Budget will embrace ‘harsh light of fiscal reality’, Sir Keir Starmer to say
The Labour government’s first budget will embrace the “harsh light of fiscal reality” but “better days are ahead”, Sir Keir Starmer will say in a speech today.
Chancellor Rachel Reeves will deliver the budget on Wednesday and setting the tone for the announcement, the prime minister will warn of “unprecedented” economic circumstances and the need to face “the long-term challenges ignored for fourteen years”.
Sir Keir is expected to tell the country: “This is an economic plan that will change the long-term trajectory of British growth for the better.”
Changes expected in the budget include a rise in employer national insurance, of at least one percentage point, and the scrapping of tax exemptions for private schools.
Labour pledged in its manifesto it would not increase taxes on “working people” and has explicitly ruled out rises in VAT, national insurance and income tax.
But, the party has been accused of hypocrisy over an expected decision to extend a freeze on income tax thresholds.
Ministers have also come under pressure to spell out who falls within the term “working people” after Sir Keir suggested those who make money from assets such as property would not fall within the definition.
Later, the prime minister is expected to say he will not offer the UK’s problems as “an excuse”, adding: “I expect to be judged on my ability to deal with this.
“We have to be realistic about where we are as a country. This is not 1997, when the economy was decent, but public services were on their knees.
“And it’s not 2010, where public services were strong, but the public finances were weak. These are unprecedented circumstances.
“And that’s before we even get to the long-term challenges ignored for fourteen years.
“An economy riddled with weakness on productivity and investment. A state that needs urgent modernisation to face down the challenge of a volatile world.”
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Why are businesses nervous about the budget?
Pre-empting criticism, Sir Keir is expected to tell the public: “It’s time we ran towards the tough decisions, because ignoring them set us on the path of decline. It’s time we ignored the populist chorus of easy answers… we’re never going back to that.
“If people want to criticise the path we choose, that’s their prerogative. But let them then spell out a different direction.”
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“Everyone can wake up on Thursday and understand that a new future is being built, a better future,” he is expected to say.
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What is likely to be in the budget?
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Ms Reeves is looking to fill what’s thought to be a £40bn “black hole” to fix public services and shore up the economy.
Some spending plans have already been confirmed, including £1.4bn to rebuild crumbling schools and a £10bn cash injection for the NHS to tackle ballooning waiting lists.
Education Secretary Bridget Phillipson repeatedly said she could not speculate on how the chancellor intends to fill the black hole in the nation’s finances during an interview on Sunday Morning With Trevor Phillips.
But, she said: “We set out in our manifesto that we would not be increasing VAT, national insurance or income tax on working people. We will hold to that. And in the payslips that they see after the budget, they will not face higher taxes.”
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Politics
£104bn of water industry investment will come from bill payers, environment secretary concedes
Steve Reed has conceded that the bulk of the £104bn of water industry investment which he boasts Labour has attracted since coming to office will come from bill payers.
In an interview with Sky News, the environment secretary sought to blame the previous Tory government for a string of high profile investors walking away from the sector over the last year.
Mr Reed does not accept claims that further threats to jail water bosses and promises to curb price rises have deterred investment.
Instead, he told Sky News that “by bringing in the £104bn of private sector investment that we secured at the end of last year, we can make sure that the investment is going in to support” the industry.
When challenged that the £104bn was total expenditure not total investment, and that bill payers would pay back this expenditure over the coming decades, Mr Reed conceded this was right – and the money ultimately is coming from bill payers.
“The money comes in from investors up front so we can do that spending straight away,” he said.
“Over decades, the investors got a modest return from the bills that customers are paying. That’s how investment works.”
Some investors have warned they do not think it viable to fund the UK water sector because of the hostile political tone of ministers and lack of certainty.
Ministers have said the government does not want to renationalise water as it would mean years of legal wrangling and cost a lot of money.
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Minister rules out nationalising the water
Labour has launched a record 81 criminal investigations into water companies over sewage dumping since winning the election last year.
Water company bosses could be jailed for up to five years and the companies fined hundreds of millions of pounds if they are found guilty.
Mr Reed committed to not interfering with those prosecutions, saying it would be “highly inappropriate” for any minister to do so.
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Key recommendations from the water report
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He rejected suggestions ministers will be pressured to ensure water bosses do not serve jail time as this will deter investors.
“It’s a judicial process, it would be highly inappropriate for any ministerial interference in the process,” Mr Reed said.
“They will work their way through the court system, as they should do, and ministers will decide on sanctions after.”
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