Tax cuts on the way? Not if Ms Reeves has anything to do with it
RACHEL Reeves yesterday refused to commit to backing Tory tax cuts – but signalled that a Labour government would give public services more funding.
The Shadow Chancellor said she would ‘never make any commitments’ on spending or tax cuts without being able to say where the money is going to come from.
But speaking at a press conference after official figures showed the economy has slipped into recession, she said that public services needed an ‘immediate injection’ of cash, putting her at odds with Chancellor Jeremy Hunt.
Ms Reeves said that her backing for tax cuts would depend on ‘the state of the public finances and the projections set out by the Office for Budget Responsibility’.
She added: ‘ I objected to the increases in National Insurance when Rishi Sunak tried to increase them as chancellor because I thought it was wrong to increase taxes on working people in the middle of a cost of living crisis.
‘We supported cuts to National Insurance when the Government finally got around to doing that, but I will never make any commitments around spending increases or tax cuts without being able to say where the money is going to come from.’
However, Ms Reeves said that the nation’s public services were ‘on their knees’ and needed ‘an immediate injection of cash’.
‘If our economy had grown at the rate of other OECD (Organisation for Economic Co- operation and Development) countries these last 14 years, our economy would be £150billion bigger, worth £5,000 for every family in the UK and we would
have tens of billions of pounds of additional tax receipts which we would be able to invest in our public services,’ she said.
‘That’s why it’s so important that we grow our economy.’
Her comments set her apart from Mr Hunt, who is understood to be considering a public spending squeeze to fund tax cuts.
She said it was ‘dangerous’ for Mr Hunt to be providing a ‘running commentary’ on his spring budget after he hinted at the prospect of a pre-election giveaway.
Asked what Labour’s budget would be like if it won power, she said: ‘We haven’t got the numbers that the Chancellor has got to inform the Budget process. I’ve made no secret of the fact that I want taxes on working people to be lower. But I’ve also been really, really clear including in the speech today that I will never make a promise where I can’t say where the money is going to come from, so I can’t make those promises.’
The Shadow Chancellor rejected suggestions that Labour’s economic plans to grow the economy were not much different from the Government’s – having ditched the flagship £28billion-a-year green investment plan last week.
Asked about the plans, Ms Reeves said: ‘I reject entirely that there is little difference between what Labour and the Conservatives offer.
‘We have got a comprehensive plan for growth that has been drawn up with business.’
She pointed to planning reforms, as well as plans to invest in a £7.3billion national wealth fund, and new publicly owned energy company, Great British Energy, among the steps Labour had set out in its plans.
Last week, Sir Keir ditched the £28billion pledge – defending the Uturn by claiming it was no longer affordable but leading to claims he could not be trusted on his pledges.
The Labour leader had promised in 2021 to invest £28billion a year until 2030 in green projects if his party came to power.
Experts fear that Labour will have to raise taxes, boost borrowing and introduce harsh spending cuts if they win power.
‘It’s hard to see how they square the circle on the public finances given the number of tax increases Labour have ruled out,’ said Arun Advani, an associate professor at Warwick University.
He told the Financial Times: ‘The answer is they may need to either break one of their pledges on taxes, or take a serious axe to reliefs.
‘But you have to add up quite a lot of reliefs to get anywhere useful.’