Labour leader Sir Keir Starmer declined to commit to his party's manifesto pledge not to raise VAT, income tax, or national insurance in the upcoming Budget. When Conservative leader Kemi Badenoch challenged him during Prime Minister's Questions, Starmer refused to rule out tax increases ahead of the November 26 Budget statement.
The fiscal pressure behind Starmer's position stems from a significant budget gap facing Chancellor Rachel Reeves. The Institute for Fiscal Studies has warned she may need to find £22 billion in tax rises or spending cuts, while the Office for Budget Responsibility has cut productivity forecasts by 0.3 percentage points. Each percentage point downgrade costs the Treasury approximately £7 billion.
During the heated parliamentary exchange, Badenoch asked Starmer "What's changed in the past four months." referring to his previous position on tax pledges. Starmer responded: "I can say this, Mr Speaker, because the figures on the productivity review that's being undertaken, this is a judgment on their record in office. Those figures are now coming through, and they confirm that the Tories did even more damage to the economy than we previously thought. We will turn that around."
Economic pressure mounts
The political uncertainty has already hit financial markets. Sterling fell to a two-and-a-half-year low against the euro and a three-month low versus the US dollar, dropping 0.4% to 1.13 euros and 1.32 dollars respectively. The pound's decline reflects growing investor concerns about Britain's fiscal outlook.
Chancellor Reeves, writing in The Guardian, insisted the UK does not have to "accept" grim economic forecasts, arguing that austerity, Brexit, and the pandemic have left "deep scars" on the economy. She emphasized: "If productivity is our challenge, then investment is our solution."
The Budget on November 26 will reveal whether Labour breaks its manifesto commitment not to raise taxes on working people, as the government grapples with the substantial fiscal gap inherited from previous administrations.
Note: This article was created with Artificial Intelligence (AI).
