Tax hikes and spending cuts will put pressure on the UK economy over the next two years – and inflation will remain among the highest in the among the G7 economies, according to a new report.

The Organisation of Economic Co-operation and Development (OECD) said the Government’s ongoing fiscal consolidation – meaning higher taxes and reduced government spending – will act as a “headwind” to the UK economy, with “past tax and spending adjustments weighing on household disposable income and slowing consumption”.

In its latest economic outlook, the influential organisation said UK growth will slow from 1.4% this year to 1.2% next year, before edging up to 1.3% in 2027, with “substantial” downside risks of the fiscal tightening plans.

It kept its forecast unchanged for 2025, but upgraded the

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