Rachel Reeves has been warned that tax hikes and spending cuts will hold back the UK economy in the next two years.
The Chancellor has been put on notice that growth will be sluggish and inflation will remain the highest of G7 countries this year.
It also warns that unemployment will hit 5 per cent as business is hit with job taxes.
It comes as a new poll says only 10% think Labour best to handle the economy in a damaging blow which is less trusted than Liz Truss.
The latest outlook on the world economy has been delivered today by the Paris-based OECD.
Forecasts show that UK growth will slow from 1.4% this year to 1.2% next year before edging up to 1.3 per cent in 2027.
It said that “past tax and spending adjustments weighing on household disposable income and slowing consumption”.
The prediction for 2026 was upgraded from the 1 per cent that featured in its outlook three months ago.
But it said that weak growth in working-age population which was in part from lower immigration figures would act as a “drag” on the economy.
The independent Office for Budget Responsibility also upgraded growth for this year but downgraded it in the coming years.
The forecasts from the OECD are more pessimistic than the independent Budget watchdog.
The Chancellor revealed a staggering £26 billion of tax hikes which included freezing tax thresholds, leaving 1.7 million people paying more tax.
She has been accused by Tory leader Kemi Badenoch of “lying” over the state of public finances to pave the way for tax hikes.
The overall tax burden reached the highest level since 1948 when records began.
Meanwhile, Britain’s inflation figures will be the highest of all G7 advances economies this year standing at 3.5 per cent.
It will dip next year to 2.5 per cent which will remain the second highest in the G7, behind the United States.
But the economy will be boosted from the lower inflation figures and slight improvements in global trade.
In response to the OECD report, Ms Reeves said: “Last week, my Budget cut waiting lists, cut borrowing and debt, and cut the cost of living.
“Less than a week later, the OECD has upgraded our growth and cut its forecast for inflation next year.
“The choices that I made at the Budget are expected to cut inflation by 0.4 percentage points, helping cut the cost of living for households and costs for our businesses.”
Shadow Chancellor Sir Mel Stride said: “The OECD are clear: unemployment is set to rise, driven in part by Labour’s Jobs Tax, and inflation will stay above target for the rest of their forecast.
“Rachel Reeves promised growth but growth is expected to weaken next year, because of her choices. This is the cost of policies that punish work, businesses and investment.”
