Keir Starmer wriggled today as he was accused of ‘misleading’ the public over Labour‘s tax plans.
The PM was repeatedly challenged over whether he deserved the ‘trust’ of the British people in a bruising interview after the Budget.
In bad-tempered clashes with Sky News‘ Beth Rigby, Sir Keir struggled to justify the latest huge tax raid.
He insisted the £30billion package was the ‘least’ that the Chancellor could impose – despite the Treasury’s OBR watchdog concluding that there was no fiscal hole on that scale that needed filling. A large chunk of the money is going on footing a much larger benefits bill.
Sir Keir also again blamed ‘headwinds’ such as Tory austerity and Donald Trump‘s tariffs for the Government’s situation. But he tried to argue that the letter of the Labour manifesto had not been broken.
The huge assault unveiled yesterday included an eye-watering £12.7billion from extending the hated tax threshold freeze for another three years.
Around a quarter of the working population will be paying higher or top rate tax by then, up from just 15 per cent when it was imposed in 2021.
The higher rate threshold would have been £70,370 by 2030 instead of £50,270 if it had risen in line with inflation.
Keir Starmer was repeatedly challenged over whether he deserved the ‘trust’ of the British people in a bruising interview after the Budget
Sir Keir and Rachel Reeves visited a community centre in Rugby today as they try to sell the Budget to voters
The tax burden is due to reach a new peak as a proportion of GDP in records that go back more than 300 years.
The Office for Budget Responsibility said economic growth under Labour would be even lower than forecast last year – and warned that none of the 88 measures unveiled by Rachel Reeves would have a ‘material impact’ on boosting GDP.
The decision to spend £3billion a year axing the two-child cap was cheered wildly by Labour MPs.
But it will involve the taxpayer funding handouts worth thousands of pounds a year each to Britain’s biggest jobless families.
The OBR warned that the largesse would result in a further 25,000 big families claiming benefits, at an estimated cost of £300million.
Overall welfare spending is forecast to be £16billion higher by 2030-31 than the watchdog thought as recently as March.
Alarmingly, annual spending on welfare per year is forecast to rise from £333billion in 2025-26 to £389.4billion in 2029-30.
The Tories condemned it as a ‘Budget for benefits street’ while Nigel Farage hit out at an ‘assault on aspiration’.
However, the measures have been welcomed by Labour MPs with ministers suggesting Ms Reeves has ‘saved her skin’.
In her own interviews this morning, Ms Reeves insisted she ‘had’ to impose more pain on the country.
She risked fuelling alarm about her future intentions as she was challenged to confirm taxes will not rise further.
‘I’m not going to write future Budgets,’ she told BBC Radio 4’s Today programme.
However, the Chancellor’s credibility was dealt another huge blow as the IFS think-tank dismissed the idea there was any ‘repair job’ to be done on the public finances.
Director Helen Miller told the traditional post-event briefing that Ms Reeves had been given an optimistic assessment by the OBR, but chose to raise spending on benefits.
Ms Miller also warned that the Government’s spending plans now ‘involve near-heroic restraint in an election year’.
In the run-up to the Budget, Treasury insiders made great play of the OBR’s grim verdict on the public finances.
But the watchdog’s report yesterday made clear that while productivity forecasts were downgraded, it had taken a more optimistic view of revenues.
As a result the Government’s fiscal position was only £6billion worse than in March, when there was £10billion of headroom to meet the Chancellor’s fiscal rules.
That shift compares to a typical movement of £21billion at fiscal packages, demonstrating that the revision was merely routine.
On ITV’s Good Morning Britain, a flustered Ms Reeves was asked by host Reid: ‘How can anyone believe anything you say?’
‘I am Chancellor in the world as it is and not in the world as I might like it to be,’ Ms Reeves replied.
Susanna Reid (centre) had Rachel Reeves (right) looking flustered this morning after grilling her about whether she broke Labour’s manifesto commitments in the Budget
Among the other measures in a packed Budget yesterday:
- The Chancellor hit salary sacrifice pensions schemes with a £4.7 billion raid.
