Keir Starmer refuses to rule out income tax raid at the Budget
Keir Starmer dodged questions on whether Labour would raise income tax, VAT or national insurance, the clearest sign yet that the government is looking at breaking key party manifesto commitments on taxes.
During Prime Minister’s Questions on Wednesday, Kemi Badenoch grilled Starmer on whether Rachel Reeves was laying the groundwork for an income tax raid next month.
In response, Starmer said: “Finally she’s talking about the UK economy.
“Retail sales are higher than expected, inflation is lower than expected, growth [forecasts] have been upgraded, the stock market is at an all time high.”
“We will build a stronger economy.”
Starmer prepares MPs for income tax hike
Badenoch pointed out that Starmer provided a different answer to a few months ago when she asked the same question “word for word”.
The Prime Minister then said “yes” when asked on whether the Labour government would commit to not break Labour manifesto commitments.
Starmer signalled that the Office for Budget Responsibility’s (OBR) downgrades to productivity trend forecasts confirmed “the Tories did even more damage to the economy”.
“They broke the economy. We are fixing it,” Starmer said.
Reports have suggested that the OBR is set to downgrade productivity forecasts by 0.3 percentage points, larger than City analysts expected and set to cost at least £20bn.
Fiscal hole
This downgrade would widen the fiscal hole faced by Reeves at the Budget, adding to rising costs incurred by higher debt interest payments than expected and U-turns on welfare savings earlier this year.
Reeves has also suggested she would build a bigger headroom than £9.9bn at the Budget to ensure she can avoid making further tax rises in future years.
Several think tanks and economists, including the left-leaning Resolution Foundation and the business group Institute of Directors, have urged the government to raise revenue by hiking income taxes.
Reeves said she was determined to “defy” gloomy forecasts set by the OBR.
She also said she would not “relitigate the past” despite senior ministers claiming Brexit had contributed to growth downgrades and higher inflation in the UK.
Badenoch hit out at Labour’s stewardship of the UK economy, claiming the government should look to cut welfare spending and ditch the Employment Rights Bill.
Starmer also avoided providing a direct answer to a question on whether workers’ rights reforms would be watered down, instead saying: “We are not going to take lessons from [the Tories].”
A Labour spokeswoman later clarified that the bill was still set to pass in full, with the government set to “work with businesses” on its implementation.
The spokeswoman also insisted the government was still “awaiting the final OBR forecast”, which will be delivered the day before the Budget.
The next round of forecasts to be sent by the OBR will be received by the government later this week.