Keir Starmer today made clear the ‘tax bomb’ in the Budget will go beyond filling the claimed £22billion ‘black hole’ left by the Tories.
The PM insisted next week’s fiscal package would ‘rebuild’ services and the economy.
But he tried to cool business fears about an expected £35billion of tax rises, insisting investors do not need to be ‘worried’.
Sir Keir’s comments, as he arrived at a Commonwealth summit in Samoa, come as Rachel Reeves prepares to confirm that she is bending fiscal rules to splurge billions more on infrastructure.
The Chancellor is set to lay out the move at IMF meetings in Washington DC later.
The government will switch to a debt measure based on liabilities – which should allow around £50billion more borrowing for projects such as running HS2 to Euston.
Keir Starmer (pictured in Apia, Samoa) insisted next week’s fiscal package would ‘rebuild’ services and the economy
Rachel Reeves is preparing to confirm that she is bending fiscal rules to splurge billions more on infrastructure
Ms Reeves is planning a huge move to impose national insurance on employers’ contributions to retirement funds – despite complaints it is a ‘straightforward breach’ of Labour‘s manifesto.
However, the burden will seemingly be borne entirely by the private sector, with Ms Reeves pumping an extra £5billion into NHS and other budgets to avoid cuts to headcount or wages.
Hundreds of thousands could be dragged deeper into the tax system by extending the freeze on thresholds again. And inheritance tax, pension pots and capital gains could also be milked to bolster the government’s books.
The rumoured £35billion of tax increases in the package could leave Ms Reeves with two unwanted slices of history.
Official figures suggest it would be the most tax raised at a Budget since 1993, in the aftermath of the Black Wednesday Sterling crisis.
And Ms Reeves could put the country on track to pay the highest tax as a proportion of GDP since comparable records began nearly eight decades ago.
However, Sir Keir insisted there would be ‘no reason’ for entrepreneurs to leave the country.
He told reporters: ‘My evidence that what we are saying is attractive to investors is last Monday’s investment summit that was hugely successful.
‘All the feedback back to us has been that it was very well received by a significant number of global investors.’
Sir Keir insisted people were investing in Britain ‘because of what this government is bringing to the table’.
Downing Street later said investors ‘shouldn’t be worried about this Budget’, despite some rushing to sell assets due to expected hikes in capital gains tax.
Longer-term stats compiled by the Bank of England indicate that taxes are likely to have been lower all the way back to 1700
Labour’s first Budget for 15 years will aim to ‘fix the foundations’ and ‘rebuild’ the country, Sir Keir said, as he insisted that the ‘£22billion black hole’ is ‘for real’ and not ‘performative’.
‘It’s for real and we’ve got to deal with it and I don’t think we are wrong to be honest about that and we have also been clear this is a budget about rebuilding the country and therefore it will also spell out the direction of travel for the country and what we want to do with it.
‘We’ve got to get both bits of that right.’
The PM said he was ‘not prepared’ to put off the pain for another year, telling reporters that while there would be more budgets to come, he wanted to ‘tackle the inheritance in this Budget’.
‘I’m not prepared to walk past it. I’m not prepared to put it off and that is a signal of the way I want to do business which is not to pretend our problems aren’t there, it’s to actually roll up our sleeves and deal with it.’