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Ir Keir Starmer ir refused calls from senior workers figures to fill the growing fiscal hole with a major tax rise.
Priorities are under pressure from assistant leader Angela Rayner and former prime minister Gordon Brown to increase taxes to pay higher public spending, including welfare.
However, the Prime Minister argued that the biggest problem facing Britain is the lack of growth. “The question is how to grow the economy and generate wealth,” he told the BBC’s programme today.
“I don’t think we can tax the path to growth. We just have high taxes.”
Starme’s comments will reassure people such as the wealthy British people and banks who have found themselves in the sight of several Labour MPs ahead of the fall budget.
Many economists believe that Prime Minister Rachel Reeves has no choice but to raise taxes as self-imposed fiscal rules become an increasingly tighter restraint jacket.
Reeves left just £9.9 billion of “headroom” against her borrowing rules in a spring statement in March, but has since seen the cost of serving government debt.
The UK’s 10-year gold leaf yield – the benchmark debt most viewed by investors – has increased over the past year than its equivalent in other G7 countries, except in Japan. As prices drop, yields rise.
Meanwhile, it announced plans to withdraw Reeves’ £1.5bn plan under pressure from Labour MPs.
The Prime Minister also indicated that the two-child benefits cap (a move that costs around £3.5 billion) introduced by the last conservative government would be scrapped, but Labour lawmakers have simultaneously called for plans to cut £5 billion from the welfare budget to be scaled down.
Reeves could face a further blow in the fall, as expected, if an independent office for budget responsibility is revising forecasts for future growth in the UK.
Given the harsh fiscal situation, Monday’s priorities refused to assure the Labour government of ‘ambition’ that it will raise defensive spending from 2.5% in 2027 to 3% of the next Congress.
“I’m not going to indulge in the fantasy politics of stealing dates from the air,” he said.
But he put pressure on Reeves and seemed to suggest that his retreat against winter fuel payments, which he said would happen as a “financial event” like the winter budget, could take place before the cold weather returned later in the year.
“If pensioners want to see what is eligible again, the sooner you make it clearer the better,” he said.
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“The right hand doesn’t know what the left hand is doing. No. 10 needs to call No. 11 and then announce details of the apparent U-turn without delay,” said Daisy Cooper, a liberal Democrat deputy leader.
In recent weeks, it was revealed in March that Rayner called for a series of tax increases to increase public finances, including eliminating corporate taxes on banks and tax-free allowances on dividends.
Looking to put an end to the two-child benefits cap, Brown suggests higher taxes on banks and the gambling industry.
