Keir Starmer has conceded that the budget “asked everybody to contribute” but argued that it had “done it in a fair way” as he sought to rebuff claims that Labour had broken its tax promises.
The prime minister said the Labour government had “kept to our manifesto” despite raising taxes by £26bn, including by freezing income tax and national insurance thresholds for an extra three years.
Labour had promised during the election campaign not to raise taxes on working people. Asked whether he would apologise for breaking that promise, Starmer said: “I accept the challenge that we’ve asked everybody to contribute. I want to be really clear on why we’ve done that,” he told Sky News.
“That is because we need to protect our NHS to make sure that it’s there for people when they need it. Secondly, to make sure that we’ve got the money to put into our schools and …… the third thing is to bear down on the cost of living.”
Pressed on whether he had misled the public, Starmer said ministers had “absolutely done the least possible we can” in terms of the impact on ordinary people and that they had “done it in a fair way”.
Challenged on the decision to axe the two-child benefit cap, which will cost £3bn a year by 2029-30, Starmer said he was “not going to apologise” for taking 450,000 children out of poverty.
The measure has long been called for by Labour MPs and charities, which argue that the cap is the single biggest driver of child poverty.
Asked whether had taken the decision to shore up his own political position, the prime minister responded: “It’s impossible to argue that this is a position that has been adopted just in the last few weeks. It is my longstanding ambition.”
Earlier on Wednesday Rachel Reeves admitted working people would need to pay more after her budget but said she had kept that to an “absolute minimum” by increasing taxes on betting firms, mansions and landlords.
The chancellor vowed to carry on in her role and “defy” economic forecasts as she defended her tax and growth measures.
Asked whether the budget was designed to ensure her own political survival and that of Starmer by mollifying a restive Labour party, Reeves said this was “my budget, delivering on my priorities”, and one she was proud of.
“Lots of people have tried to write me off over the last 16 months. And you’re not going to write my obituary today,” she told Times Radio. “There’s plenty more that I’m going to do to grow our economy and make working people better off.
“I have defied the forecasts this year. The OBR said in the spring our economy would grow by just 1% this year. They said yesterday 1.5%. I’m going to defy those forecasts next year and the year after that.”
Reeves said her decision to scrap the two-child benefit cap, which was welcomed by Labour MPs but attacked by the rightwing press for raising welfare spending, was a “good investment” in children’s futures. She said that in 60% of families that would benefit the parents were in work.
She said her decision to freeze tax thresholds, the central revenue-raising measure in the budget, did not amount to a breach of Labour’s manifesto but declined to rule out more tax rises next year.
More than 1.7 million workers will either pay tax for the first time or be pushed into a higher band by the additional three-year freeze, which is forecast to bring in £12.4bn to the exchequer by 2030-31. Scotland has a separate income tax system.
The chancellor also announced a slate of smaller tax increases to pay for government spending and build a larger buffer against her borrowing rules, including a new pay-per-mile tax for electric vehicles.
Speaking to the BBC Radio 4 Today programme, Reeves said she believed she had made “the fair and necessary choices” and declined to apologise for them, blaming global economic pressures and the budget watchdog’s productivity downgrade.
“I have to operate in the world as it is,” she said. “I do recognise that is asking people to contribute a bit more but I’ve kept that contribution to an absolute minimum through other changes that I announced,” she said.
“Asking the gambling companies to pay more, people in properties worth more than £2m to pay more, asking landlords to pay a bit more tax on their rent to bring it closer to the taxes that their tenants pay on their salaries.”
Questioned about criticism that her budget did not include growth-boosting measures, Reeves cited new investment announcements from JP Morgan and Goldman Sachs, which said on Thursday it was expanding its presence in Birmingham.
The Financial Times reported earlier this week the Treasury had asked banks to praise the budget after Reeves opted not to raise taxes on the industry.
Speaking to MPs on Wednesday night the chancellor expressed frustration that the Office for Budgetary Responsibility had not scored the growth potential of the UK’s trade deals with the US, EU or India, or the planning and infrastructure bill.
The OBR has said none of those policies individually had a major enough impact to meet its 0.1% threshold for scoring them.
Mel Stride, the shadow chancellor, said lifting the two-child benefit cap was the wrong choice and that the budget would “lead to 25,000 more people going on to benefits as a direct consequence of making them more attractive”.
“I think it’s only fair that those that are on benefits face the same kind of decisions as those that are working hard, paying taxes and paying for those benefits,” the Tory MP told BBC Breakfast.
He argued that were the Conservatives in power they would cut £23bn from the welfare bill and abolish stamp duty for primary residences.
