LABOUR’S economic strategy was mired in confusion today as Sir Keir Starmer and Chancellor Rachel Reeves appeared at odds over future tax rises.
The Prime Minister refused to confirm the commitment made by Ms Reeves this week that the government would not seek further tax increases or more borrowing in this parliament.
Ms Reeves had made the pledge to bosses’ organisation the CBI at its conference on Monday, where she was obviously anxious to ingratiate herself with the big employers.
However, this promise further boxes in a government already struggling to formulate a clear plan, so the PM declined to back his Chancellor when pressured by Tory leader Kemi Badenoch in the Commons.
Ms Badenoch asked: “At the CBI conference on Monday, the Chancellor said: ‘I’m clear, I’m not coming back with more borrowing or more taxes.’
“I know that telling the truth is important to the Prime Minister, so will he repeat his Chancellor’s pledge now?”
Sir Keir replied with a litany of his favourite but now tired catchphrases: “We’re fixing the foundations. We’re dealing with the £22 billion black hole that they left.”
But then he added: “I’m not going to write the next five years of Budgets but we said we wouldn’t hit the payslips of working people.
“We’ve invested in the future, and we’ve kept that promise.”
Ms Badenoch pointed out, reasonably enough, that Sir Keir had declined to give the required commitment and that Ms Reeves’ promise was therefore worthless.
Party chairwoman Ellie Reeves, the Chancellor’s sister, tried to turn the tables back on the Tories, asking: “Kemi Badenoch has again been unable to explain whether she would reverse changes to employer NICs that pay for Labour’s investment in the NHS and education.
“Would she cut the funding for hospitals and schools which she claims to back?”
But the truth is that Labour has placed itself in a bind. By ruling out any increases to most taxes, including corporation tax and a wealth tax, it has left itself stretched for funds to “fix the foundations” in Sir Keir’s words.
For Ms Reeves, on the Blairite right of Labour, appeasing business is the main issue, but Sir Keir clearly wants to leave himself some wriggle room.
Leading think tank the Institute for Fiscal Studies warned that existing public spending plans would still require real-terms cuts after next year, or an unambiguous return to the austerity Sir Keir has pledged to avoid.
Only better-than-expected growth will get the government out of its self-dug hole, but “if she is unlucky, expect her to come back with more tax increases,” IFS director Paul Johnson said.
