Keir Starmer today refused to rule out another stealth raid on Brits as Labour desperately tries to balance the books.
Sir Keir dodged giving a commitment against extending the freeze on thresholds beyond 2028 as he was challenged by Kemi Badenoch at PMQs.
The policy has brought in huge sums for the Treasury by dragging millions more Brits deeper into the tax system.
But experts have warned Rachel Reeves still faces making deep cuts in spending at the Spring Statement next week despite Labour‘s curbs on benefits.
The fiscal event next Wednesday had originally been billed as a low-key update, after she vowed only to hold one Budget a year.
However, the UK’s economic slowdown – partly blamed on the huge tax raid on business as well as Trump’s trade war – and rising debt costs have wreaked havoc with her plans.
Before the welfare reforms unveiled yesterday, Ms Reeves was thought to have a black hole of between £15billion and £20billion to fill in the public finances.
That means even if the Treasury’s OBR watchdog agrees that the benefits changes save £5billion significant extra action will be needed.
Ms Reeves has ruled out more borrowing or tweaks to the main tax rates, leaving spending cuts her only option despite Labour complaints about a return to ‘austerity’.
However, No11 has been playing down the prospect of any tax tweaks – such as freezing thresholds – before the next Budget in the Autumn.
Mrs Badenoch said: ‘The Chancellor promised a once-in-a-parliament Budget that she would not come back for more. And in that Budget, she said there will be no extension of the freeze in income tax thresholds.
‘Ahead of the emergency budget, will he repeat the commitment that she made?’
Sir Keir replied: ‘She’s got such pre-scripted questions she can’t actually adapt them to the answers that I’m giving. I think she now calls herself a Conservative realist. Well, I’m realistic about the Conservatives.
‘The reality is they left open borders and she was the cheerleader. They crashed the economy, mortgages went through the roof. The NHS was left on its knees, and they hollowed out the armed forces.
‘This Government has already delivered two million extra NHS appointments, 750 breakfast clubs, record returns of people who shouldn’t be here, and a fully-funded increase in our defence spending. That is the difference that a Labour Government makes.’
Unprotected departments have been told to model reductions of up to 11 per cent in real-terms ahead of the Spending Review in the summer.
The OBR estimated at the Budget in October that the government had headroom of around £10billion for meeting its fiscal rules.
They are that day-to-day spending must be paid for by revenue, not borrowing, and to have debt falling as a share of national income by 2028-29.
However, that headroom is thought to have been completely wiped out. Economists believe that up to £20billion of spending or revenue-raising will be needed to rebuild a credible buffer.
There is speculation that some of the difference can be made up because parts of the aid money diverted to defence can be classified as capital spending – which does not count for the rules.
The respected IFS think-tank has estimated that limiting real-terms growth in day-to-day departmental spending to 1.1 per cent would save roughly £5billion a year by the end of the parliament.
One government official told the Financial Times that financial markets will expect Reeves to re-establish a ‘reasonable level of headroom’.
Some expect Ms Reeves will also ‘backload’ deeper cuts to the end of the OBR’s forecast period, effectively gambling that the picture will look better later on and they can be abandoned.
After PMQs, Downing Street was quizzed about Sir Keir failing to pledge not to extend the freeze on income tax thresholds.
Asked if the plan was still to unfreeze the thresholds from 2028, the PM’s official spokesman said: ‘As the Chancellor has said repeatedly, we have delivered a once-in-a-parliament Budget to wipe the slate clean, put the public finances back on a stable footing and get growth back into the UK economy.
‘It’s for the Chancellor to comment on fiscal policy outside of fiscal events. But we’ve taken the necessary decisions to deliver economic stability, which is a key foundation for getting growth back into the economy.’
Pressed if he was ruling out extending the freeze on income tax thresholds at next week’s Spring Statement, the PM’s official spokesman replied: ‘I’m just saying it’s for the Chancellor to comment on tax policy, not for me.
‘You have got the Chancellor’s previous words that we have delivered a once-in-a-parliament Budget to wipe the slate clean and get growth back in the UK economy.’
The Chancellor set out departmental spending plans for 2025-26 in October, with allocations for 2026-27 onwards due to be finalised in June.
Labour MPs have been up in arms over the Government’s benefits cuts, despite ministers making the ‘moral’ case that those who ‘can work should work’.
Keir Starmer has batted away criticism that policies now amount to ‘austerity’, insisting efficiencies can prop up services.
