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Sir Keir Starmer has admitted for the first time he was planning a manifesto-busting increase to income tax rates in the run-up to the Budget, as he denied misleading voters about the public finances.
The UK prime minister in a speech on Monday gave his backing to chancellor Rachel Reeves and defended last week’s Budget, saying “there was no misleading” about economic forecasts from the official fiscal watchdog.
“There was a point when we thought we might have to reach for a manifesto breach of some significance. I didn’t want to get to that place but I recognised that we might have to,” he told reporters in central London.
Labour promised in its manifesto not to raise the rates of income tax, value added tax or national insurance. In Reeves’ first Budget last year, she raised the rate of national insurance paid by employers.
In the lead-up to last week’s Budget, Reeves had spoken publicly about the negative impact of weaker productivity growth forecasts on tax revenues and refused to rule out raising income tax rates.
The Office for Budget Responsibility revealed on Friday that it had informed the chancellor ahead of the Budget that these weaker forecasts were largely offset by other improved estimates for tax revenues.
Starmer denied that his government had misled the public about the forecasts in an attempt to soften up the public for tax rises. He also criticised the timing of the OBR’s productivity downgrade.
“I’m not sure why it wasn’t done at the end of the last government,” he told reporters. “I’m not angry, I’m just bemused as to why it wasn’t done then.”
He also expressed his support for the OBR, saying the independent forecaster was vital for financial stability, despite its accidental leak of the Budget last week 50 minutes before Reeves had started speaking.
Reeves in her Budget on Wednesday ultimately did not raise income tax rates, but instead raised £26bn in new taxes largely by extending a freeze on personal tax thresholds.
The money largely went towards boosting the buffer the government has against its key fiscal rule and on increased welfare spending.