UK (Parliament Politics Magazine) – UK PM Keir Starmer defends Labour’s economic stance but does not rule out tax hikes amid forecasts of a £51bn gap in public finances.
As reported by The Independent, Sir Keir Starmer stood by Labour’s economic plans while facing pressure over a £51bn gap that may lead to tax rises.
He said Chancellor Rachel Reeves’ budget will raise living standards and help people feel better off.
Keir Starmer’s views on potential tax hikes
The Labour leader, during his visit to Milton Keynes, declined to confirm whether the Government’s tax freeze on income tax, VAT, and corporation tax will remain in place in the upcoming Budget.
Mr Starmer said,
“In the autumn, we’ll get the full forecast and set out our budget. The focus will be on living standards, so that we will build on what we’ve done in the first year of this Government.”
He stated,
“We’ve stabilised the economy. That means interest rates have been cut now four times. For anybody watching this on a mortgage, that makes a huge difference monthly to how much they pay.”
Mr Starmer added,
“In the first year, we’ve raised wages as well, both in the private sector plus the minimum wage, which means people have got a bit more money coming into their pocket, and so at this stage that will be set out in the budget, but the focus will very much be on living standards and making sure people feel better off.”
When asked if he agreed with economists who say tax rises are necessary to increase revenue, the Prime Minister replied, “Some of the figures that are being put out are not figures that I recognise.”
Number 10 later claimed that Labour remains committed to standing by its manifesto pledges, which include not raising income tax or VAT for working people.
National Institute of Economic and Social Research report on the government’s financial outlook
The National Institute of Economic and Social Research warned that slowing economic growth and a struggling labour market are putting pressure on government finances.
They added that the financial impact of Labour’s welfare U-turns has pushed the deficit even deeper.
It said the government faces the challenge of raising over £51 billion, which includes rebuilding a financial buffer that has dropped to just under £10 billion.
The institute stated that Ms Reeves will likely need to reconsider her pledge to avoid raising taxes, instead resorting to “moderate and sustained” increases to manage the gap.
Niesr said,
“Substantial adjustments in the autumn budget will be needed if the Chancellor is to remain compliant with her fiscal rules.”
Professor Stephen Millard, Niesr’s deputy director for macroeconomics, stated,
“Things are not looking good for the Chancellor, who will need to either raise taxes or reduce spending or both in the October budget if she is to meet her fiscal rules.”
The watchdog warned that raising the income tax threshold past 2028 could bring in an estimated £8.2 billion, falling short of the needed revenue.
What did Lisa Nandy say about introducing a wealth tax?
Culture Secretary Lisa Nandy, responding to concerns that the Chancellor may miss fiscal targets by £40 billion, ruled out introducing a wealth tax.
She said,
“The Chancellor has very much poured cold water on that idea, partly because many countries have tried this sort of approach, but mostly because we were elected as a government in a time when taxes on working people were at their highest rate for generations.”
Ms Nandy added,
“We want to bring taxes down for people, we want to help support them, put money back into people’s pockets, and all the things that we’ve been doing as a government in the last 12 months have been aimed at that.”
What did Sir Mel Stride say about Labour’s economic management?
Shadow chancellor Sir Mel Stride stated,
“Experts are warning Labour’s economic mismanagement has blown a black hole in the nation’s finances which will have to be filled with more tax rises – despite Rachel Reeves saying she wouldn’t be back for more taxes.”
He added,
“Labour will always reach for the tax rise lever because they don’t understand the economy.”
Key facts about wealth tax
- Wealth tax targets very rich people with lots of assets.
- It’s charged yearly on the total value of their property, investments, and more, after subtracting debts.
- The tax rate goes up for those with more wealth to help reduce inequality.
- Wealth tax is rare because it’s hard to enforce and risks losing rich people’s money.