Rachel Reeves needs to put up taxes to cover £40bn deficit, thinktank says | Tax and spending

Rachel Reeves will need to raise taxes to close a government spending gap that is on course to reach more than £40bn after a slowdown in economic growth and higher-than-expected inflation, according to a leading thinktank.

In a blow to Labour’s hopes of balancing the books without breaking manifesto commitments ruling out personal tax rises, the National Institute of Economic and Social Research (NIESR) said a number of factors would knock off course the chancellor’s plans to stay within Whitehall spending limits.

These factors included headwinds from Donald Trump’s tariff war, higher debt interest payments and U-turns on welfare spending cuts.

NIESR said “moderate but sustained” tax rises would be needed in the autumn budget for Reeves to overcome a deficit of £41.2bn and…