Starmer forced to deny breaking Labour manifesto as experts sound dire warning over Budget plans
Sir Keir Starmer was forced to deny Labor had misled the public about record £26bn tax rises as leading economists warned that Rachel Reeves’ budget would fail to boost Britain’s growth.
In a scathing assessment of the Chancellor’s plans, the highly respected Institute for Fiscal Studies (IFS) said Ms Reeves was avoiding measures that could divert growth: it was previously the chancellor’s “number one priority”.
Budget watchdog the Office for Budget Responsibility (OBR) also said none of the dozens of measures announced on Wednesday would have a “material” impact on growth.
The heartbreaking decision comes as the prime minister tries to rebut claims that Labor has broken its manifesto commitment not to raise taxes on workers – something the IFS has said openly.
When debate broke out over his manifesto pledge, Sir Keir insisted the tax-increased budget was needed to help the NHS and schools and alleviate child poverty, but dodged questions about whether his government would have to raise taxes again.
On a dramatic day in Westminster as experts digested dozens of measures in the Budget, this was also revealed:
- An extended freeze on tax thresholds will hit low earners harder than a 1p increase in the basic income tax rate, according to an influential think tank
- Ms Reeves’ pledge to shave £150 off the cost of energy bills will drop to just £39 after three years, the IFS says
- Experts predict new ‘mansion tax’ will cause prices of homes worth more than £2 million to fall
- The OBR, which mistakenly published details of Ms Reeves’ budget before announcing it, said an “outsider” may have accessed the link as her boss offered to resign over the blunder
During a briefing on Thursday morning, the IFS called on Ms Reeves to be more ambitious on measures to boost growth and highlight reforms to the tax system as one way of doing this. Predictions of how much the UK economy will grow have been downgraded by the OBR in its Budget analysis.
Director Helen Miller said: “Growth not only makes us richer, it makes it easier to solve almost every problem. In the last Budget the chancellor said: ‘Every Budget I deliver will focus on our mission to grow the economy.’ This was not on the program yesterday.
“It was never going to be possible to do such a big tax increase and have it be good for growth. But — and I’m fully aware that I sound like a broken record here — tax reform was the way to make sure taxes didn’t do more harm than necessary.”
He added that Ms. Reeves, like her predecessors, continues to avoid meaningful tax reforms that could move the dial. “This mostly felt like a government trying to get through its Budget,” he added.
The IFS also compared the Budget to the “fiscal fiction” of previous governments and warned that it contained “backloaded” measures and unrealistic forecasts of future “spending constraints”.
OBR chairman Richard Hughes said “none of the measures” in Ms Reeves’s Budget “will have a material impact” on growth.
Meanwhile, pressed on measures in the Budget, Sir Keir insisted Labor had “maintained our manifesto”, pledging not to increase income tax, national insurance or VAT on employees.
Ms Miller accused Labor of breaching its manifesto commitment and said national insurance, a tax the party had specifically mentioned, would be “increased” as a result of freezing the income tax threshold and other measures. “I would call this a violation of the manifesto,” he said.
But the Labor leader denied the accusation, telling Sky: “We have kept our manifesto as promised but I accept the challenge that we are asking everyone to contribute.”
Ms Reeves also refused to say Labor had broken its manifesto commitment.
But he added: “I recognize that yesterday I asked working people to contribute a little more by freezing these thresholds for another three years from 2028. I know that will mean working people will pay a little more.”
Solution Foundation said: It is stated that the decision to extend the freeze on tax thresholds will affect lower income earners and that by 2030-31 people earning less than £35,000 a year will pay more than if the Chancellor increased the basic income tax rate by 1p.
Sir Keir also said he would “make no apologies” for lifting 450,000 children out of poverty, as he hit back at claims that Labour’s move to scrap the two-child benefit limit was explained as a way to appease unhappy Labor MPs.
Asked whether he was removing the two-child limit for universal credit to strengthen his own position, he told Sky News: “It’s impossible to argue that this is a position that has only been adopted in the last few weeks. It’s a long-standing ambition of mine.”
“I am proud to be a prime minister who has done more to tackle child poverty than any prime minister ever.”
He also highlighted the “tremendous impact” “disgusting” Tory policy has had on the health of hundreds of thousands of children.
“I will not apologize for lifting half a million children out of poverty,” Sir Keir said.
Shadow chancellor Sir Mel Stride hit out at the move, saying removing the title was the “wrong choice”.
