Rachel Reeves: Labour Faces Challenges, Immediate Turnaround Unlikely
Labour’s shadow chancellor, Rachel Reeves, has acknowledged that the party would not be able to immediately reverse the economic challenges if elected. In an interview with the BBC’s Sunday with Laura Kuenssberg, Reeves emphasized the need for a methodical approach to addressing the worst economy since World War Two. While not ruling out cuts in some areas, she pledged to carefully identify ways to fund existing commitments to the NHS and schools.
Reeves’ comments came after Chancellor Jeremy Hunt presented the government’s tax and spending plans, including a National Insurance cut and expanded child benefit. Hunt expressed optimism about the economy, anticipating a turnaround despite the previous year’s recession. Labour had earlier proposed using funds from changes to non-dom tax status and a windfall tax on oil and gas companies to improve the NHS and fund school breakfast clubs. However, these funds were redirected by Hunt to support the National Insurance cut.
In response to the funding shortfall for Labour’s spending commitments, Reeves assured a methodical review of government documents to identify funding streams. She highlighted Labour’s plans to tax private equity executives and introduce VAT and business rates in private schools. Reeves also confirmed Labour’s support for the government’s capital gains tax cuts on second homes.
With a general election expected, Labour’s tax and spending plans are under scrutiny, especially as they lead in opinion polls. Hunt’s Budget retained a planned increase in day-to-day public spending until 2029, potentially leading to significant budget cuts in unprotected departments. The Institute for Fiscal Studies criticized both parties for not acknowledging tough choices and trade-offs, suggesting unprotected departments could face day-to-day cuts of £20 billion.
Reeves acknowledged the challenges, stating that a Labour government’s inheritance would be the worst since World War Two. However, she expressed a commitment to work on reversing the situation gradually. Labour’s plans include a £7.3 billion investment in a National Wealth Fund to boost growth and the announcement of a taskforce, including former Bank of England governor Mark Carney, to advise on fund implementation.
The shadow chancellor also highlighted Labour’s pro-business and pro-worker workers’ rights package, promising full employment rights from day one, which will feature in the party’s manifesto. Responding to the interview, Chief Secretary to the Treasury Laura Trott criticized Labour for lacking a clear plan to fund their commitments, warning of potential higher taxes.
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