Labour has said it plans to give more power to the budget watchdog so the “mini-budget” blunder last year will never happen again.
Speaking at the London Stock Exchange alongside shadow chancellor Rachel Reeves on Friday, Labour leader Sir Keir Starmer blamed former Prime Minister Liz Truss’s government for causing “huge damage” with her so-called mini-budget and sought to assure voters that Labour can bring back “stability” to the UK’s fiscal policy if it gets the key to the public purse.
In the event of an emergency when the OBR won’t be able to publish a forecast in time, the budget quango will be allowed to set a date for when the forecast can be published, she said.
Labour chose to make the announcement just ahead of the anniversary of Truss’s mini-budget, which spelled the downfall of her short-lived government.
Having won the race to enter No. 10 on a platform of tax cuts and economic growth last year, the former prime minister and her chancellor Kwasi Kwarteng quickly announced a number of tax cuts along with a £60 billion package to help households and businesses pay for energy bills, which more than almost tripled in six months’ time. The energy bill bailout was to be funded by borrowing.
The tax cuts and unfunded spending caused a financial market meltdown, triggering a firesale of government bonds that led to a pension fund crisis and plummeting housing market demand.
Although Ms. Truss and Mr. Kwarteng defended the budget saying it would be funded by the increased revenue from economic growth and subsequently shank the size of the bailout and rolled back some of the tax cuts, the budget led the prime minister to resign only seven weeks after she took office.
Some of the negative reaction from the market was attributed to the government’s failure to include an OBR forecast on the impact of the announced measures.
Ms. Reeves asserted that her planned law change will make sure “never will a prime minister or chancellor be allowed to repeat the mistakes of the ’mini' Budget.”
George Osborne, the Conservative former Treasury who created the OBR, said Labour’s proposals are “sensible, pragmatic improvements.”
“If the Tories are smart they’ll adopt them,” he said.
Ms. Reeves has vowed to stick to a “non-negotiable” fiscal rule of “never spend[ing] what we cannot afford.”
Truss: Bureaucracy Won’t Pay Debt
Ms. Truss reacted by saying it “beggars belief” that Labour believes the multi-trillion-pound debt problem can be solved by more bureaucracy.“The 25-year economic consensus has led to state spending being higher than it’s been for around 50 years, taxes at their highest since WW@ and a debt of over £2.5 trillion. This has caused low economic growth,” she said in a statement on X, formerly known as Twitter.
“It beggars belief that Labour think Britain’s problems will be solved by bigger government and even more powers for quangos.
“Hard-working people and businesses—freed from overbearing regulation, tax, and debt—are going to get Britain growing again, not more bureaucrats in London.”