- Ms Reeves bowed to Left-wing demands for a ‘mansion tax’ of up to £7,500 a year despite Treasury warnings it will cost the taxpayer £300 million in lost revenue in the coming years.
- Motorists faced a double whammy with fuel duty due to rise next year and Ms Reeves ushering in a new 3p-a-mile road pricing scheme for electric vehicles.
- The Treasury set aside £1.8billion for the development of Labour’s controversial plan for digital ID cards.
- Ms Reeves unveiled plans to knock £150 off energy bills by switching some green levies onto the taxpayer.
- The annual limit on cash ISAs was slashed from £20,000 to £12,000.
The Chancellor told GB News: ‘I did have to increase taxes yesterday, but I’ve kept them to an absolute minimum on ordinary working people, freezing those thresholds for an additional three years from 2028.’
Ms Reeves added: ‘This Government are backing aspiration.’
The Chancellor told Sky News that Labour was ‘very specific in the manifesto that we wouldn’t increase the rates of income tax, national insurance or VAT’.
She added: ‘But I do recognise yesterday that I have asked working people to contribute a bit more by freezing those thresholds from 2028.
Chancellor Rachel Reeves said she ‘had’ to impose more pain on the country even though the Treasury’s own watchdog only told her there was a £6billion hole in the public finances
‘I do recognise that will mean working people will pay a little bit more but I have kept that contribution to an absolute minimum by closing, as the IFS and the Resolution Foundation are saying, by closing a number of tax loopholes and also bearing down on government spending and waste and inefficiency.
‘And as a result, I have managed to keep that to an absolute minimum, but people recognise that public finances are under a lot of pressure.’
Ms Reeves said she was ‘not denying this has an impact on working people’.
‘But what we are doing is taking £150 of people’s energy bills next year, that is significant. That is the biggest challenge for people, and pensioners around the country,’ she added.
At the IFS briefing, Ms Miller pointed out that there had been ‘months and months of speculation about how Ms Reeves would respond to a significant deterioration in the economic forecasts’.
‘Yet, in the event, there was no big fiscal repair job,’ she said.
‘There was a material downgrade to the OBR’s medium-term productivity forecast.
‘There was also a chunky increase in forecasts of various aspects of public spending.
‘Yet the overall forecast downgrade was minimal. That’s because the Chancellor was saved by a stonking increase in the forecast for tax receipts.’
Ms Miller added: ‘So, having been handed a slightly-worse-than-last time, but definitely better-than-expected forecast, what did she do?
‘In short, she raised spending, and she raised taxes. There’s more spending than taxes for the next three years, meaning higher borrowing.
‘After that, the tax rises are larger, delivering an increase in the Chancellor’s ‘headroom’ from a paltry £10 billion in the March forecast to around £22 billion this time around.
‘It was a borrow-to-spend Budget in the short term, and a combination of a tax-and-spend and tax-and-bank-it Budget in the medium term.’
The Resolution Foundation pointed out that most workers would have been better off if Ms Reeves had just increased income tax rates
The think-tank highlighted that the tax rises in the Budget are backloaded very close to the election
The Resolution Foundation argued that Ms Reeves’s decision to stick to her ‘manifesto tax pledge has cost millions of low-to-middle earners, who would have been better off with their tax rates rising than their thresholds being frozen’.
The think tank said in its initial response that raising all rates by 1p would have been less costly than freezing thresholds for anyone with an income below £35,000.
‘Indeed, all but the top 10 per cent of the income distribution are worse off because of opting for threshold freezes over rate rises (which raise similar amounts of revenue),’ it said.
Chief executive Ruth Curtice said most of Budget’s impact would be felt in three years.
‘Those threshold freezes kick in in 2028. Some of the other measures also not coming in – for example the mansion tax and the salary sacrifice – until 2028, so that’s when most of the pain from this Budget will be felt,’ she told BBC Radio 4’s Today programme.
‘This Parliament is set to be second only to the last parliament for (living) standards… This decade continues to look really, really tough.’
On welfare, the think tank boss said that while spending on pensioner and health and disability benefits is rising more than expected, ‘we didn’t hear much yesterday of how they (the Government) might take action in the future’ to save money in that area.
