Rachel Reeves Pitches Labour As Party Of Economic "Responsibility" As Government Faces Pound Crisis
Keir Starmer and Rachel Reeves at Labour party conference (Alamy)
Shadow Chancellor Rachel Reeves has pitched Labour as the “party of economic responsibility” against a backdrop of fiscal chaos as the pound continued to collapse in the wake of Kwasi Kwarteng's sweeping tax cuts.
So far senior Tories including Kwarteng and Prime Minister Liz Truss have remained quiet on the growing crisis, but the Treasury did put out a statement this afternoon confirming that Cabinet Ministers will announce "further supply side growth measures in October and early November".
They added: "Next month, the Chancellor will, as part of that programme, outline regulatory reforms to ensure the UK’s financial services sector remains globally competitive.
"He will then set out his Medium-Term Fiscal Plan on 23 November. The Fiscal Plan will set out further details on the government’s fiscal rules, including ensuring that debt falls as a share of GDP in the medium term."
The Treasury said Kwarteng has requested that the Office for Budget Responsibility (OBR) sets out a full economic forecast alongside the plan, and confirmed there will be another Budget in the Spring with a further OBR forecast.
There is speculation the Bank of England could now be forced to introduce a further rise in interest rates as the value of sterling has fallen dramatically – close to $1.03 on Monday morning, before rising again – following Kwarteng’s mini-Budget on Friday in which he made £45bn worth of tax cuts. There are now warnings that subsequent economic turmoil could lead to the pound reaching parity with the dollar for the first time in history.
The Bank also put out a statement, saying it "will not hesitate to change interest rates as necessary”, and was "monitoring developments in financial markets very closely in light of the significant repricing of financial assets”.
Launching Labour's economic offering at the party’s annual conference in Liverpool on Monday, Reeves said Labour would “fight” the radical set of fiscal policies introduced by Kwarteng, including scrapping a cap on bankers' bonuses and reducing the top rate of tax, “every step of the way”.
“We are facing a national emergency: Energy prices, up, The cost of the weekly food shop, up. People’s wages not keeping up," Reeves told a packed conference hall.
“On Friday, the Chancellor had an opportunity to set out a serious response to the cost-of-living crisis, and he failed.”
Referring to her own experience working at the Bank of England, the Leeds MP added: “The Chancellor and the Prime Minister, meanwhile, resemble two desperate gamblers in a casino, chasing a losing run. But they’re not gambling with their money, they’re gambling with yours.
“They’ve lost credibility they’re losing confidence, they’re out of control."
Labour leader Sir Keir Starmer had already said that Labour would reverse Kwarteng's decision to reduce the rate of tax paid by people earning over £150,000 from 45p to 40p, if he were in Number 10, but Reeves went further to say that cash would be used to fund more NHS staff.
“It is becoming clearer by the day that Labour is the party of economic responsibility and the party of social justice,” she said.
There are nerves among some Tory MPs about the state of the market’s reaction to Friday’s statement. Asked about how the economic turmoil was being received within the party, one senior Tory MP replied simply, "😬".
PoliticsHome understands that MPs who backed Rishi Sunak in the leadership contest, where the former chancellor argued that tax cuts would be irresponsible, are dismayed that his warnings had not been heeded.
Since Friday Kwarteng has defended his tax cuts, and said he believed the market would soon return to normal, but he remained tight-lipped when approached by journalists outside the Treasury this morning.
Kwarteng told the BBC he was “not going to make any comment” on the figures, in sentiments echoed by Prime Minister Liz Truss’ official spokesperson.
Earlier on Monday, Shadow Business Secretary Jonathan Reynolds said it would not be "overdramatic" to liken the last few days to the Black Wednesday crash of 1992, when the UK was forced to withdraw from the Exchange Rate Mechanism.
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