Prime Minister Keir Starmer tried to assuage fears that the upcoming Budget will hamper the economy’s momentum, insisting he would not sanction policies which inhibited growth.
Speaking in Italy, Starmer stressed that stimulating economic growth was his “number one priority” as the Budget approaches, despite the sometimes gloomy mood music.
“If it promotes economic growth, it’s in the Yes column — if it is inhibiting growth, it’s in the No column,” he reportedly said.
But he argued that the government’s initial focus would be to address the alleged £22bn blackhole left by the Conservatives, because that would help ensure economic stability.
“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,” he said.
Starmer’s comments come amid concerns that Labour’s rhetoric has been excessively negative since entering office, with repeated warnings of “difficult decisions” looming in October’s fiscal event.
Chancellor Rachel Reeves is reportedly considering a number of tax rises to help address the parlous state of the public finances, including a hike to capital gains tax which many in the City argue would have huge consequences for economic growth.
Economists at Goldman Sachs expected Reeves to raise taxes by at least £20bn in the Budget.
Business leaders are also worried about the potential implications of the government’s workers’ rights package, which some have warned could put firms off hiring.
Starmer also responded to a letter, signed by eight senior economists, which warned that the government could not secure its growth mission without a strategy to “substantially increase” public investment.
“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,” Starmer said.
“But we have got to make sure we have strong fiscal rules in place. We’ve just passed legislation to make sure that we never ever get to the situation that Liz Truss got us into before,” he added.
A report from the Office for Budget Responsibility (OBR) last week made clear the potential fiscal benefits of generating economic growth.
The report warned that public debt was on course to rise to 270 per cent of GDP by the mid-2070s on current trends, but if productivity growth returned to its pre-financial crisis average then debt would remain below 100 per cent of GDP for the entire forecast period.