It was notable flying into Johannesburg that in all the Prime Minister’s answers about the G20 summit – next week’s make-or-break Budget was at the forefront of his mind
As Keir Starmer jetted to South Africa for the G20 summit, home was on his mind.
The PM has been battling a series of troubling domestic issues in the last few weeks – from speculation over his own position to questions over income tax in the Budget. It was notable flying into Johannesburg that in all Mr Starmer’s answers about the G20 summit – next week’s make-or-break Budget was at the forefront of his mind.
He told reporters: “I will focus on the deals we can do, the business we can do with our partner countries and make sure that the work we do internationally is impacting directly at home in the positive sense. If you want to deal with the cost of living and make people better off with good secure jobs, investment from G20 partners and allies is really important.”
It is clear that Mr Starmer – at ease on the international stage – is aware of the Budget shadow looming over him and the need to show ordinary people he is delivering for them. In a series of broadcast interviews on Friday afternoon, he repeatedly swerved questions on tax, but said he had in his “mind’s eye people struggling with the cost of living”.
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It is the line he has repeated over and over again during this trip – a line he wants to stick in people’s mind after a rocky lead up to the November 26 financial statement.
A fortnight ago the Chancellor used a rare pre-Budget speech to put the country on notice for tax increases – and set hares running over an increase in income tax. She would have been the first Chancellor since Dennis Healey in 1957 to do so.
It also would have been a clear breach of Labour’s manifesto not to hike key taxes – including VAT, national insurance, and income tax – on working people. She pointedly refused to say whether the commitment stood as she took to the stage in No9 Downing Street – risking a huge political storm on November 26.
Some Labour MPs told The Mirror they were resigned to the idea of the manifesto being shredded. Others feared the electoral consequences. But just days later amid an extraordinary briefing war at the top of government over the PM’s leadership the plan to hike income tax was abandoned.
Treasury insiders said better than expected forecasts meant Ms Reeves no longer had to break Labour’s manifesto vow by hiking income tax – but tax remains on the table. A source said: “She will want people to see that despite difficult economic circumstances, she is making the right choices and not the politically expedient ones that will mean a stable economy.”
They expressed frustration at the volume of speculation and the leak of the income tax U-turn but insisted the overarching strategy of the Budget has not changed. There will be no return to austerity but the Chancellor is expected to tackle wasteful spending, with measures such as scrapping Police and Crime Commissioners and NHS England, as well as cracking down on fraud.
The Chancellor also wants to increase her headroom to protect against future economic shocks and to avoid putting up inflation. Cutting NHS waiting lists, reducing the national debt and easing pressure on the cost of living are her main priorities.
A Treasury source said: “We fixed the foundations last year and we are seeing progress. But we have faced challenges from global factors, tariffs etc. We know for working families that the economy still feels stuck. She’s determined to turn the page on that and also to defy the forecasts on growth.”
After a turbulent year for the Labour government – forced to rip up plans on welfare cuts and reinstate the winter fuel payments after massive rebellions – there is also a need to unite a fractious party going into the new year. Major elections across England, Scotland and Wales loom in May and there are constant whispers over the PM’s position among Labour MPs. A No10 source said: “This has to be a unity Budget. The PLP [Parliamentary Labour Party] has to come together.”
One senior Labour source said a strong offering on child poverty at the Budget – notably scrapping the two-child benefit limit in full – could help to bring together the party. The Chancellor and Prime Minister only have days to find out whether their plan succeeds.