Prime Minister Sir Keir Starmer warns of a ‘painful’ October Budget adding things will get worse before they get better in the UK economy in a speech on Tuesday. Tony McDonough reports
There will be no gain without pain for the UK economy, Prime Minister Sir Keir Starmer warned in a speech on Tuesday.
Speaking from the rose garden in Downing Street, Sir Keir said the current state of the public finances meant the Government’s first Budget on October 30 was “going to be painful” hinting at tax rises.
However, during the General Election campaign Labour ruled out raising income tax, national insurance or VAT. This gives the Treasury less room for manoeuvre as it looks to fill what it claims is a £22bn black hole in the public finances.
Nonetheless, with new figures showing borrowing for the first three months of this year £5bn more than originally thought, tax rises are likely to be on the way. The PM said those with the broadest shoulders “should bear the heavier burden”.
Sir Keir blamed the previous Conservative Government for weakening the nation and vowed to fix the foundations. Referring to the recent riots, he added: “We have not just inherited an economic black hole, but a societal black hole.”
Labour has already announced the removal of winter fuel payments for 10m pensioners in England and Wales. In the speech he said he needs to be “honest about the choices we face”, adding “things will get worse before they get better”.
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He added: “Just as when I responded to the riots, I’ll have to turn to the country and make big asks of you to accept short-term pain for long-term good. The difficult trade-off for the genuine solution.”
Paul Johnson, director of the Institute for Fiscal Studies, said Labour had backed itself into a corner by ruling out changes to income tax, national insurance and VAT. He added direct taxes on people with average wages are “the lowest they’ve been in 50 years”.
“Trying to significantly increase taxes without impacting that group of people will be very complex and potentially have some negative economic consequences,” said Mr Johnson.