Keir Starmer Says There Was "No Misleading" Over Public Finances In Budget Build Up
Prime Minister Keir Starmer gave a speech in London on Monday morning to defend last week's Budget (Alamy)
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Prime Minister Keir Starmer said that there was “no misleading” over the state of the economy in the lead-up to the Budget, as he defended Chancellor Rachel Reeves against allegations that she was dishonest about the public finances.
In recent days, Reeves has come under growing pressure over accusations that she exaggerated the size of the fiscal black hole facing the country to justify raising taxes. The Chancellor denied this claim on Sunday.
Speaking at a press conference on Monday, Starmer came to the defence of the Chancellor, insisting that the government had not misled the public or the markets by overstating the size of the fiscal black hole before raising overall tax levels to their highest level on record.
“We had already made the commitment that we were going to protect our public services, particularly the NHS, to cut borrowing costs and to bear down on the cost of living,” he said.
“We have had a clear commitment that we made throughout the process of what we thought we were going to achieve. Against that backdrop, it was inevitable that we would always have to raise revenue, so there's no misleading there.”
Starmer admitted that the government considered breaching the Labour manifesto pledge not to raise income tax, before he and Reeves we made aware that forecasts by the Office for Budget Responsibility (OBR) watchdog had improved.
“During the overall process, the numbers improved, and there was a point at which we thought, myself included, that we might have to reach for a manifesto breach of some significance,” he said.
“I didn't want to get to that place, but I recognised we might have to, and as the process then continued, it became clear to me and others that we might be able to do what we needed to do with our priorities without that manifesto breach.”
Starmer added that he had wanted to bring down borrowing costs and achieve a bigger fiscal headroom than last year’s Budget, which he said has been a “very significant part of the Budget”.
He described the government's decision to lift the two-child benefit cap at the Budget last week as a move he is "proud" of. This step was welcomed by many Labour MPs, who see removing the cap as key to tackling child poverty.
On the OBR, the PM described the independent watchdog's accidental release of details about the Budget last week as a "serious error" and “massive discourtesy” to Parliament.
On Monday afternoon, the independent financial watchdog is expected to publish the findings of an investigation into how the mistake happened, which could result in pressure on its chair, Richard Hughes, to resign.
In his speech, the prime minister said there was a “moral case” to reform the welfare system, blaming the previous Conservative government for the welfare bill having “gone up extraordinarily”.
“I've been particularly concerned about young people, the best part of a million young people, who are not at work and not learning,” he said.
“Over and above any other issue, I think it's a moral issue, because I know all the evidence points to this: that if you're not earning or learning at that age, the likelihood is it is going to be that much more difficult to get into earning and learning later in your life.”
He said that the current welfare system “has trapped people in poverty” and was a “poverty of ambition”.
Former health secretary Alan Milburn has been appointed to lead an independent investigation into why there has been a rise in youth economic inactivity.
The government attempted to reduce welfare earlier this year, but was forced to abandon its plans by a major Labour backbench rebellion.
Acknowledging that the public will have to pay higher taxes, Starmer said that he believed the government has “now walked through the narrowest part of the tunnel”.
“While I know it's still hard for lots of people… in the year ahead, you will see the benefits of our approach, and not just in the national statistics, but in your communities,” he said.
He also reaffirmed the government’s commitment to build a closer relationship with the European Union after Brexit, stating that this would have to require “trade-offs”.
“Let me be crystal clear, there is no credible economic vision for Britain that does not position us as an open trading economy,” he said.
