Keir Starmer will face ‘harsh financial reality’ in key budget – BNN Bloomberg

(Bloomberg) — British Prime Minister Keir Starmer said his government will “face the harsh light of financial reality” as Chancellor of the Exchequer Rachel Reeves prepares to unveil a historic package of tax hikes and more borrowing in a crucial event. budget on Wednesday.

“It’s time for us to make tough decisions because ignoring them sets us on a path to decline,” Starmer is expected to say in his speech on Monday, according to remarks pre-briefed at 10 Downing Street. “This is an economic plan that will change the long-term trajectory growing the UK for the better.”

Starmer and Reeves are preparing a budget that will shape UK policy for the rest of the decade. The government hopes to secure an election victory in five years’ time by stabilizing Britain’s public finances now with up to £40 billion ($51.9 billion) in tax rises and spending cuts including higher payroll taxes for businesses, gains tax capital and inheritance tax – combined with increased investment, financed by increased borrowing, in an attempt to stimulate economic growth.

The Budget will deliver “fair, responsible, long-term solutions for working people”, Starmer must say. “It is stability that means we can invest, and reforms will maximize that investment.”

The budget is key for Starmer, who wants to show progress on his promise of “change” that helped secure a landslide election victory in July. Since his victory, his popularity ratings have declined amid controversy over Labor politicians getting freebies, an unpopular decision to cap winter fuel payments for pensioners and internal divisions within his top team.

The Government will portray the tax rises planned in Wednesday’s Budget as needed to fill a £22 billion black hole they say they inherited from the previous Conservative administration, as well as needed to boost spending on public services. Reeves will combine those tax rises with significant changes to Britain’s fiscal rules, deciding to target a new debt measure that will allow her to borrow up to £70 billion during her time in Parliament.

“These are unprecedented circumstances,” Starmer was expected to say on Monday. “Long-term problems have been ignored for 14 years. The economy is riddled with weaknesses in productivity and investment.”

However, the Budget is also an important moment for Starmer and Reeves due to the potential for backlash from the public and financial markets. The Labor Party is already facing criticism that it is set to break its manifesto promises with planned tax rises, particularly with the impending increase in National Insurance payroll tax on businesses.

Labour’s manifesto ruled out tax increases on “working people” and explicitly ruled out increases in income tax, national insurance and VAT. But Starmer and his team ran into difficulties when asked about the definition of a “working person”. On Sunday, Education Secretary Bridget Phillipson declined to comment on whether a small business owner is a “working person”, although he will pay more tax if Reeves delivers an expected increase in national insurance for employers.

“Working people won’t see higher taxes on their payslips,” Phillipson told BBC TV. “I can’t speculate on the exact tax numbers.”

Starmer and Reeves will also have to worry about how financial markets will react to their budget plan. The UK government’s borrowing costs have risen in recent days in response to Reeves’ signal that it intends to borrow more, and markets are awaiting reassurance on the scale of the chancellor’s borrowing plans.

“There are certainly questions about how public money is spent,” Phillipson said when asked about Labor’s borrowing plans. The government will borrow “in a responsible and credible way, with clear financial rules that guide those decisions,” she said.

Other measures expected in the budget include:

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