LONDON (Reuters) – British Prime Minister Keir Starmer will say on Monday he should be judged on his ability to tackle “unprecedented” economic challenges he inherited ahead of a budget he said would restore crumbling public services and speed up growth.
On Wednesday, finance minister Rachel Reeves will set out her first tax and spending plans which must address a difficult fiscal picture without raising major taxes on workers, cutting public services or spooking investors with extra borrowing.
Starmer, whose Labour Party won a landslide election victory in July, has said generating growth is his number one priority, but he said that the situation was different to previous scenarios faced by incoming governments in 1997 and 2010 because both the economy and public services were in a weak state.
“We have to be realistic about where we are as a country… These are unprecedented circumstances,” Starmer will say in a speech on Monday, according to extracts released by his office.
“But I won’t offer it as an excuse. I expect to be judged on my ability to deal with this.”
Starmer has not enjoyed much of a honeymoon period since the election. Shortly after the victory, Reeves said Britain’s fiscal situation was worse than thought due to a 22 billion-pound ($28.5 billion) black hole she said she had inherited from the previous Conservative government.
She announced the government would scrap winter fuel payments for pensioners, a decision that has hurt Labour’s popularity.
The government is now seeking around 40 billion pounds in tax rises and spending cuts to address the fiscal gap while maintaining a pledge not to impose austerity on public services.
“(Working people have) had enough of slow growth, stagnant living standards and crumbling public services. They know that austerity is no solution,” Starmer will say.
“We choose a different path: honest, responsible, long-term decisions in the interests of working people.”
Reeves has said she will announce a change to the definition of public debt in the government’s fiscal rules in order to allow her to borrow more to invest in the hope of speeding up economic growth.
A pledge not to raise income tax, sales tax or social security contributions paid by working people has sparked debate, however, with the government looking set to increase the contributions paid by employers instead.
The Conservatives have challenged the new government’s assessment of the public finances, saying they are a pretext for tax rises that Labour had been planning already.
($1 = 0.7717 pounds)
(Reporting by Alistair Smout, Editing by Angus MacSwan)
