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Keir Starmer today refused to say that taxes will not rise again despite Rachel Reeves making the pledge to business.
In bad-tempered clashes at PMQs, the premier insisted he was ‘not going to write the next five years of Budgets right here at this despatch box’.
Tory leader Kemi Badenoch swiped that the burden would inevitably rise again under Labour – and also goaded Sir Keir over millions of Brits signing a petition demanding a fresh general election.
The Chancellor – who was seated behind Sir Keir this afternoon – made the pledge on Monday as she sought to placate business leaders about her £25billion raid on employer national insurance.
She told the Confederation of British Industry (CBI) annual conference: ‘I’m really clear, I’m not coming back with more borrowing or more taxes.’
Economists cast doubt on the commitment, with spending plans branded ‘front loaded’ and ‘implausible’. Tories pointed out that Labour had already broken election promises over tax.
Yesterday Business Secretary Jonathan Reynolds appeared to contradict Ms Reeves by suggesting instead that any tax hikes would be on a lesser scale.
Mr Reynolds told MPs: ‘What the Chancellor was saying at the CBI was to make clear… that there will not be a further ask of the business community comparable to what we had to do at the beginning of this parliament.’
In bad-tempered clashes at PMQs, Keir Starmer insisted he was ‘not going to write the next five years of Budgets right here at this despatch box’
Tory leader Kemi Badenoch swiped that the burden would inevitably rise again under Labour – and also goaded Sir Keir over millions of Brits signing a petition demanding a fresh general election
But Business Secretary Jonathan Reynolds appeared to contradict her by apparently suggesting instead that any tax hikes would be on a lesser scale
Ms Badenoch opened the session by going on the attack over the Budget and tax.
‘At the CBI conference on Monday, the Chancellor said – and I quote – ‘I’m clear, I’m not coming back with more borrowing or more taxes’,’ she said.
‘I know that telling the truth to this House is important to the Prime Minister, so will he repeat his Chancellor’s pledge now?’
‘We set out our position at the Budget, which was just set out. We’re fixing the foundations. We’re dealing with the £22 billion black hole that they left.
‘I’m not going to write the next five years of budgets here at this despatch box but we said we wouldn’t hit the payslips of working people. We’ve passed the Budget. We’ve invested in the future, and we’ve kept that promise.’
Ms Badenoch accused Sir Keir of ‘making everything worse’ rather than ‘fixing foundations’.
‘The whole House would have heard him refuse to repeat the Chancellor’s pledge, a pledge as worthless as the manifesto promises that he’s talking about,’ she said.
‘If he is fixing foundations, why is it that the PMI (purchasing managers’ index) index shows that business confidence has crashed since the Budget?’
Sir Keir hit back: ‘She talks about tax rises but two weeks ago she stood there and said she wanted all the investment, all the benefits of the Budget, but she didn’t know how she was going to pay for it.’
Economists have voiced significant doubts about the Chancellor’s pledge not to cut taxes, saying the remarks could ‘come back to haunt her’ and that she would need to ‘get lucky’ with better growth to fulfil it.
Ben Zaranko, Associate Director at the Institute for Fiscal Studies, a leading economic think-tank, said that with pressures mounting on the public sector it would be ‘extremely difficult’ to stick to present spending plans.
‘It wouldn’t be at all surprising if those plans get topped up,’ Mr Zaranko said.
If the economy improves, Ms Reeves would have more money to pay for the extra spending but that is not guaranteed.
‘The question then is whether the Chancellor gets lucky on growth or whether she has to come back with more tax rises,’ said Mr Zaranko.
Business leaders are furious with Ms Reeves over the NI hike which they say poses a grave threat to jobs. They have warned it will be passed on in the form of lower wages and higher prices.
Paul Dales, chief UK economist at consultancy Capital Economics, said: ‘I can see why she said it.
‘The Budget hasn’t gone down well and she needs to convince everyone that it was a one-off so people can move forward without worrying about a repeat. But there’s a chance it will come back to haunt her.’
Already, the cost of government borrowing on financial markets has risen in reaction to Ms Reeves’s spending splurge, reducing the Chancellor’s ‘headroom’ to meet her rule on balancing the books, Mr Dales noted.
He said it ‘wouldn’t take much more’ of such increases, or a weakening of the economy ‘to mean that the rule will be broken unless she raises taxes or cuts spending’
‘So she’s skating on thin ice already,’ Mr Dales added. ‘It’s certainly a risky strategy.’
Rachel Reeves made the pledge on Monday as she sought to placate business leaders about her £25 billion raid on employer national insurance
Despite Ms Reeves saying the spending ‘envelope’ for departments is now fixed, the respected IFS think-tank has warned that the government’s plans are ‘front-loaded’ and look ‘implausibly tight’
Julian Jessop, economics fellow at the Institute of Economic Affairs, a free-market think-tank, said the pledge not to raise taxes further ‘lacks credibility’.
‘Her own fiscal rules mean there are many scenarios in which taxes could have to rise further,’ Mr Jessop added.
And it comes after Labour has already broken its promise not to put up national insurance.
‘The breach of the manifesto and election campaign commitments on tax (in spirit if not necessarily the letter) have undermined trust in anything the new government says,’ said Mr Jessop.
He said Mr Reynolds ‘rowing back’ was a ‘more credible position’, suggesting that Labour will not again raise £40 billion in a single Budget but ‘still leaves the door open for many smaller rises’.
John Roberts, AO chief executive, was asked on BBC Radio 4’s Today programme yesterday whether he was reassured on the tax front.
‘I don’t think there’s very much that’s reassuring frankly at the minute,’ he said.
‘I don’t think that it’s a job creation, and I don’t think that it’s a growth budget.
‘The truth will be when we see the government’s plans for what they plan do with the debt that they are saddling the country with.
‘The focus is on is the government going to spend that money wisely. I haven’t seen any indication of that from a business point of view.’
Tory MP Neil Shastri-Hurst said: ‘We have all heard this one before. At the General Election, Labour said they would not raise taxes.
‘Yet, they raised a record £40billion through tax rises in their first Budget. Labour’s anti-growth agenda means they will always be forced to turn to the taxpayer.’