CHANCELLOR Rachel Reeves made a statment to the House of Commons on 29 July, in which she pledged to “restore economic stability” and said she would take “difficult decisions” to find £5.5 billion of savings this year, and £8.1 billion next year.
The Chancellor also said a set of non-negotiable fiscal rules will be confirmed at the Budget on 30 October, alongside further decisions on tax and spending.
Responding to Rachel Reeves’ statement, Fran Boait, co-executive director of Positive Money, said: “To see the Chancellor echoing the same economically illiterate rhetoric as the last government to justify further spending cuts is exasperating.
“It’s high time politicians got this straight: the government budget is categorically not like a household budget. The government has the power to increase its own revenue, and it can borrow at far better rates than households, with far different repayment expectations, too.
“As well as better borrowing, there are also a range of wealth taxes the Chancellor could deploy to bring in billions without harming household finances. Or better yet, instead of just blaming the state of the economy inherited from the last government, Reeves could talk about the arbitrary fiscal rules Labour has inherited from them, and have the courage to change these, freeing up billions for public spending in the process.”
Hannah Peaker, director of policy at the New Economics Foundation said: “Rachel Reeves said the country voted for change but her statement today reaffirmed a commitment to the out-dated fiscal rules and veiled austerity measures that have left our public services in dire straits. While a pay rise for public sector workers is welcome news, the government needs to go much further with investing in public services to ensure that our children can learn in schools which are not falling down and our loved ones are able to get an operation without spending years on a waiting list.
“The chancellor claims we can’t afford investment but there was also no mention of raising taxes on the richest who can most shoulder the cost. This would be a simple way for the government to protect the services we all rely on. Ensuring that taxation of income from wealth – such as dividends and capital gains – are taxed at the same rate as earnings from work, could raise at least £10-15 billion a year.
“This government needs to go much further as well and address the self-imposed fiscal rules which are holding back the serious levels of investment we need just to maintain our key services. They should be investing with ambitions to ensure everyone has access to good healthcare, education, childcare, affordable housing and cheap, clean energy – this is how we build a strong economy for the future.”
* Read the Chancellor’s full statement here.
* Source: Positive Money and New Economics Foundation