Sir Keir Starmer has issued a grim warning on a Budget later this week that is expected to feature record-breaking tax rises.
The prime minister used a major speech in Birmingham on Monday to pave the way for “tough decisions” on Wednesday when Rachel Reeves delivers her first Budget.
With his government already under siege for its economic plans, Sir Keir tried to clear up what he means by “working people”, whose taxes he has promised to protect.
The prime minister mentioned “working people” 24 times in his speech as he tried to see off criticism over his own vague definition by saying: “they know who they are”.
In his party’s manifesto, there was a promise not to increase income tax, national insurance or VAT but already that appears to be under threat, with a rise in the employers’ rate of national insurance now widely expected.
In addition, there are expected to be tax raids on inheritance and capital gains as the chancellor attempts to close a £40bn gap between spending plans and government income.
The prime minister attempted to pin the blame for the tax rises to come in a grim Budget on the inheritance left to his government by the Tories. Critics have noted that bumper pay rises for the public sector, particularly doctors and train drivers, have made matters much worse.
But Sir Keir defended the looming tax rises.
He said that “better days are ahead” and “everyone can wake up on Thursday and see that a new future is being built, a better future”.
The prime minister said: “Borrowing will drive long-term growth. Tax rises will prevent austerity and rebuild public services. We choose to protect working people. We choose to get the NHS back on its feet. We choose to fix the foundations, reject decline and rebuild our country with investment.”
He added: “The time is long overdue for politicians in this country to level with you honestly about the trade-offs this country faces, to stop insulting your intelligence with the chicanery of easy answers.
“Working people know that hard choices are necessary. They lived through the Liz Truss episode. They lived through the cost of living crisis.
“So they know that the things they want from us – protecting their living standards, building our nation, fixing our public services – they know that this can only be achieved alongside economic stability. There are no shortcuts.”
The prime minister also dropped some early measures which he hopes will alleviate the pain.
These included a £240m package for councils to help get people on long-term benefits back to work.
He also said that bus ticket prices will be capped at £3 until 2025, a rise from the current £2.
The chancellor is now expected to increase employer contributions to national insurance by 2 per cent, despite promising not to increase national insurance in the party’s manifesto.
There are also expected to be hikes in inheritance tax and capital gains. Ms Reeves has pledged not to increase “taxes on working people” including income tax, employee contributions to national insurance or VAT.
In his speech, Sir Keir promised the Budget will “ignore the populist chorus of easy answers” amid a series of expected tax hikes, including an increase to employer national insurance by at least one percentage point.
Referring to the statements announced by New Labour’s Gordon Brown and austerity-era Conservative chancellor George Osborne, Sir Keir said: “We have to be realistic about where we are as a country. This is not 1997, when the economy was decent but public services were on their knees.
“And it’s not 2010, where public services were strong but the public finances were weak. These are unprecedented circumstances.
“And that’s before we even get to the long-term challenges ignored for 14 years: an economy riddled with weakness on productivity and investment, a state that needs urgent modernisation to face down the challenge of a volatile world.”
The prime minister said he would not offer the UK’s problems as “an excuse”, adding: “Politics is always a choice. It’s time to choose a clear path, and embrace the harsh light of fiscal reality so we can come together behind a credible, long-term plan.”
