Sir Keir Starmer and Rachel Reeves came under stinging attack from senior City figure Sir Howard Davies who accused the Government of “slowing the economy”.
The former chairman of NatWest bank was scathing in his criticism of the Labour Government’s conduct which he said had hit growth.
“I would say that the way the Government have been behaving in recent months is such that if they were trying to slow the economy down, I can’t think of anything else I would do,” Sir Howard, a former director of the London School of Economics, told BBC radio.
“You demonstrate, first of all, that you’ve got trouble at the top of the Government, you then conduct a series of remarkable leaks suggesting that you’re going to tax property, you’re going to tax wealth, you’re going to tax gambling, you’re going to tax banks, you’re now going to tax even bikes for goodness sake.
“All of that is a cumulative weighing down and creation of uncertainty.”
He continued: “In addition you have legislation whcih makes it more expensive to hire people and you carry out a policy of public spending whereby public sector wages are going up by 6.6% a year and private sector by 4.2% and that is stopping the Bank of England from reducing interest rates.”
He denied that Ms Reeves had a proper plan for economic growth, saying that while there were some policies to boost activity such as a third runway at Heathrow they were “jam tomorrow”.
The Chancellor insists that economic growth is her No1 priority despite hitting businesses in her first Budget with a £20 billion rise in National Insurance contributions for employers.
The latest mooted fiscal move by Ms Reeves is to cut back a tax break for cyclists, being branded a “Mamil Tax” as it is likely to particularly hit “middle-aged men in Lycra” in London and the South East who buy expensive bikes.
Not all the reports of various tax rises are being briefed by the Treasury or other part of Whitehall.
But in an unprecedented move, Ms Reeves has already made clear that she is set to tear up Labour’s flagship manifesto pledge on tax, with an expected rise in Income Tax in the Budget on November 26.
She has also signalled that millions of households will be hit with higher taxes, rather than businesses, by saying she will not go for growth-busting new levies.
London and the South East are set to be hardest hit as the Chancellor has said that wealthier people should bear more of the burden of her tax rises expected to run into the tens of billions of pounds.
Latest GDP figures on Thursday showed the economy grew by just 0.1% in the July-to-September quarter, below City expectations.
Asked about Sir Howard’s warning, Energy Security Secretary Ed Miliband, on the morning media round for the Government, said: “I respect Howard but the truth is there is global turbulence going on, not least the tariffs from the US which has had a real effect across the world, we had the cyber attack on JLR which had something to do with today’s growth figures.”
He insisted on BBC radio that Ms Reeves “has a very clear priority which is to grow our economy so that she can raise living standards of people in this country”.
But pressed that the Chancellor was adopting policies hitting growth, he added: “I don’t know what the evidence is for that.”
Asked about the NI hit on employers and new workers’ rights, he stressed that Ms Reeves had imposed the levy to invest in public services while maintaining fiscal stability as the “absolute bedrock of economic growth” and that by tackling inequality productivity could be improved.
