The Institute for Fiscal Studies (IFS) has delivered a direct challenge to Chancellor Rachel Reeves, accusing her of avoiding the substantial tax reforms the organisation says are needed to support Britain’s economic growth.
Helen Miller, the think tank’s director, issued a detailed critique of the Chancellor’s strategy, arguing that despite the Government’s stated focus on expansion, the latest Budget showed limited ambition for the kind of change the IFS believes is required.
The respected economic research body said there was a clear gap between ministerial rhetoric about prioritising growth and the practical measures unveiled, suggesting the Chancellor had again chosen caution over wide-ranging reform.
This intervention came as the Office for Budget Responsibility (OBR) released updated forecasts showing a weaker economic outlook for Britain over the second half of the decade.
The watchdog’s latest projections set out reduced expectations for growth, with several years downgraded and the overall trajectory pointing to slower expansion.
While the OBR raised its forecast for the current year to 1.5 per cent from an earlier estimate of one per cent, its projections for the period after 2025 declined significantly.
The outlook for 2026 was revised from one point nine per cent to one point four per cent, while the forecast for 2027 shifted from one point eight per cent to one point five per cent.
Further reductions affected 2028 and 2029, with both years recast at one point five per cent, down from previous expectations of 1.7 per cent and 1.8 per cent.
The IFS said these revised projections highlighted the scale of the challenge facing Britain in securing stable long-term growth.
During the institute’s detailed Budget review, Ms Miller delivered a stark assessment of the Chancellor’s decisions.
IFS has accused Chancellor Rachel Reeves of sidestepping major tax reforms it deems vital for UK growth
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“Growth not only makes us richer, it makes almost every problem easier to solve,” Ms Miller said, before noting Ms Reeves’ own previous comments: “Every Budget I deliver will be focused on our mission to grow the economy.”
Ms Miller added: “That wasn’t on show yesterday.”
The IFS director said the Budget reflected a Government taking incremental steps rather than delivering the major changes that many economists argue are necessary to boost productivity.
“This felt mostly like the Budget of a Government trying to scrape through,” she said.
Ms Miller acknowledged the difficulties of major reform while arguing that the scale of Britain’s economic pressures and the Government’s stated objectives called for more decisive action.
She said that while large tax rises could not support growth, wider fiscal reform remained essential to reducing economic harm.
“It was never going to be possible to do such a large tax rise and have that be good for growth,” Ms Miller said, adding: “Tax reform was the way to ensure that taxes don’t do more damage than necessary.”
She said the Chancellor had followed a pattern seen under several predecessors in avoiding wide-ranging structural changes.
“The Chancellor, like her predecessors, continues to shy away from meaningful tax reform that could move the dial,” she said.
The mansion tax was labelled as inconsistent
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Paul Johnson, Ms Miller’s predecessor as IFS director, had previously argued for a full revaluation of council tax bands when suggestions emerged of a mansion tax on homes valued above £2million.
Ms Miller said the current arrangements had become increasingly inconsistent.
“We will now have two property taxes based on different valuations,” she said, adding: “One reason our tax system is too complex is because it’s often seen as easier to add something than to fix what we already have.”
The IFS said that now Budget speculation had passed, ministers might be able to focus on measures aimed at supporting productivity and growth.