OECD warns Reeves higher taxes and spending restraint will limit consumer expenditure

The UK’s tax and spending policies will weigh on household disposable income and slow consumption, the OECD forecast. Photograph: Jordan Pettitt/PA

A leading thinktank has warned Rachel Reeves that tight government spending and higher taxes will restrict consumer expenditure, despite it predicting the UK economy will grow at a faster pace than France, Germany and Italy next year.

Analysts at the Organisation for Economic Cooperation and Development (OECD) said the government’s ongoing “fiscal consolidation” – meaning higher taxes and reduced government spending – would act as a “headwind” to the UK economy, with “past tax and spending adjustments weighing on household disposable income and slowing consumption”.