The Prime Minister has established his own “Budget Board” in a further sign that he is seizing control of economic policy himself and has lost confidence in Chancellor Rachel Reeves. One of the aims is to rebuild relations with employers, who have been hit by an increase in National Insurance and higher minimum wage, pushing up the cost of employing staff, while business organisations such as the CBI are worried about the impact of the Government’s new Employment Rights legislation.
The Budget board, which will meet weekly, includes Treasury Minister Torsten Bell, who is assisting Ms Reeves. It also includes Baroness Minouche Shafik, Starmer’s new economic adviser, who is advising the Prime Minister personally. Other members are also working directly with Number 10 rather than the Treasury. They include Varun Chandra, Sir Keir’s business adviser, and Tim Allan, the new Number 10 communications chief.
The Financial Times reports one Labour official said: “This is about putting more weight behind a pro-business Budget. We have to reassure business that we are not just going to keep taxing to spend.”
Another told the newspaper: “The Budget board will funnel into the decisions that the prime minister and chancellor take. We don’t want to find ourselves in a difficult position with business again.”
The cost of Government borrowing soared to its highest level since 1998 earlier this month, amid market concern over the state of the Government’s finances. Costs have since fallen slightly but a report by Oxford Economics warned the Treasury’s annual interest payments are now £5 billion higher than in March, and could rise further.
The report said: “In our view, the UK economy remains exceptionally fragile; subdued growth and high inflation and a weak fiscal position are set to persist.”
It said the Chancellor may need to plug a £30 billion gap in the public finances when she delivers her Budget on November 26, and the Oxford Economics report continued: “Therefore, hefty tax increases look likely.”
Ms Reeves has denied previous suggestions that the Budget black hole could be as high as £50 billion. Watchdog the Office for Budget Responsibility will confirm the state of the public finances in a report to coincide with her Budget statement.
The Prime Minister promised not to sack his Chancellor after she was seen in tears in the Commons in July.
Conservative leader Kemi Badnoch has warned that people across the country poorer this winter because Rachel Reeves is scrambling to tax “anything she can lay her hands on” in November’s Budget.
She accused the Chancellor of driving the nation to bankruptcy and racking up debts our children will have to pay “over decades”.
But Labour was unwilling to stop “spending more than we earn” on benefits and huge pay rises for trade unions, said Mrs Badenoch. Instead, she claimed the Chancellor and Prime Minister Sir Keir Starmer are trying to balance the books with job-destroying taxes which will hurt economic growth and push up debt further.
The Conservative leader said: “So, what’s her plan? She’s going to tax us more.
“She is in the Treasury right now, I’m sure, with officials. I’m a former Treasury Minister, I know how it works. She’ll be desperately making plans for anything she can lay her hands on.
“She will be looking at hiking taxes on our homes, wages, and pensions. Every single one of us will be paying a Reeves penalty this winter.”
Mrs Badenoch said: “Everything this government is doing is making life more expensive for all of us.”
A Labour Party spokesperson said: “It’s delusional of Kemi Badenoch to think anyone would want to take economic advice from her Conservative Party. Their economy-crashing, growth-killing, irresponsible approach to governing left mortgages spiralling and working people worse off.
“The only thing in Britain that needs a bailout is the Conservative Party from its leadership. The Tories haven’t listened, they haven’t learned, and they can’t be trusted.”