Rachel Reeves: Budget to Bring ‘Harder Choices

Chancellor Rachel Reeves has warned that her choices will be “harder” at this year’s Budget, with questions being raised on whether she will row back on Labour manifesto tax commitments to plug a £30bn shortfall.

In a speech at the Labour Party conference, Reeves said that “harsh global headwinds” and the effects of her Tory predecessors would force her to make more controversial decisions at this year’s Budget.

She also indicated that she would frame tax rises as “contributions” as she said she wanted economic growth to be spread out across the UK.

“In the months ahead, we will face further tests, with the choices to come made all the harder by harsh global headwinds, and the long-term damage done to our country, which is becoming ever clearer.”

Reeves also used her speech to call out her critics, which include Manchester Mayor Andy Burnham and opposition parties, for taking aim at her fiscal rules.

“When I said we must not and would not take risks with Britain’s economic stability, that argument was not just for an election.

“Even now, with the global uncertainty we have seen ripple through financial markets, there are still critics out there who would too readily forget the consequences of reckless economic choices.”

But earlier in the morning, Reeves revealed she would make the Office for Budget Responsibility (OBR) only publish one forecast a year rather than two, which represents an adjustment to her fiscal rules she said were “non-negotiable”.

“The International Monetary Fund have said that we should move to just one major fiscal event a year, and I agree with their recommendations, and to be able to do that, we do need to change the way that the OBR do their forecasting,” Reeves told Times Radio.

“Two full forecasts a year make it harder to have that one fiscal event. There are different ways you could do it, you could do a shorter term forecast, you could do a forecast that just looks at the changes in the economy over that period of time.”

“We’ve already moved to having just one budget a year, but we’re trying through these changes to facilitate that.”

She also refused to rule out VAT rises in the morning, with the issue becoming thornier for the government given Labour’s manifesto stating that the tax would not be changed.

When asked if the manifesto commitments on taxes still stands, chief secretary to the Treasury Darren Jones told Sky News: “The manifesto stands today, because the decisions haven’t been taken yet…we’ve got forecasts coming from the OBR, we don’t know what they say yet.”

Rachel Reeves talks up new policies

Reeves’ speech to Labour Party members on Monday also featured announcements to create a youth mobility scheme with the European Union, a new initiative to give young people out of work and education a guaranteed paid work placement and a pledge to build libraries across primary schools.

In response to the speech, Shadow Chancellor Mel Stride said Reeves was making it harder for young people to get into work despite reforms to youth employment.

“Rachel Reeves says she wants to abolish youth unemployment – yet in her very first Budget, she introduced a £25bn jobs tax that made it more expensive for businesses to hire, especially young people,” Stride said.

“That’s the contradiction at the heart of Labour’s plan: they talk about opportunity, but their policies kill jobs.

“Reeves is trying to fix a problem she created – while pointing the finger of blame, as she so often does, at everyone else.

“You don’t get more young people into work by punishing the very businesses that hire them. The answer isn’t more taxpayer-funded schemes – it’s growth, lower taxes, and a pro-jobs economy.”

Before Reeves spoke, business secretary Peter Kyle clarified that he would “implement the Employment Rights Bill in full” despite calls from business leaders for reforms to be watered down.

Kyle also paid tribute to former deputy prime minister Angela Rayner for driving the Billadding that Labour was “eternally grateful” for her contributions.