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Keir Starmer has issued a grim warning on a Budget later this week that is expected to feature record-breaking tax rises.
The prime minister used a major speech in Birmingham on Monday to pave the way for “tough decisions” on Wednesday when Rachel Reeves delivers her first Budget.
With his government already under siege for its economic plans, Sir Keir tried to clear up what he means by “working people”, whose taxes he has promised to protect.
The prime minister mentioned “working people” 24 times in his speech as he tried to see off criticism over his own vague definition by saying: “they know who they are”.
In his party’s manifesto there was a promise to not increase income tax, national insurance or VAT but already that appears to be under threat with a rise on the employers’ rate of national insurance now widely expected.
Added to that, there is expected to be tax raids on inheritance and capital gains as the chancellor attempts to close a £40 billion gap in spending plans and government income.
The prime minister attempted to pin the blame of the tax rises to come in a grim Budget on the inheritance left his government by the Tories. Although critics have noted that bumper pay rises for the public sector, particularly doctors and train drivers, have made matters much worse.
But Sir Keir defended the looming tax rises in Wednesday’s Budget.
He said “better days are ahead” and “everyone can wake up on Thursday and see that a new future is being built, a better future”.
The prime minister said: “Borrowing will drive long-term growth. Tax rises will prevent austerity and rebuild public services. We choose to protect working people. We choose to get the NHS back on its feet. We choose to fix the foundations, reject decline and rebuild our country with investment.”
He added: “The time is long overdue for politicians in this country to level with you honestly about the trade-offs this country faces, to stop insulting your intelligence with the chicanery of easy answers.
“Working people know that hard choices are necessary. They lived through the Liz Truss episode. They lived through the cost-of-living crisis.
“So they know that the things they want from us – protecting their living standards, building our nation, fixing our public services – they know that this can only be achieved alongside economic stability. There are no short cuts.”
The prime minister also dropped some early measures which he hopes will alleviate the pain.
This included a £240 million package for councils to help get people on longterm benefits back to work.
He also said that bus ticket prices will be capped to £3 until 2025, a rise from the previous £2.
The chancellor is now expected to increase employer contriibutions to national insurance by 2 per cent, despite promising not to increase national insurance in the Budget. There are also expected to be hikes in inheritance tax and capital gains. She has pledged not to increase “taxes on working people” including income tax, employee contributions to national insurance or VAT.
In his speech, Sir Keir promised the Budget will “ignore the populist chorus of easy answers” amid a series of expected tax hikes, including an increase to employer national insurance by at least one percentage point.
Referring to the statements announced by New Labour’s Gordon Brown and austerity-era Conservative chancellor George Osborne, Sir Keir said: “We have to be realistic about where we are as a country. This is not 1997, when the economy was decent but public services were on their knees.
“And it’s not 2010, where public services were strong, but the public finances were weak. These are unprecedented circumstances.
“And that’s before we even get to the long-term challenges ignored for 14 years: an economy riddled with weakness on productivity and investment, a state that needs urgent modernisation to face down the challenge of a volatile world.”
The prime minister said he will not offer the UK’s problems as “an excuse”, adding: “Politics is always a choice. It’s time to choose a clear path, and embrace the harsh light of fiscal reality so we can come together behind a credible, long-term plan.”
