See more Daily Mail on Google - save us as a Preferred SourceBy DAVID WILCOCK, DEPUTY POLITICAL EDITOR Published: 10:11 BST, 3 June 2026 | Updated: 10:31 BST, 3 June 2026
Rachel Reeves' decision to hammer firms with a 'jobs tax' in her 2024 Budget had an even bigger impact on the economy than first thought, the Treasury watchdog has admitted.The Office for Budget Responsibility said its UK growth forecast for last year had been 'too optimistic', with its prediction of 2 per cent being replaced with an initial estimate of just 1.4 per cent.The OBR forecasts determine how much leeway British governments have for public spending and get close attention from financial markets and politicians, as well as setting out forecasts for growth and inflation. In a new report analysing its forecasting the watchdog said that it could have under-estimated the impact of 'policy effects' on the economy like Ms Reeves decision to raise National Insurance Contributions (NICs) months after entering No11.The move has been widely criticised for forcing businesses, especially in hospitality, to close and helping fuel a youth unemployment crisis.In March this year Ms Reeves defended the move, saying it helped to 'properly fund public services' including the NHS, although she also conceded 'it's a valid argument to say that that should not have happened'.The OBR also said it will factor in the unexpectedly strong persistence of inflation after the 2022 energy price shock when it updates its forecasts later this year in the wake of the Iran war. In a new report analysing its forecasting it said that it could have under-estimated the impact of 'policy effects' on the economy like Ms Reeves decision to raise National Insurance Contributions (NICs) months after entering No11
