Rachel Reeves will use the Budget to blame Brexit for driving a multibillion-pound black hole in the public finances.

The Chancellor is expected to seize upon analysis published by her independent tax and spending watchdog next month to claim that higher taxes are partially owing to Britain’s decision to leave the European Union.

The Office for Budget Responsibility (OBR) is widely expected to warn that the economy can no longer grow as quickly as in the past because productivity is weaker.

Ms Reeves told international policymakers last week that Brexit had reduced Britain’s growth potential.

“The UK’s productivity challenge has been compounded by the way in which the UK left the European Union,” she said at a meeting at the International Monetary Fund in Washington.

The OBR’s judgment – which will be published in detail alongside the Budget on Nov 26 – will have severe consequences for Ms Reeves’s Budget plans.

The watchdog admitted this summer it had been too optimistic about growth.

If its officials decide to bring its productivity forecasts back in line with consensus, it would imply £18bn of tax rises.

The OBR currently assumes the economy will be 4pc smaller in the long-term because of Brexit. Ms Reeves is trying to convince the watchdog that her planning reforms and trade deals with the EU, US and India will boost growth.

Ms Reeves’s comments come days after Andrew Bailey claimed that Brexit will hurt the economy for years to come.

The Governor of the Bank of England said the impact would be “negative” for the “foreseeable future” as he warned that putting up trade barriers always damaged growth.

While Mr Bailey stressed that he was not offering a personal view of Brexit, he said that years of low UK productivity had driven up debt.

He added: “What’s the impact on economic growth? As a public official, I have to answer that question – and the answer is that, for the foreseeable future, it’s negative.”

Ms Reeves is understood to be frustrated by the timing of the OBR’s downgrade, less than a year after she took steps to strengthen its oversight of the economy.

The Chancellor has already set out its spending plans for the next three years and is understood to be reluctant to reopen those spending envelopes to balance the books.

The Treasury will instead focus on policing budgets and ensuring claims on its emergency overdraft are kept in check.

Ms Reeves is also weighing up options to stop what she admitted was a “doom loop” of higher taxes and low growth by stopping a six-month cycle of budget black holes. 

She is deciding whether to order the tax and spending watchdog to produce a forecast over a shorter time horizon or focus mainly on the economic outlook instead of its fiscal implications.

This would in theory end the prospect of her raising taxes twice a year if she fails to balance the books.

However, Sir Mel Stride, the shadow chancellor, said the economy was flatlining because of the Government’s choices.

“Rachel Reeves is making the wrong ones – letting spending spiral, failing to reform welfare and hammering families with higher taxes to cover her own economic mismanagement,” he said.

Sir Mel added: “Under her watch, inflation has doubled, debt has ballooned and borrowing costs have hit a 27-year high. 

“A theme is emerging: when things go wrong, it’s never Rachel Reeves’ fault – but it’s always your family that pays the price.”

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