Sunak challenges Starmer on tax and borrowing

Prime Minister Sir Keir Starmer has deflected claims his government is planning to raise some taxes and borrow more to fund investment in the upcoming budget.

Outgoing Conservative leader Rishi Sunak asked Sir Keir if he would raise a tax paid by employers and change rules to allow more borrowing.

Speaking at Prime Minister's Questions, Sir Keir said he would stick by Labour’s manifesto promise to not raise taxes on “working people”.

But the prime minister said he would not be drawn on decisions to be set out in the budget on 30 October.

Sunak said it was clear the prime minister had “opened the door to raising employer national insurance contributions, including on pensions, and fiddling the figures so he can borrow more”.

The budget this month is the first major financial event since Labour won a landslide victory in the general election in the summer.

It will set the direction of the Labour government, which has had a difficult few months following the summer riots, a row over donations and a reshuffle of the prime minister’s Downing Street team.

Chancellor Rachel Reeves discussed the budget at a meeting of cabinet ministers on Tuesday.

Since taking office, Reeves has warned of "difficult decisions" on tax, spending and benefits, to plug a £22bn "black hole" she claims was left by the Conservatives.

Labour ruled out raising income tax, national insurance and VAT in its election manifesto, and Sir Keir said he would stick to those commitments at Prime Minister’s Questions on Wednesday.

But Sir Keir did not say whether his pre-election promise applied to national insurance paid by employers.

The chancellor has also dropped hints that she is considering changing self-imposed borrowing rules to allow significantly more investment in major infrastructure projects.

At PMQs on Wednesday, Sunak highlighted comments made by Reeves last November.

Reeves told reporters she was “not going to fiddle the figures or make something to get different results” when asked whether she would consider using the easier debt target.

“We will use the same models the government uses,” she said.

At PMQs, Sunak asked the prime minister if he still agreed with the chancellor.

“I’m not going to get drawn on issues for the budget, just as he wouldn’t when he was standing at this dispatch box,” Sir Keir said.

Labour committed in its manifesto to balancing its day-to-day spending with money raised through taxes, and getting debt falling as a share of the economy in five years' time.

A Treasury source said no final budget decisions had been made but acknowledged changing the fiscal rules to allow more borrowing was part of the budget discussions.

The source highlighted Reeves’s speech at the Labour conference, where she said: “It is time that the Treasury moved on from just counting the costs of investments, to recognising the benefits too.”

A Treasury spokesperson said: “The chancellor has vowed to lead the most pro-growth Treasury in history and has been clear that it is important that we count the benefits of public investment and not just the cost of it.“