Politics latest: Reeves hints at tax rises and spending cuts to break out of Britain’s ‘doom loop’

Economists have warned that the chancellor is facing a black hole of up to £50bn at her next Budget, but has been told she cannot afford to tinker at the margins “by picking from a Scrabble bag” of smaller tax increases.

Leading tax expert Dan Neidle, the founder of Tax Policy Associates, said the “wise” way for Ms Reeves to increase taxes would be “raising one of the main taxes, possibly by expanding the base of VAT, which may or may not break a manifesto pledge”.

Rachel Reeves is set to attend the annual International Monetary Fund (IMF) meeting today in Washington DC.

The chancellor will meet G7 finance ministers and attend a Ukraine roundtable before a G20 ministerial dinner on Wednesday.

It comes after the IMF warned UK inflation will surge to the highest in the G7 in 2025 and 2026.

Rachel Reeves has been delivered another major blow ahead of next month’s make-or-break Budget as the International Monetary Fund (IMF) warned inflation will surge to the highest in the G7 in 2025 and 2026.

The latest outlook report suggests British households will face the fastest-growing costs among the G7 group of advanced economies, driven in part by rising food and hospitality prices.

Its report, described as “grim”, casts doubt on the Bank of England’s hopes of bringing interest rates back down to the 2 per cent target rate in the near future.

The IMF said price inflation in the UK would increase more sharply than previous predictions in July; it now expects UK inflation to average at 3.4 per cent in 2025, rather than 3.2 per cent, and 2.5 per cent in 2026 next year, up from 2.3 per cent.

It also trimmed its growth prediction for 2026 amid concerns over the jobs market – but raised its forecast for this year.

Sir Keir Starmer is set to face a grilling in the Commons as questions mount over the China spy case and the upcoming Budget.

The prime minister will answer questions from opposition at PMQs after his Government and the Crown Prosecution Service clashed over the release of vital evidence.

No 10 accused the CPS of having blocked the publication of a crucial witness statement.

The CPS hit back, and insisted it was entirely up to the Government to release the evidence if it wanted to.

Rachel Reeves acknowledged she was looking at potential tax rises and spending cuts to fill a black hole in her Budget which she said was partly due to the lingering impact of Brexit.

The Chancellor said “of course, we’re looking at tax and spending” as she prepares for her November 26 statement.

She told Sky News: “Challenges are being thrown our way, whether that is the geopolitical uncertainties, the conflicts around the world, the increased tariffs and barriers to trade and now this review looking at how productive our economy has been in the past and then projecting that forward.

“But I won’t duck those challenges. Of course, we’re looking at tax and spending as well, but the numbers will always add up with me as Chancellor because we saw just three years ago what happens when a government, where the Conservatives, lost control of the public finances – inflation and interest rates went through the roof.”