Chancellor Rachel Reeves will be forced to raise taxes in her upcoming spending review, a former Downing Street economic adviser has warned.
Nick Williams, who left Number 10 last month, has slammed the Labour Government's spending plans as "not credible" with a U-turn likely on the horizon.
Writing in The Times, Williams reminded Prime Minister Keir Starmer that the next Budget will be "the last opportunity to make a meaningful change that the public has time to feel" before the next General Election.
Reeves is reviewing Government departments’ spending plans for the next three years, with any looming cuts be confirmed at the spending review on June 11.
The Chancellor may be forced to raise taxes, former Number 10 economist warns
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Ahead of this date, ministers have been told to model cuts of up to 11 per cent annually, which has led to Labour being accused of implementing austerity.
The Chancellor gave the Treasury £9.9billion in financial headroom at the last budget but analysts warn she could be forced to make harsher spending cuts or raise tax rises to address the fiscal black hole left by the last Conservative Government.
Williams explained: "While the Government builds momentum behind growth, the path of public spending is just not credible. Not to mend creaking local government. Not to tackle rampant crime. Not to meet the modern demands for defence.
"And certainly not to fill the fiscal hole from sharply cutting immigration. The bottom line is that taxes will have to go up. There are ways this can be done which are fair and respect manifesto promises.
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Analysts have warned the Treasury's fiscal headroom has been slashed since the last Budget PA"The next opportunity to do so is the Autumn Budget. This is also realistically the last opportunity to make a meaningful change that the public has time to feel before the next election."
Labour has received backlash from its own MPs, including members of Socialist Campaign Group and the socially conservative Blue Labour group.
Both groups are urging the Chancellor to scrap her strict fiscal rules, which enforce that day-to-day spending is funded by tax receipts not borrowing, and that debt should fall as a share of the economy during this parliament.
Chris Curtis MP, the co-chair of the Labour Growth Group, is sounding the alarm that the country is stuck in an "economic doom loop".
Despite these concerns, Reeves was handed a win with the latest gross domestic product (GDP) figures from the Office for National Statistics (ONS).
In the first quarter of 2025, the UK economy grew by 0.7, surpassing previous projections made by the Office for Budget Responsibility (OBR).
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Taxpayers are struggling with the unsustainable burden of council taxPAHailey Low, an associate economist at the National Institute of Economic and Social Research (NIESR), noted that the impact of recent tax polices and tariffs from the US are likely to not appear in these figures.
Low share: "The economy displayed strong growth of 0.7 per cent in Q1 of 2025, driven by a front-loaded uptick in exports and economic activity as firms and households sought to hedge against anticipated tariff announcements and hikes in NICs and NLW respectively.
However, in the medium term, rising domestic cost pressures, subdued demand, and volatile global trade conditions are weighing on confidence and economic activity.
"As monetary policy navigates a delicate balance, the need for a credible long-term fiscal strategy is more pressing than ever."
