UK Treasury weighs £30bn in tax rises as Budget deadline looms; OECD downgrades productivity

The Treasury is frantically working on around £30 billion of extra tax revenue for the Budget, government insiders say, though the figure remains uncertain and could change by November 26. The push comes as the Office for Budget Responsibility is expected to downgrade productivity forecasts, a development that would complicate Chancellor Rachel Reeves’s plan to balance the books. Taken with last year’s Budget, the anticipated squeeze would push the tax burden higher by roughly £70 billion in barely 13 months, a heavy load for households and businesses already contending with elevated prices in a slowing economy.

Officials are said to be weighing a menu of tax-raising options designed to hit the scale Reeves is facing. Labour-aligned think tanks have floated measures ranging from extending the freeze on tax thresholds by two more years to new levies on items from crisps and chocolates to long-haul flights and pensions. One line of thinking would extend the threshold freeze for two years, a move that could raise about £7.5 billion, while proposals to lower the VAT registration threshold for small firms from £90,000 to £30,000 would bring more businesses into the VAT net and add compliance costs for sole traders. ITV reported that the OBR is expected to lower forecasts for annual productivity growth by around 0.2 percentage points, a downgrade that could force Reeves to identify roughly £20 billion in additional savings by the Budget’s forecast period. In addition, she may need about £5 billion to cover a potential winter-fuel payment and related benefit curbs, and another £5 billion to handle rising debt-interest costs.

Treasury insiders emphasized that productivity downgrades are not yet a certainty and would be met with policy adjustments as data evolve. Reeves,=self-reported, has framed the issue as a long-standing problem: “For too long, Britain has been the laggard of productivity performance.” During a visit to Revolut’s new London headquarters in Canary Wharf, she underscored a broader policy aim to attract talent and investment by expanding visa routes for skilled workers, arguing the government would “make it easier to bring talent to the UK.”

The OECD’s latest outlook added to the pressure, forecasting that the UK would suffer the highest inflation among G7 economies this year and remain above target into 2025. The agency projected growth near 1.4% this year, slipping to about 1% in 2026 as higher taxes and spending restraint weigh on domestic activity. The OECD also warned that global growth would slow in the second half of 2025 as US tariffs and tighter policy tighten trade and investment dynamics. Separately, S&P Global’s flash UK PMI for September showed private-sector expansion cooling to 51.0, the weakest in four months, with higher costs feeding softer demand and more potential job cuts. The figures pointed toward continued inflationary pressure and a fragile recovery.

Analysts noted that inflation remains well above the Bank of England’s 2% target, with food prices sustaining pressure and the CPI already at 3.8% in August. The OECD’s capstone message was that a tighter fiscal stance and growing trade frictions would dampen external and domestic demand, complicating Reeves’s mission to deliver growth for working people under a new plan for change. The UK economy grew 0.7% in the first quarter and 0.3% in the second, underscoring a tentative recovery that now faces a renewed test from higher taxation and cost pressures.

Shadow Chancellor Sir Mel Stride seized on the OECD data to argue that Labour’s economic program would push Britain into a “high tax, high inflation, low growth” cycle. He warned that Reeves risks “taxing her way to growth,” insisting the country could not sustain a policy path built on further taxation rather than productive investment. The interwoven narrative—weak productivity, elevated inflation, and a potential drag from fiscal consolidation—frames the Budget as a critical inflection point for Reeves’s leadership and the economy alike.

As the global outlook signals softer demand ahead, the Budget remains a focal point of political contention. Officials say the figures are inputs into a living plan that will adapt as new data arrive, with the fiscal timetable still allowing for adjustments before the final numbers are set. The debate captures a broader question for the United Kingdom: how to balance fiscal responsibility with growth-friendly policies in a constrained environment, while navigating a shift in the international economic landscape that also features a changing United States policy posture and its tariff regime.