Keir Starmer has refused to rule out more spending cuts and tax rises ahead of Rachel Reeves’ spring Budget on 26 March.
But speaking to journalists on a trip to meet President Donald Trump in Washington DC, the prime minister has tried to calm fears claiming that the worst news was delivered in the Budget in October.
Sir Keir was attempting to deal with dire warnings from a number of economic thinktanks who have warned that he has little headway to afford his spending plans with growth at minimal levels.
It comes as he announced this week that defence spending is to be boosted to 2.5 per cent of GDP at the cost of the international aid budget.
With just four weeks to go from the spring statement and the Office of Budget Responsibility (OBR) verdict on the public finances he was pressed on whether he would be happy to raise taxes again.
Sir Keir declined to rule that out, stating: “Well we are at the early stages of that, and obviously I am not going to get ahead of myself until we have made decisions. But as I have said before, in terms of the big decisions on tax… obviously the Budget was the place that we took those decisions – but as ever, going into a statement I am not going to say in advance what we might do and what we might not do.”
The Budget saw £40 billion of tax rises as well as cuts to winter fuel allowance and a number of other programmes.
Sir Keir though was keen to emphasise that this would not be repeated.
He said: “Let me not let hares running, the big decisions were in the Budget of last year and that’s the way we are approaching this spring statement.”
Following the announcement on increasing defence spending, economists at the Institute for Fiscal Studies (IFS) said the increase in defence spending to 2.5 per cent of GDP will cost the Treasury around £6bn, accusing the PM of misleading voters with his claim it amounts to a £13bn annual boost. The think tank also warned that chancellor Rachel Reeves might have to break pre-existing tax and spend promises to meet the PM’s longer-term 3 per cent spending target.
IFS associate director Ben Zaranko said: “Getting towards 3 per cent of GDP will eventually mean more tough choices and sacrifices elsewhere – whether higher taxes or cuts to other bits of government.”
