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LONDON (AP) — Fixing Britain’s troubled economy will be a long haul in a “harsh” fiscal environment, Prime Minister Keir Starmer said Monday, setting the stage for his government’s high-stakes first budget this week.
Starmer hopes voters will accept his argument that higher taxes and limited public spending increases are needed to “fix the foundations” of an economy that he says has been undermined by 14 years of Conservative government. But his message — things will slowly get better — is a risky one in a high-speed political world.
“It’s time to embrace the harsh light of fiscal reality,” Starmer said, telling voters that politicians must “stop insulting your intelligence with the chicanery of easy answers.”
“I will never stand here and tell you to feel better, if you don’t,” he added during a speech in the central England city of Birmingham two days before Wednesday’s budget. “Change must be felt.”
Starmer’s center-left Labour Party was elected July 4 after promising to banish years of turmoil and scandal under Conservative governments, get Britain’s economy growing and restore frayed public services, especially the state-funded National Health Service.
Pumping money into health, education and other services is made harder by a sluggish economy, hobbled by rising public debt and low growth of just 0.2% in August. Starmer also says that on taking office he discovered a 22 billion pound ($29 billion) “black hole” in the public finances left by the Conservative government.
The Conservatives say they left an economy that was growing, albeit modestly, with lower levels of debt and a smaller deficit than many other Group of Seven wealthy nations.
Paul Johnson, head of independent think-tank the Institute for Fiscal Studies, said the budget hole is real, but that both Labour and the Conservatives were dishonest about the economy during the election.
“It was obvious that they were either going to have to cut spending, which is what the previous government said they were planning to do, or increase taxes,” he told Sky News. “But of course, no party was willing to say that. That’s why we called it a conspiracy of silence at the time.”
That means the budget is certain to include tax increases – though Labour has pledged not to raise the tax burden on “working people,” a term whose definition has been hotly debated in the media for weeks.
Treasury chief Rachel Reeves – Britain’s first female chancellor of the exchequer — is widely expected to tweak the government’s debt rules so that she can borrow billions more for investment in the health system, schools, railways and other big infrastructure projects, and to raise money by hiking tax paid by employers, though not employees. She could also raise taxes on capital gains, arguing they do not form part of the main income of working people.