Sir Keir Starmer is expected to deliver a robust defence of the Government’s Budget on Monday, as Chancellor Rachel Reeves faces mounting scrutiny over claims she misrepresented the state of the public finances to justify £26bn in tax rises.
In a speech aimed at shoring up his chancellor’s position, the prime minister will argue that Ms Reeves has ensured economic stability by increasing fiscal “headroom” to safeguard the country against future market turbulence. He will also defend her decision to expand welfare spending, rejecting accusations that Labour is reluctant to appear “tough” on benefits, while nonetheless pledging to reform the system and support more young people back into employment.
However, Sir Keir is likely to face questions over Ms Reeves’s conduct and whether she breached any rules, after accusations that she failed to disclose that the Treasury held a £4bn surplus rather than a £20bn deficit in the run-up to the Budget.
The row intensified after the Office for Budget Responsibility (OBR) revealed it had notified the chancellor in September that the deficit had significantly improved, and in October that it had disappeared entirely. Despite this, Ms Reeves warned in a 4 November speech that weak productivity had created “consequences for the public finances” and insisted that tax rises were required to tackle a supposedly £20bn shortfall.
The fallout has prompted several political challenges:
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The Conservatives have urged the Financial Conduct Authority (FCA) to investigate
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Reform UK has requested a probe into whether the ministerial code was broken
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Ms Reeves is expected to be questioned in Parliament
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She maintains that the prime minister was fully briefed and aware there was no fiscal black hole
Pressed on Sky News to say whether she had lied to the public, Ms Reeves rejected the accusation, insisting: “Of course I didn’t.” Conservative leader Kemi Badenoch accused her of misleading voters, claiming Ms Reeves held an “emergency press conference” painting an unnecessarily bleak picture of the UK’s finances despite having been told the opposite by the OBR.
Reports also suggest members of Sir Keir’s top team believed the Cabinet had been misinformed. The Times quoted one unnamed minister who described the Budget process as “a disaster from start to finish”.
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Addressing the Budget, Sir Keir will defend the chancellor’s choice to allocate billions more to welfare, including the scrapping of the two-child benefit cap—an intervention expected to lift 450,000 children out of poverty. He will accuse the previous Conservative government of leaving “children too poor to eat and young people too ill to work”.
Nonetheless, the prime minister will stress that Labour must reform the welfare system—not to appear “politically tough”, he will argue, but to address the reality that the current system is “trapping” thousands of people, particularly the young, out of work. He will say the status quo is costing the country economically and socially, asserting that “any Labour Party worthy of the name cannot ignore that”.
Sir Keir will claim the Budget’s measures to reduce energy bills, freeze rail fares and restore economic resilience are already helping to ease the cost of living. Raising taxes to boost fiscal headroom, he will argue, will help keep inflation down and maintain Labour’s commitment not to borrow for day-to-day spending.
He will add that “economic growth is beating expectations”, though the Government must “go further and faster” to sustain momentum. Business secretary Peter Kyle will be tasked with providing monthly updates on investment in growth sectors, as the Government seeks to “root out excessive costs” across the economy.
Writing in The Guardian, Sir Keir said Labour’s economic strategy would take years to fully deliver but promised: “We will deliver the change we promised and will be judged on it at the next election.”
On Sunday, Ms Reeves pushed back against criticism from the Institute for Fiscal Studies (IFS), which said improved economic forecasts meant her repair job had been modest. She argued that dismissing a £4bn surplus would have been “the lowest surplus that any chancellor ever delivered” relative to fiscal rules and insisted both she and the prime minister had been fully aligned.
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Describing their working relationship as a “partnership”, she said: “Keir and I met regularly to discuss the Budget and the choices… I’m proud of the choices we made to cut waiting lists, cut inflation and strengthen the economy’s resilience.”
