TAXES will have to be hiked further to help stabilise the public finances, Rachel Reeves has been told.
A health check on the UK economy highlighted the need to “mobilise additional revenue” to withstand shocks, the OECD said.
The influential report came as Bank of England boss Andrew Bailey said there could be as many as four interest rate cuts next year.
After assuring business leaders that she would not need to increase borrowing or taxes any further, the Chancellor received a serious warning.
The growth forecast for the upcoming year has been increased from 1.2% to 1.7%. However, the OECD is concerned that the Budget adjustments may hinder business investment in the future.
The boost, down to higher government spending, will make the UK the best-performing G7 economy next year beating Japan, France, Germany and Italy.
Rachel Reeves, the Chancellor, emphasized the importance of growth, stating that the OECD’s upgrade positions the UK to be the fastest expanding European economy in the G7 over the next three years.
“That is only the start. Growth only matters if it’s matched by more money in people’s pockets.”
The influential report also said interest rates which currently stand at 4.75 per cent will now expect to fall by less than expected.
The government’s spending plans will keep inflation at 2.7 per cent next year, the OECD say. It will then see a slower interest rate fall, expected to be 3.5 per cent by the first part of 2026.
But Bank of England chief Andrew Bailey last night was asked if there would be about four interest rate cuts next year, saying: “Yup.”
He told the FT: “We’ve been looking at a number of potential paths ahead — and some of them are better than others.”
He also said the rise in national insurance contributions is the “biggest issue” in how firms balance prices, wages and the employment levels.
Figures also show that 45 companies have de-listed so far this year – the most since 2010 – from the London Stock Exchange.
Meanwhile, Sir Keir Starmer refused to repeat his previous pledge that the UK will have the fastest growth in the G7 during a heated clash with Tory leader Kemi Badenoch.
Downing Street later clarified that the government remains “committed” to that mission.
The global economy is predicted to grow by 3.2 per cent this year and 3.3 per cent next year which is higher than predicted.
