Rachel Reeves is already drowning - now she's about to be torpedoed and sunk

Rachel Reeves once styled herself as an "Iron Chancellor". Today, she's certainly sinking like one. Down and down her reputation goes.

Every new day brings more grim headlines, including today. Economic growth is slowing again, as official figures show GDP rose just 0.3% in the second quarter of 2025, down from 0.7% in the first three months of the year. By contrast, inflation, unemployment, government spending, taxation, debt, the deficit and gilt yields are all rocketing.

As the Budget looms on November 26, it's increasingly likely that Labour will break its manifesto promise not to raise one of the big three taxes - income tax, national insurance (NI) or VAT.

Starmer's team is already softening the ground for the move, knowing it will trigger a huge political backlash. Reeves will catch the full force of it.

As if all that wasn't enough, something even more destructive is heading straight towards the Chancellor. A weapons-grade fiscal torpedo that could blow a £40billion hole in her Budget within days.

It's now in the final stages of assembly by fiscal watchdog the Office for Budget Responsibility (OBR). Later this week, it will fire it right at the Treasury, and Reeves already has that sinking feeling.

For years, UK productivity forecasts have been too optimistic. Now the OBR has decided to revise its predections, cutting at the worst possible time for the Chancellor.

Oxford Economics reckons the downgrade will slice 1.4% off GDP this Parliament, compared to the OBR's current path. Lower productivity means lower growth and less for the Treasury to tax.

If correct, this will blow a £40billion hole in the Chancellor's Budget plans. Reeves is said to be furious at the OBR's timing, but no amount of anger will fix the figures.

The new forecast will leave her trapped between the devil and the deep blue sea. Or rather, between cutting spending or hiking taxes. And there's little doubt which way she'll jump.

Nobody in Labour is going to throw her a life belt. MPs didn't come into power to cut spending, they want more of it.

Reeves's speech yesterday was loaded with fresh pledges to keep activists happy, but not a word on which taxes will rise to pay for them.

Her Budget was already shaping up to be the most dramatic in decades. The OBR's anticipated downgrade will make it even more explosive.

Reeves is looking hard at the Resolution Foundation's proposal to knock 2p off NI and shift it onto income tax, ensuring pensioners contribute more. But that will only raise £6billion.

An extension of the income tax threshold freeze until 2030 is also on the table. Even that won't be enough if the black hole is as wide as feared.

The OBR's intervention is the last thing Reeves needed, but it's hard to summon sympathy after so many blunders.

At some point soon, the Iron Chancellor's reputation will sink to the sea floor. Unfortunately, taxpayers will be shipwrecked too.