Prime Minister Rachel Reeves said Labor’s budget this week would begin a new era of public and private investment in hospitals, schools, transport and energy, the most significant in the party’s history.
In an interview with the Observer ahead of the first budget by a female prime minister, Ms Reeves said she was a member of the Labor Party, which was launched under Clement Attlee in 1945, Harold Wilson in 1964 and Tony Blair in 1997. drew comparisons with historic reform programs.
“This is the fourth time Labor has come to power from opposition,” she says. “In 1945, we were rebuilt after the war. In 1964, our company was rebuilt with the “white fever of technology.” and restructured public services in 1997. We need to do it all now. ”
But Mr Reeves faces huge controversy as he announces spending cuts, including a £40bn tax rise and up to a 2% rise in employer national insurance contributions, amid claims he would at least break the spirit of Labour’s election pledges. (NICs)) and the income tax threshold may be further frozen after 2028.
Such a threshold freeze (which Mr Reeves described as “picking out the pockets of working people” when the Conservatives re-announced the same policy last year) would mean 400,000 people would be paying tax for the first time and 600,000 would be on higher rates. You will have to pay tax at the tax rate. .
Before the election, Labor ruled out increasing income tax, national insurance and value-added tax on “working people”.
In the interview, Mr Reeves insisted that he was in fact fully keeping his campaign promise, as people would not see their taxes rise immediately after the budget was passed, and the National Insurance increase would not directly affect employees. “The day after the Budget, people will not see increases in the major taxes they pay – income tax, national insurance and value added tax… We have voted to increase these taxes. promised not to raise taxes for working people.
“One of the things that has undermined trust in politics and politicians is the failure to keep the promises made in the manifesto. We don’t want to be in that kind of government, and we don’t want to be prime minister either.”
Shadow Chancellor Jeremy Hunt said raising national insurance contributions for employers would have a negative impact on wages and employment. Photo: Toby Melville/Reuters
However, Shadow Chancellor Jeremy Hunt said the rise in the Employer NIC would be an “employment tax paid by working people” and the impact would be passed on to employers, leading to “a decline in employment and wages”. He said that it means “a decline in forms of low pay or dismissal; Citing the Institute for Fiscal Studies, he said the increase would be a “clear breach” of commitments.
Although he is bound to face a backlash over the tax rises, Mr Reeves paints the budget as the beginning of a period of major “national regeneration” to tackle the legacy of chaos left by the Tories – now a £22bn black hole. I’m determined. Change fiscal rules to allow £50bn more to be borrowed for capital projects to reverse infrastructure decline across the public realm, while improving spending through tough decisions on tax.
A hospital reconstruction plan is also expected to be announced as a budget bill in parallel with these plans. Mr Reeves said such a plan would not be possible without changing fiscal rules and made it clear he expected the Conservatives to oppose such changes after the budget.
Mr Reeves, who sees an opportunity to draw new boundaries with the Conservatives, said: “If the Conservatives vote against our new fiscal rules next week, they are basically backing the current path of decline. It would mean that we are doing so,” he said. We are happy to have that discussion. We’re on the right side of it. ”
Furthermore, she added: “The big political divide after this will be whether to support investment or support decline.
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“We have inherited a plan from the previous government in which net public sector investment, capital investment, has fallen significantly over the course of this Parliament, meaning that a large number of hospitals will not be built. This means that huge opportunities to grow the economy in the energy sector will be lost and those jobs will go elsewhere.”
She details how she believes two types of investment are critical to the country’s transformation as a direct result of reforming borrowing rules.
The first is significant private sector investment alongside public funding, such as the recently announced plans for £21bn of public investment in carbon capture and storage alongside billions of pounds of private investment. This is a project that “packs” the following. Other similar public-private models in the energy, digital, science and transport sectors are expected to be announced in the Budget.
New and developing industries also offer great opportunities to attract investment, she says.
“This is Wednesday’s new settlement to rebuild our country and seize the huge opportunities there are in technology and energy. There is a global race for those jobs and we are seizing them for Britain. If we can free up public and private investment, we can do great things again as a country.”
Ms Reeves said she would not remove the two-child allowance cap, which is believed to be pushing thousands more young people into poverty, but would take other steps to alleviate child poverty. spoke.
“We are a good Labor government and a good Labor government will lift children out of poverty and improve the NHS. I hope people can see that we are starting to turn a corner.”
