Budget will ‘face up’ to black hole in public finances, Keir Starmer vows

Sir Keir Starmer has said the Budget will “face up” to the reality of Labour’s inheritance from the Conservatives as Rachel Reeves prepares to borrow tens of billions of pounds to invest in Britain’s crumbling infrastructure.

Ahead of the party’s first Budget in 15 years, the prime minister promised to tackle the hole left in Britain’s public finances and give the public “a sense of how we intend to do business” going forward.

Wednesday’s financial statement is expected to be a mixed bag, with deep spending cuts and sharp tax rises offset by a debt-funded spending spree of tens of billions.

The chancellor is planning to change the government’s so-called fiscal rules, freeing up around £50bn for spending on infrastructure, The Guardian reported.

But, while she unveils the planned investment in clean energy and other infrastructure, Ms Reeves is to unveil tax increases and spending cuts of around £40bn a year. The harsh day to day spending plans come as she seeks to fill a hole in the public finances while also offering a much-needed boost to public services including the NHS.

Speaking while travelling to Samoa for a meeting of Commonwealth leaders, Sir Keir addressed Labour’s inheritance from the Conservatives head on, saying: “I am not prepared to walk past it.”

And, setting the stage for the Budget, he said: “It’s our first opportunity to define the way in which we will approach the economy and that’s why I say we will fix the foundations and rebuild the country.”

“Fixing the foundations is about facing up to the inheritance and being clear that we’re not going to walk past it.

“We’re not going to continue kicking it into the long grass and pretending it isn’t there.”

He added that, on top of rebuilding the country, the Budget would be about what greater financial stability makes possible in future.

Sir Keir told reporters: “Obviously there are other Budgets to come but this is a significant one which will set the approach, the framework if you like, and it will give a sense of how we intend to do business.

“We are going to tackle the inheritance in this Budget.

“I’m not prepared to walk past it. I’m not prepared to put it off and that is a signal of the way I want to do business which is not to pretend our problems aren’t there, it’s to actually roll up our sleeves and deal with it.”

Amid expectations employer national insurance contributions are to be hiked, Sir Keir said Labour will keep its manifesto commitments. The party claims its decision to rule out national insurance increases only applied to employee, not employer, contributions.

And he dismissed fears of entrepreneurs leaving the UK over fears of changes to capital gains tax, saying there is “no reason for them to”.

The PM pointed to the recent UK investment summit he hosted as an indicator of mood music among investors.

"All the feedback back to us has been that it was very well received by a significant number of global investors," he said.

Some £63 billion inward investment resulted from the summit, according to the Government.

"I am confident that we will see more inward investment before Christmas to add to that £63 billion," Sir Keir said.

Sir Keir is in Samoa while his chancellor attends G7, G20 and IMF meetings in Washington, DC.

Ahead of her trip, Ms Reeves promised the Budget would be “a reset for our economy”.

She added: “A Britain built on the rock of economic stability is a Britain that is a strong and credible international partner. I’ll be in Washington to tell the world that our upcoming Budget will be a reset for our economy as we invest in the foundations of future growth.

“It’s from this solid base that we will be able to best represent British interests and show leadership on major issues like the conflicts in the Middle East and Ukraine."

Gita Gopinath, deputy managing director of the International Monetary Fund (IMF), welcomed Ms Reeves’ plans to change the fiscal rules to allow more borrowing for investment.

Speaking to the BBC, she said that “public investment is needed in the UK”. “If you compare the UK to G7 countries, investment has fallen short,” she added, while stressing the need to stabilise national debt over five years.