{"id":3221716,"date":"2025-12-02T09:04:39","date_gmt":"2025-12-02T10:04:39","guid":{"rendered":"https:\/\/ur1stop.com\/blog\/?p=3221716"},"modified":"2025-12-02T10:26:55","modified_gmt":"2025-12-02T10:26:55","slug":"uk-faces-headwinds-from-tax-and-spending-moves-oecd-says","status":"publish","type":"post","link":"https:\/\/ur1stop.com\/blog\/2025\/12\/02\/uk-faces-headwinds-from-tax-and-spending-moves-oecd-says\/","title":{"rendered":"UK faces &#039;headwinds&#039; from tax and spending moves, OECD says"},"content":{"rendered":"<div><img decoding=\"async\" src=\"data:image\/svg+xml,%3Csvg%20xmlns='http:\/\/www.w3.org\/2000\/svg'%20viewBox='0%200%20370%20247'%3E%3C\/svg%3E\" data-lazy-src=\"https:\/\/ur1stop.com\/blog\/wp-content\/uploads\/2025\/12\/15655a30-cf5c-11f0-902b-b378fe598ba1.jpg\" class=\"zeen-lazy-load-base zeen-lazy-load ff-og-image-inserted\" \/><noscript><img decoding=\"async\" src=\"https:\/\/ur1stop.com\/blog\/wp-content\/uploads\/2025\/12\/15655a30-cf5c-11f0-902b-b378fe598ba1.jpg\" class=\"ff-og-image-inserted\" \/><\/noscript><\/div>\n<div data-component=\"text-block\" readability=\"22\">\n<p class=\"sc-9a00e533-0 eZyhnA\">Tax rises and spending cuts will act as a &#8220;headwind&#8221; to growth in UK&#8217;s economy, according to an influential global policy group.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">UK inflation will also remain among the highest of the G7 advanced economies, although it is expected to ease, the Organization for Economic Co-operation and Development (OECD) said.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">The OECD forecast the UK&#8217;s economy would be &#8220;steady&#8221; with growth of 1.4% this year before slowing to 1.2% in 2026, although its prediction for next year is an improvement on its previous estimate.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">The forecast comes less than a week after the Budget, which announced tax increases of \u00a326bn over the next five years. <\/p>\n<\/div>\n<div data-component=\"text-block\" readability=\"62.478340173279\">\n<p class=\"sc-9a00e533-0 eZyhnA\">After slowing next year, UK growth is expected to edge up to 1.3% in 2027, according to the OECD.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">However, its forecasts are more pessimistic than those of the UK government&#8217;s official forecaster, <a target=\"_self\" href=\"https:\/\/www.bbc.co.uk\/news\/articles\/cg5m7mg8p59o\" class=\"sc-f9178328-0 iCaRzc\">the Office for Budget Responsibility, which expects 1.5% growth this year<\/a>, 1.4% next year and 1.5% in 2027.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">The OECD said &#8220;fiscal consolidation will be a headwind to the economy, with past tax and spending adjustments weighing on household disposable income and slowing consumption&#8221;.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">It also said &#8220;sluggish&#8221; productivity and &#8220;weak&#8221; growth in the working-age population, which was partly due to slowing inward migration, would &#8220;continue to act as a drag on the economy&#8221;.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">However, it expects the economy to get a slight boost in late 2026 from lower interest rates and a &#8220;gradual&#8221; improvement in global trade. The OECD expects two more interest rate cuts from the Bank of England, taking the key rate to 3.5%.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">UK inflation is expected to be 3.5% this year &#8211; unchanged from the OECD&#8217;s previous forecast, but the highest in the G7.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">The inflation rate is then predicted to drop to 2.5% next year, down from its previous estimate of 2.7%.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">Reacting to the OECD&#8217;s report, Chancellor Rachel Reeves said: &#8220;Last week, my Budget cut waiting lists, cut borrowing and debt, and cut the cost of living. Less than a week later, the OECD has upgraded our growth and cut its forecast for inflation next year.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">&#8220;The choices that I made at the Budget are expected to cut inflation by 0.4 percentage points, helping cut the cost of living for households and costs for our businesses.&#8221;<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">Reeves has come under pressure since delivering her Budget following <a target=\"_self\" href=\"https:\/\/www.bbc.co.uk\/news\/articles\/cewjkv8jylko\" class=\"sc-f9178328-0 iCaRzc\">accusations that she gave a misleading picture of the government&#8217;s finances<\/a> ahead of the announcement.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">The OECD said the Budget measures would help to improve the government deficit &#8220;substantially&#8221;.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">However, it added care needed to be taken with changes to tax and spending &#8220;given substantial downside risks to growth and upside risks to inflation&#8221;.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">&#8220;Tax and spending measures should also aim to further support growth potential, complementing ongoing structural reforms such as the overhaul of infrastructure planning and the simplification of financial services regulation.&#8221;<\/p>\n<\/div>\n<div data-component=\"text-block\" readability=\"24\">\n<p class=\"sc-9a00e533-0 eZyhnA\">On a global basis, the OECD said the world&#8217;s economy had been &#8220;resilient&#8221; this year, although growth is expected to slow in 2026.