Chancellor Rachel Reeves could float "tax raid on pensions" before this year's upcoming Autumn Budget due to the fragile state of the economy, analysts warn.
During yesterday's Spring Statement, Reeves ruled out tax rate hikes and pledged to keep to her strict fiscal rules despite the Office for Budget Responsibility (OBR) projecting that gross domestic product (GDP) will half to one per cent in 2025.
This comes as a blow to Reeves, who has prioritised economic growth during her time at the Treasury, however GDP is expected to surpass previous estimates in later years.
Despite this, the OBR warned that any financial headroom left by the Chancellor in her Spring Statement could be wiped out if President Donald Trump's implements sweeping tariffs on UK imports.
Rachel Reeves could introduce 'tax raid on pension' in major U-turn ahead of Budget, economist warns
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As such, economists are sounding the alarm that the Chancellor will have to make a U-turn and introduce tax increases in order to balance the books.
Paul Johnson, the director of the Institute of Fiscal Studies (IFS), broke down the options left for Reeves during a post-Spring Statement briefing:
He explained: "There is a good chance that economic and fiscal forecasts will deteriorate significantly between now and an Autumn Budget.
"If so, she will need to come back for more, which will likely mean raising taxes even further.
“That risks months of speculation over what those tax rises might be – a raid on pensions, a wealth tax on the richest, another hike to capital gains tax?"
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Analysts have previously warned that retirees are already in the firing line of a "stealth tax" due to the Government's decision to keep tax allowances frozen.
Due to tax thresholds remaining at the same level during a period of time when incomes or inflation are rising, older Britons are being pulled into higher tax brackets.
Many retirement experts have noted that the state pension payments alone could become liable for this "stealth tax" once the benefit's full, new rate exceeds the personal allowance.
Notably, pensions were notably absent from the Chancellor's fiscal agenda during her speech from the House of Commons but the IFS is confident this will remain the case.
Johnson added: "Overall, this was a holding exercise ahead of the really significant decisions later in the year.
"The June Spending Review will be where the Chancellor’s tighter spending plans crystallise into specific choices and start bumping up against reality, and against her cabinet colleagues.
"And the Autumn Budget? Even small downgrades to the OBR’s forecasts could mean more action is needed to fill a fiscal hole. And given global risks and shoddy UK data, a bigger downgrade is entirely possible.
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Chancellor Rachel Reeves has come under fire for her fiscal policiesPOOL"Indeed, the OBR document points to the downside risk around its all-important productivity assumption.
"We might be in for another blockbuster Autumn Budget. What the Chancellor has all but guaranteed is another six months of damaging speculation and uncertainty over tax policy.
"That didn’t go well between last July’s election and October’s Budget. I fear a longer rerun this year."
No date has been given for the 2025 Autumn Budget but it is speculated to be scheduled for late October/early November.
