Reeves Champions Diplomacy as 'Best Economic Policy' While UK Tax Burden Set to Deepen
Chancellor Rachel Reeves has declared that de-escalating the war in the Middle East represents the "best economic policy" for safeguarding growth, even as the International Monetary Fund reveals the UK's tax burden is projected to increase at a faster rate than any other country.
Diplomatic Push Amid Economic Concerns
Speaking at a CNBC event in Washington, Reeves intensified her criticism of the Trump administration's decision to initiate war with Iran, labeling it a "mistake" and "folly." Her remarks followed the IMF's fiscal report, which indicates government receipts as a share of GDP will rise more rapidly in the UK than in any nation tracked by the organization.
Reeves emphasized, "We are a net importer of gas, which means we are impacted by the conflict in the Middle East. That's why I deliver this message clearly, alongside ten other countries that signed today's statement: we seek de-escalation of the crisis."
She argued, "Our growth will be higher and inflation lower if this conflict ends, achievable only through de-escalation. The best economic policy now, for the UK and globally, is de-escalation of this conflict and reopening the Strait of Hormuz."
IMF Report Highlights Rising Tax Burden
In a new report, the IMF projects the UK tax burden, measured by government revenue as a share of GDP, will climb to 42.1 percent by 2031. This represents a 4.5 percentage point increase since Labour assumed power in 2024, a rise approximately three times larger than France's.
Reeves has raised over £65 billion in taxes through her first two Budgets, aiming to enhance public sector pay and stabilize public finances. However, the upcoming months will scrutinize public financial health post-war impacts and potential defense funding needs.
Confidence Amid Challenges
Despite a challenging week where the IMF warned the UK economy would suffer more than any G7 nation from the war, Reeves expressed confidence. "We will beat the forecasts again," she stated, maintaining that diplomacy remains the optimal strategy to protect growth and price stability.
Earlier on Wednesday, President Trump announced the "permanent" reopening of the Strait of Hormuz, a critical passage for one-fifth of global oil and gas supplies, though safety concerns persist for shipping in the region.
Across the Atlantic, military experts, including former Labour defence secretary Lord George Robertson, have criticized Reeves for insufficient armed forces funding, adding pressure during her US trip.
