Tax Hikes or Cuts Loom

Families across the UK may soon face up to £40 billion in tax hikes or severe spending cuts over the next decade, according to a warning from the Office for Budget Responsibility (OBR).

Prime Minister Sir Keir Starmer has consistently criticized the previous Conservative government, accusing them of creating a £22 billion "black hole" in the nation’s finances. The Labour leader also cautioned that the upcoming October budget would be "painful," with the government needing to make tough financial decisions.

The OBR predicts that several factors — rising life expectancy accompanied by poor health, interest rate hikes, and ambitious net-zero climate goals—will create mounting economic pressures in the coming years. It forecasts that the national debt could swell to nearly three times the country's GDP by 2071.

Further straining the economy, the need for increased defence spending due to the ongoing war in Ukraine is expected to add to these financial challenges. According to the OBR, addressing the issue would require a combination of tax increases or spending cuts amounting to £40 billion each year for the next decade just to return the national debt to pre-Covid levels.

Chief Secretary to the Treasury Darren Jones emphasized the gravity of the situation: "It has laid bare the shocking state public finances were left in by the previous government."

Meanwhile, Shadow Treasury Minister Gareth Davies accused Labour of "fabricating a narrative" to justify what he described as reckless tax proposals.

Starmer’s economic strategy has focused heavily on driving growth, yet recent figures from the Office for National Statistics (ONS) revealed that the UK economy stagnated in July, marking the second consecutive month without growth — contrary to economists’ predictions of a recovery.

In response to the stagnant economy, Chancellor Rachel Reeves acknowledged the severity of the situation: "I am under no illusion about the scale of the challenge we face... Two-quarters of positive economic growth does not make up for 14 years of stagnation."