Reeves to acknowledge that workers will bear the cost of these tax changes, raising questions about the fairness and efficacy of her economic policies.

The OBR’s forecasts paint a grim picture for the UK’s economic growth, predicting a modest GDP per capita growth of only 1.2% per year for the remainder of the decade, in stark contrast to higher projections for the United States. The lack of a clear growth strategy raises concerns about Reeves’ commitment to boosting employment and addressing welfare reform, particularly as her plans seem to disproportionately impact low-paid workers.

Furthermore, her budget is projected to result in a significant increase in government borrowing, which the OBR indicates will lead to higher interest rates and inflation, further straining households. The anticipated rise in mortgage costs by approximately £450 a year for average borrowers, combined with the National Insurance increase, paints a bleak picture for disposable incomes.

The OBR has also warned that the high levels of tax and public spending under Reeves’ proposals could “crowd out” private investment, contradicting her narrative that these measures are designed to foster a more favorable environment for business investment. This concern has led to a downgrading of growth expectations, leaving the government with less room for maneuver in the future.

As the economic implications of Reeves’ Budget become clearer, Labour may need to reassess its strategy. If they do not adapt to these challenges, the opposition could find itself vulnerable to criticism from the Conservatives, particularly if the new party leader leverages the economic shortcomings highlighted by the OBR. The need for welfare reform and a focus on boosting workforce participation is emphasized as essential for sustainable growth, suggesting that a fundamental shift in approach may be necessary for Labour to regain momentum and credibility.