Keir Starmer might rip up fiscal rule e book to borrow an additional £20bn

Keir Starmer last night insisted he will reject Budget proposals that damage growth – amid warnings his downbeat approach is damaging the economy.

Speaking to reporters while travelling in Italy, the Prime Minister said economic growth was the ‘number one priority of this government’, adding: ‘All decisions will be made against that objective.’

He said that he and Chancellor Rachel Reeves would judge each Budget proposal by ‘asking the question will this promote economic growth or not?’

He added: ‘If it promotes economic growth it’s in the Yes column if it is inhibiting growth it’s in the No column.’

Sir Keir also hinted that Labour could re-write its own ‘fiscal rules’ to allow an extra £20 billion borrowing – easing the pressure for immediate spending cuts, but increasing the burden of debt on future generations. He said ‘borrowing to invest’ could help boost growth.

Speaking to reporters while travelling in Italy , the Prime Minister said economic growth was the ‘number one priority of this government’. Pictured: Keir Starmer attending the Battle of Britain service at Westminster Abbey

Sir Keir said that he and Chancellor Rachel Reeves (pictured) would judge each Budget proposal by ‘asking the question will this promote economic growth or not?’. Pictured: Rachel Reeves visits a housing development site in Liverpool 

Experts have warned that a number of measures being considered by Labour for next month’s Budget, such as raising capital gains, could undermine economic growth.

Former Bank of England chief economist Andy Haldane said last week that boosting growth would rely heavily on private sector investment, which could be deterred by higher taxes on wealth and capital.

‘We have to be cautious and careful,’ he said. ‘So we don’t scare off the risk takers, we don’t scare off the providers of private capital.’

Sir Keir also hinted that further spending and welfare cuts are likely in the October 30 Budget, saying that ministers plan to fill the alleged £22 billion ‘black hole’ they say was left by the Conservatives.

Ms Reeves announced a series of measures to save money in August, including the controversial plan to axe the winter fuel allowance for 10 million pensioners. But these saved only £5.5 billion, leaving the Chancellor with at least another £15 billion of in-year savings to find to meet her own target.

Sir Keir insisted that immediate action was the right approach, however ‘tough’.

‘The framing of it [the Budget] is economic growth,’ he said. ‘Because I believe stability is vital for economic growth – we aren’t going to get economic if we don’t stabilise the economy – we’re going to do the really hard stuff now

Former Bank of England chief economist Andy Haldane (pictured) said last week that boosting growth would rely heavily on private sector investment

In a gloomy speech from the Downing Street rose garden last month, Sir Keir claimed his Government has done more in seven weeks than the Tory government did in seven years in power

‘That’s why we’re going to deal with this 22 billion black hole now…I’m not prepared to put it off or put it into the long grass or leave it until next year or the year after. I think we have to deal with it now.’

‘I’ll be judged in five years on whether I’ve delivered the change I’ve promised to the country in relation to the economy, living standards, the health service, public services and whether people feel better off. We’re going to do the tough, difficult things up front.’

Sir Keir also opened the door to changing the government’s ‘fiscal rules’ to allow Ms Reeves to borrow more next month.

Jeremy Hunt has accused Labour of plotting to fiddle the rules by changing the definition of debt it uses to meet its plan to get debt falling within five years.

Asked about the claims, the PM said: ‘You’re tempting me into issues which are going to have to be dealt with in the Budget. 

‘There are different theories on economic growth. I’ve always thought it’s important to borrow to invest. That was part of what we said before the election. 

‘That’s not a new principle. But we have got to make sure we have strong fiscal rules in place.

‘What I’ve said to my team is Liz Truss had unfunded commitments for tax cuts.

‘Unfunded commitments for spending are just as bad and likely to have the impact on the economy, which is why the stability piece applies just as much to a Labour government as it does to a Tory government in my view.’