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Labour faces inheriting worst economy ‘since Second World War’ – shadow chancellor

29 Feb 2024 3 minute read
Shadow chancellor Rachel Reeves. Pic: Dominic Lipinski PA

Labour would inherit the worst economic situation of any incoming government “since the Second World War” if the party comes into power at the next general election, the shadow chancellor has said.

Speaking with Sky News, Rachel Reeves pointed to “debt interest payments, growth, living standards and taxation” as she accused the Conservative Party of “burning the whole house down” during its time in government.

Inheritance

She told the broadcaster: “This is the worst inheritance any incoming government will have had since the Second World War in terms of debt interest payments, growth, living standards and taxation.

“(Former chancellor) George Osborne said in 2010 that they were going to fix the roof. What they’ve done is smash the windows, broken the door down and are burning the whole house down.

“That is the reality for whoever is prime minister and chancellor after the next election – that’s the inheritance that whoever forms the next government is going to have to deal with.”

Her comments come ahead of next week’s spring Budget, with Chancellor Jeremy Hunt said to be considering a squeeze on public spending plans in order to deliver tax cuts in the fiscal event on March 6.

Mr Hunt faces continued pressure from Conservatives to cut taxes when he delivers what is likely to be his final Budget before the next election, as the overall tax burden approaches record levels.

He is thought to be considering abolishing the non-dom status as a potential way of raising money which could be used to fund tax cuts, although the Chancellor – who has previously resisted scrapping the status – will hope the public finance forecasts mean the revenue-raising measure will not be necessary.

Mr Hunt will be wary of doing anything which could undermine the competitiveness of the City and has previously suggested he would rather wealthy foreigners stayed in the UK rather than going overseas to jurisdictions where they could continue to benefit from a non-dom tax regime.

Non-domiciled status allows foreign nationals who live in the UK, but are officially domiciled overseas, to avoid paying UK tax on their overseas income or capital gains – Rishi Sunak’s wife Akshata Murty has previously enjoyed non-dom status.

Tax cuts

Ms Reeves signalled she would potentially replicate any impending tax cuts, but they would need to be in line with her fiscal rules.

She said: “Fiscal responsibility is non-negotiable for me. The sums have to add up.

“Everything will be subject to the fiscal rules I’ve set out.

“I want taxes on working people to be lower. But it has to be affordable.”

If Labour does emerge victorious in the election, Ms Reeves said there would be a “relentless focus” on economic growth.

“I am not going to be able to turn everything round overnight,” she said.

“We are going to have to grow the economy. There will be a relentless focus on what we need to grow the economy.”

Labour has said it would abolish non-dom status, with the money used to pay for NHS improvements, but if Mr Hunt adopted the policy and used it to fund tax cuts it could leave Ms Reeves with another headache.

A Labour source said: “We will wait and see whether the Chancellor manages to get this past Rishi Sunak given his family finances.”


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Ernie The Smallholder
Ernie The Smallholder
1 month ago

It does show that the UK is broken and it is certainly is no insurance policy as the Welsh labour leadership claims

For Wales, our only choice, like every other country is sovereignty and independence.

Plaid Cymru is the only choice to gain independence from the UK and its political problems of centralised power at Westminster.

The other Welsh based political party groups are either too small or not yet organised to give Wales a proper choice for our future.

Doctor Trousers
Doctor Trousers
1 month ago

and we’re supposed to believe that they’re going to be in any fit state to deliver on whatever vague promises they’ve made about devolution? if they even last a full five year term, they’re going to spend the whole time fire-fighting (not to mention in-fighting) and desperately trying to claw back just some of the damage the tories have done. then when that five years are up, the tories will be back in, nothing will have been done to safeguard devolution, and we will lose what we already have. if you believe in home rule, or even if you only… Read more »

Jeff
Jeff
1 month ago

Must be a hard act to follow after this Conservative mess. This will need a few terms to deliver. We can only wait and see. Only one thing should count at this next election and that is removing the Conservative party as a viable party after what it has done to the UK. To that end I will vote accordingly.

Neil Anderson
Neil Anderson
1 month ago

Nothing that Rachel Reeves has yet said points to a. any great understanding on her part about how the economy really works b. that she would select policy levers that would work. Ms Reeves is out of her depth (Jeremy Hunt is totally submerged) and any improvement her government is able to make will be minuscule at most. At least the BoE’s Catherine Mann (in the Financial Times today) is placing the cause of most of our inflation where it now does arise – “price rises are increasingly driven by people [the wealthy] who are immune to the pressures of… Read more »

Neil Anderson
Neil Anderson
1 month ago
Reply to  Neil Anderson

That should read “Any government claim to have reduced inflation rates is risible.” Apologies

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