Starmer challenges critics ahead of make-or-break UK budget
This is a budget that will define UK politics for the rest of the decade
KEIR Starmer said his Labour government had no choice but to deliver unpopular tax rises and spending cuts at Wednesday’s (Oct 30) budget, squarely blaming his Conservative predecessors for Britain’s ailing public finances and challenging them to explain what they would do differently.
“The tough stuff is coming in this budget,” the prime minister said following a speech in Birmingham on Monday (Oct 28) setting out the context for Rachel Reeves’ pivotal fiscal statement this week. The Chancellor of the Exchequer would “embrace the harsh light of fiscal reality,” he said.
“If people want to criticise the path we choose, that’s their prerogative – but let them then spell out a different direction,” Starmer said, calling on both the Tories and his critics in the media to detail how else they’d fund public services amid a bleak fiscal picture. “Nobody wants higher taxes, nobody wants public spending cuts, but we have to be realistic about where we are as a country.”
Starmer and Reeves are preparing a budget that will define UK politics for the rest of the decade. The government is hoping to set up an election win in five years’ time by stabilising Britain’s public finances now through as much as £40 billion (S$68.6 billion) of tax hikes and spending cuts – including raising payroll taxes for businesses, capital gains tax and inheritance tax – combined with an investment ramp up funded by more borrowing, in a bid to spur growth.
Starmer outlined how he would make the unpalatable calls at the start of his premiership before delivering on his promises of change to voters closer to the next election. He said he would “run toward the tough decisions” but that “better days were ahead,” implying he didn’t want further tax hikes or spending restraint at future budgets.
The budget will deliver “honest, responsible, long-term decisions in the interests of working people,” Starmer said. “It’s stability that means we can invest, and reform that will maximise that investment.”
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In an indication of looming controversial measures, Starmer said a government-funded cap on bus fares would rise to £3 from £2, an increase that some Labour lawmakers and regional mayors had opposed. Some £240 million more funding would be provided for local government services to help the unemployed back into work as part of labour market reforms.
The budget comes at a critical time for Starmer, who wants to show progress on the “change” pledge that helped win a landslide election victory in July. Since that win, his popularity ratings have declined amid controversies over the taking of freebies by Labour politicians, an unpopular decision to curb winter fuel payments to pensioners and internal ructions in his top team.
Acknowledging the difficult start in office, Starmer said he would publish “clear ambitions” on how he would make progress on each of his so-called five missions to rebuild Britain, including boosting growth and accelerating the green energy transition. Labour aides are planning a series of more retail-friendly announcements on these key policy areas to try to forge a more positive narrative about the administration, Bloomberg previously reported.
The government will paint the tax hikes coming in Wednesday’s budget as necessary to fill a £22 billion black hole they say they inherited from the previous Conservative administration, while also being needed to boost spending on public services. Reeves will pair those tax hikes with a significant change to Britain’s fiscal rules, opting to target a new debt measure that would allow her to borrow as much as an extra £70 billion over the course of the Parliament.
“These are unprecedented circumstances,” Starmer is due to say. “Long-term challenges ignored for 14 years. An economy riddled with weakness on productivity and investment.”
Yet the budget is also a high-wire moment due to the potential backlash from the public and financial markets. Labour is already facing accusations that planned tax hikes will break its manifesto pledges, particularly over the prospective increase in the national insurance payroll tax for businesses.
Labour promised not to raise tax on “working people” and explicitly ruled out hiking income tax, national insurance and VAT. But that has contributed to a media frenzy around the definition of a “working person.”
Starmer sought to address those criticisms, arguing that “working people know exactly who they are” and suggested his priority would always be those who are struggling financially and do not have significant assets.
Starmer and Reeves also have to worry about how financial markets will react to their fiscal plan. UK government borrowing costs have risen in recent days in response to Reeves signalling that she intends to borrow more, and markets are watching for reassurances over the extent of the chancellor’s plans.
Bond traders expect Reeves to unveil borrowing of £293 billion this fiscal year – the highest for any year other than 2020, which was skewed by the response to the pandemic – though analysts are confident the market will take down the extra supply without a hitch.
“The time is long overdue for politicians in this country to level with you honestly about the trade-offs this country faces,” Starmer said. BLOOMBERG
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