Tories have ‘crashed the economy’ says Starmer amid calls for election
Severe spending cuts and tax rises are due to be imposed by Rishi Sunak and Jeremy Hunt within weeks because ministers “crashed the economy”, Keir Starmer has said as he renewed calls for a general election.
The Labour leader said people were already “paying the price” for government mistakes, after reports that a buffer in the public finances could be created by trying to claw back £50bn – significantly greater than the expected £35bn fiscal black hole.
A long-awaited statement laying out the plans was pushed back by Sunak from 31 October to 17 November, and the chancellor is holding meetings with cabinet ministers this week to discuss where the axe should fall.
Seeking to tie Sunak to the economic chaos caused by his predecessor, Liz Truss, Starmer said during a visit to a school in Thurrock: “We were not even talking about cuts a month ago.” He added: “The whole discussion about cuts has become an issue only because the government has crashed the economy.”
Starmer said the priority should be to stabilise the economy and recognise that “it’s working people that grow it”. After a visit to a school in Essex, he said Sunak should call a general election and that parents he had spoken to agreed.
Economic forecasts are expected to be published by the Office for Budget Responsibility within the next few weeks, which could predict that the UK will be plunged into recession next year.
And while currency markets have stabilised, borrowing costs remain significantly higher than they were.
Sunak would not be drawn on the extent of the economic chaos wreaked by Truss’s government, telling broadcasters on Friday simply that “mistakes have been made” and “my job is to fix them”.
He said he and Hunt would have to make “difficult decisions” in order to get borrowing and debt on a more sustainable footing. Doing so, Sunak said, would help “get a grip on inflation” – which for September stood at 10% – and limit “as best as possible” further rises in interest rates.
The Bank of England is expected to meet at the start of November, but has been placed in a more difficult position as its interest rates decision is now coming before the chancellor’s statement.
Sunak also said on Friday that people should be reassured fairness would be “at the heart” of his recovery plan, saying it would “protect the most vulnerable” and grow the economy “in the long run”.
The £50bn Sunak and Hunt are hoping to drum up amounts to about 2% of the UK’s gross domestic product and, if reached primarily through spending cuts, would mean a return to the 2010 days of austerity, according to the Financial Times.
As part of the revenue-raising measures, it is understood that the government is considering making changes to the existing windfall tax, which was adopted in May by Sunak when he was chancellor despite initial resistance.
Hunt is exploring the possibility of extending it for two years beyond the original 2025 end date, while Sunak has raised the possibility of cutting the tax if oil and gas prices return to “historically more normal levels”.
However, profits at the world’s biggest oil companies have soared to nearly £150bn so far this year, and Shell announced this week that it had paid zero windfall tax in the UK despite making record global profits.