Reeves says diplomacy is ‘best economy policy’ as UK tax burden to mount
Chancellor Rachel Reeves has said that de-escalating the war in the Middle East is the “best economic policy” to protect growth as the International Monetary Fund showed the UK tax burden was set to deepen at a faster pace than any country.
Speaking at a CNBC event in Washington, Reeves doubled down on her attacks against the Trump administration’s decision to start a war in Iran, labelling it a “mistake”.
Her comments came after the publication of a fiscal report by the IMF on government revenues and spending over the next few years, which showed the difference in government receipts as a share of GDP would rise at a faster pace than any country tracked by the organisation.
Reeves said: “We are a net importer of gas, which does mean that we are impacted by the conflict in the Middle East, which is why I do come with this message loud and clear, along with the 10 other countries that have signed this statement today, that we want to see a de-escalation of the crisis.
The best economic policy now for the UK and globally is de-escalation of the Middle East conflict and the reopening of the Strait of Hormuz, the Chancellor has argued.
Speaking in Washington, Rachel Reeves said: “We are a net importer of gas, which does mean that we are impacted by the conflict in the Middle East, which is why I do come with this message loud and clear, along with the 10 other countries that have signed this statement today, that we want to see a de-escalation of the crisis.
“Because our growth will be higher and inflation will be lower if this conflict comes to an end, and that can only happen through de-escalation.
“But the best economic policy now, not just for the UK but globally, is de-escalation of this conflict and a reopening of the Strait of Hormuz.”
‘We will beat the forecasts again’
Earlier on Wednesday, President Trump announced the “permanent” re-opening of the Strait, through which a fifth of global oil and gas supplies pass, but decision-makers are deliberating over whether it is safe to send ships to the region.
Reeves has not hidden her criticism against Trump’s war with Iran, claiming it was “folly” in an interview with the Daily Mirror.
It has been a difficult week for the Chancellor on her trip to the US after the IMF said the UK economy would suffer greater damage than any other G7 nation from the war. Across the pond, military experts including former Labour defence secretary Lord George Robertson have also taken aim at her failure to provide the armed forces with sufficient funding.
During an event in Washington, the Chancellor added that she was “confident” that the UK economy would “beat the forecasts” but insisted that diplomacy remained the best action to protect growth and price stability.
UK tax take to rise faster than France
But in a new report on Wednesday, the IMF said that the tax burden, measured by government revenue as a share of GDP, would rise to 42.1 per cent by 2031.
The 4.5 percentage point difference, first noted in The Telegraph, in the tax burden compared to when Labour took power in 2024 was around three times as large as France’s.
In her first two Budgets as Chancellor, Reeves raised more than £65bn in taxes in a bid to give public sector workers better pay and shore up public finances.
The next few months will now raise questions over the health of public finances following the impact of the war and how further funding for defence may be provided.