The warning from the Resolution Foundation, the think tank credited with shaping Labour\u2019s economic policy, comes as the Institute for Fiscal Studies<\/a> (IFS) has questioned Rachel Reeves<\/a>\u2019s plan to bring down high levels of borrowing, and warned that tax hikes or spending cuts will be needed in order to boost defence spending.<\/p>\n The criticism comes after the Office for Budget Responsibility <\/a>(OBR) indicated that gross domestic product (GDP) will increase by just 1.1 per cent in 2026, down from the 1.4 per cent it forecast in November, after the chancellor delivered her spring statement on Tuesday<\/a>. <\/p>\n The watchdog upgraded its forecasts for 2027 and 2028 by just 0.1 per cent, from 1.5 per cent to 1.6 per cent. <\/p>\n The Resolution Foundation\u2019s assessment of the chancellor<\/a>\u2019s address warned that Britain\u2019s \u201cbroader economic picture remains bleak\u201d, despite the prime minister having repeatedly insisted that his \u201cnumber one mission is economic growth\u201d. <\/p>\n open image in gallery<\/p>\n Rachel Reeves delivered her spring statement on Tuesday (House of Commons)<\/p>\n \u201cThe OBR is forecasting the weakest decade of real growth to 2028 in a century \u2013 ie since the great depression \u2013 outside of the exceptional shocks associated with the depths of the global pandemic and the Second World War,\u201d the think tank said. <\/p>\n Meanwhile, the IFS has warned that meeting the Nato commitment to spend 3.5 per cent of national income on defence would cost \u00a335bn a year in today\u2019s terms \u2013 equivalent to current spending on the Ministry of Justice and the Home Office combined.<\/p>\n As an example of the government\u2019s options, the IFS said funding the increase in defence spending would mean 3 to 3.5 percentage points on the main rate of VAT.<\/p>\n IFS director Helen Miller said: \u201cThe takeaway is that we should not expect the government to be able to meaningfully increase what we spend on defence \u2013 if that\u2019s what it decides it wants to do \u2013 without significantly cutting other government programmes or raising taxes.\u201d<\/p>\n She said the events in the Middle East and the market reaction represented the \u201cbig economic news\u201d on Wednesday, rather than the spring statement delivered the previous day by Rachel Reeves<\/a>.<\/p>\n Ms Miller added: \u201cGas prices rose by more than 20 per cent yesterday and are up almost 80 per cent compared to [last] Friday. The stock market fell almost 3 per cent. The cost of borrowing rose sharply. Maybe these changes will be short-lived. There are many days with large market moves that we quickly forget.<\/p>\n \u201cBut if war in the Middle East drags on, that will be unambiguously bad news for all of us, including for the chancellor<\/a>.<\/p>\n \u201cOn the economic front, higher oil and gas prices and more economic uncertainty would [act as a] drag on economic growth. Disposable incomes would fall as inflation rises. Higher inflation would likely mean higher interest rates.\u201d<\/p>\n It came as a senior member of the fiscal watchdog warned that the UK\u2019s historically high tax burden could be stifling growth. <\/p>\n Speaking at the Resolution Foundation\u2019s press conference in the wake of the spring statement, Professor David Miles, a member of the OBR\u2019s Budget Responsibility Committee, said there was uncertainty because the tax burden was moving into \u201cuncharted territory\u201d.<\/p>\n![\"Rachel](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2026\/03\/260303_Spring-statement-15_70904.jpeg\")
<\/p>\n
![\"Iranian](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2026\/03\/Screenshot-2026-03-01-at-20-48-54.png\")
<\/p>\n