Sir Keir Starmer has expressed his support for the upcoming Budget while emphasizing the need for the Government to act “further and faster” to stimulate economic growth. This statement comes as Downing Street rejected allegations that Rachel Reeves, the Chancellor, misled voters about the economic challenges facing the nation, labeling such claims as “categorically untrue.”
The controversy centers around pre-Budget speculation regarding a potential £20 billion gap in meeting fiscal rules, exacerbated by a downgrade in productivity forecasts. On November 4, 2023, Reeves suggested that tax increases might be necessary due to the implications of sluggish productivity growth on public finances.
Government’s Response and OBR Insights
The Office for Budget Responsibility (OBR) disclosed on Friday that it had informed the Chancellor on September 17 that an improved tax revenue from increasing wages and inflation was likely to reduce the anticipated shortfall. By October, the OBR indicated that the shortfall had disappeared entirely. This information has led some opposition figures to call for the Financial Conduct Authority (FCA) to investigate whether the Treasury misled the public regarding the fiscal situation.
In defense of Reeves, a source from Downing Street stated, “No 10 was aware of the content of the speech, which we believe accurately outlined the need to raise revenues.” The source further asserted that the OBR figures justified the need for significant revenue-raising to fulfill governmental commitments and achieve desired fiscal headroom.
They also emphasized that the OBR’s forecast did not factor in additional spending related to the removal of the two-child benefit cap and reversals on winter fuel payments and welfare cuts.
Starmer’s Upcoming Speech and Planned Reforms
In an effort to steer the political narrative, Starmer plans to deliver a speech on Monday to endorse the decisions made by Reeves in the Budget and outline his vision for long-term economic growth. He intends to highlight the Budget’s role in addressing the cost of living crisis, ensuring economic stability, and protecting public services.
Starmer will assert that “economic growth is beating the forecasts,” but will reiterate the necessity for the Government to enhance its efforts to encourage further growth. He is expected to announce reforms aimed at expediting the construction of nuclear power plants, following findings from the Government’s nuclear regulatory taskforce. The taskforce concluded that excessive regulations have made the UK one of the most expensive places to develop nuclear energy.
To maintain momentum, Business Secretary Peter Kyle will be tasked with applying a similar deregulatory strategy to major infrastructure projects, aligning with Labour’s industrial strategy.
On the media front, Reeves is anticipated to face tough questioning regarding her pre-Budget statements during Sunday morning news programs. She is also likely to promote the Government’s record investment of £7.3 billion in local road maintenance, aimed at assisting councils in addressing pothole issues.
In response to the unfolding controversy, Tory shadow chancellor Sir Mel Stride has reportedly contacted the FCA to investigate “possible market abuse” stemming from what he describes as “misleading” comments and the irregular disclosure of sensitive budgetary information.
Additionally, Stephen Flynn, the leader of the Scottish National Party in Westminster, has called for an immediate inquiry into allegations of misleading budget briefings, questioning whether Reeves’s remarks constituted “market manipulation.”
A spokesperson for the Treasury commented that they would refrain from speculating on the OBR’s processes and how it relates to internal decision-making leading up to the Budget. The spokesperson affirmed that the Chancellor made choices focused on reducing the cost of living, alleviating hospital waiting lists, and managing the national debt effectively.