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">The body expects the global economy to grow by 3.2% this year, before slowing to 2.9% in 2026 &#8211; estimates that are unchanged from its previous forecast. It then expects a small rebound in growth to 3.1% in 2027.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">However, it warns that the outlook &#8220;remains fragile&#8221;. Any further rises in trade barriers could &#8220;inflict significant damage on supply chains and global output&#8221;, it says.<\/p>\n<p class=\"sc-9a00e533-0 eZyhnA\">It also warns of a risk from the AI bubble bursting, noting there is a risk &#8220;of potentially abrupt price corrections&#8221; given the high share prices for some companies.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Tax rises and spending cuts will act as a &#8220;headwind&#8221; to growth in UK&#8217;s economy, according to an influential global policy group.UK inflation will also remain among the highest of the G7 advanced economies, although it is expected to ease, the Organization for Economic Co-operation and Development (OECD) said.The OECD forecast the UK&#8217;s economy would be &#8220;steady&#8221; with growth of 1.4% this year before slowing to 1.2% in 2026, although its prediction for next year is an improvement on its previous estimate.The forecast comes less than a week after the Budget, which announced tax increases of \u00a326bn over the next five years. After slowing next year, UK growth is expected to edge up to 1.3% in 2027, according to the OECD.However, its forecasts are more pessimistic than those of the UK government&#8217;s official forecaster, the Office for Budget Responsibility, which expects 1.5% growth this year, 1.4% next year and 1.5% in 2027.The OECD said &#8220;fiscal consolidation will be a headwind to the economy, with past tax and spending adjustments weighing on household disposable income and slowing consumption&#8221;.It also said &#8220;sluggish&#8221; productivity and &#8220;weak&#8221; growth in the working-age population, which was partly due to slowing inward migration, would &#8220;continue to act as a drag on the economy&#8221;.However, it expects the economy to get a slight boost in late 2026 from lower interest rates and a &#8220;gradual&#8221; improvement in global trade. The OECD expects two more interest rate cuts from the Bank of England, taking the key rate to 3.5%.UK inflation is expected to be 3.5% this year &#8211; unchanged from the OECD&#8217;s previous forecast, but the highest in the G7.The inflation rate is then predicted to drop to 2.5% next year, down from its previous estimate of 2.7%.Reacting to the OECD&#8217;s report, Chancellor Rachel Reeves said: &#8220;Last week, my Budget cut waiting lists, cut borrowing and debt, and cut the cost of living. Less than a week later, the OECD has upgraded our growth and cut its forecast for inflation next year.&#8221;The choices that I made at the Budget are expected to cut inflation by 0.4 percentage points, helping cut the cost of living for households and costs for our businesses.&#8221;Reeves has come under pressure since delivering her Budget following accusations that she gave a misleading picture of the government&#8217;s finances ahead of the announcement.The OECD said the Budget measures would help to improve the government deficit &#8220;substantially&#8221;.However, it added care needed to be taken with changes to tax and spending &#8220;given substantial downside risks to growth and upside risks to inflation&#8221;.&#8221;Tax and spending measures should also aim to further support growth potential, complementing ongoing structural reforms such as the overhaul of infrastructure planning and the simplification of financial services regulation.&#8221;On a global basis, the OECD said the world&#8217;s economy had been &#8220;resilient&#8221; this year, although growth is expected to slow in 2026.The body expects the global economy to grow by 3.2% this year, before slowing to 2.9% in 2026 &#8211; estimates that are unchanged from its previous forecast. It then expects a small rebound in growth to 3.1% in 2027.However, it warns that the outlook &#8220;remains fragile&#8221;. Any further rises in trade barriers could &#8220;inflict significant damage on supply chains and global output&#8221;, it says.It also warns of a risk from the AI bubble bursting, noting there is a risk &#8220;of potentially abrupt price corrections&#8221; given the high share prices for some companies.<\/p>\n","protected":false},"author":1,"featured_media":3221718,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-3221716","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/ur1stop.com\/blog\/wp-json\/wp\/v2\/posts\/3221716","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ur1stop.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ur1stop.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ur1stop.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ur1stop.com\/blog\/wp-json\/wp\/v2\/comments?post=3221716"}],"version-history":[{"count":2,"href":"https:\/\/ur1stop.com\/blog\/wp-json\/wp\/v2\/posts\/3221716\/revisions"}],"predecessor-version":[{"id":3221719,"href":"https:\/\/ur1stop.com\/blog\/wp-json\/wp\/v2\/posts\/3221716\/revisions\/3221719"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ur1stop.com\/blog\/wp-json\/wp\/v2\/media\/3221718"}],"wp:attachment":[{"href":"https:\/\/ur1stop.com\/blog\/wp-json\/wp\/v2\/media?parent=3221716"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ur1stop.com\/blog\/wp-json\/wp\/v2\/categories?post=3221716"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ur1stop.com\/blog\/wp-json\/wp\/v2\/tags?post=3221716"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}