Labour 'could borrow more to fund new spending splurge'
Labour could borrow more to fund new spending splurge, admits shadow chancellor Rachel Reeves – as IFS warns taxes will have to rise whoever wins the election
Labour could borrow more to fund a new spending splurge, Rachel Reeves admitted today.
The shadow chancellor suggested there is more scope for borrowing to invest in the economy – although she stressed debt will need to come down over the longer term.
The comments came in a round of interviews ahead of her speech to Labour conference in Liverpool.
Ms Reeves insisted that Labour has no intention of hiking taxes significantly if it wins the next election.
However, the respected IFS think-tank warned that whoever ends up in power is likely to need to increase the burden to keep public services afloat.
In a round of interviews this morning, Rachel Reeves suggested there is more scope for borrowing to invest in the economy – although she stressed debt will need to come down over the longer term
Debt has been running at some of the highest levels since the Second World War
Asked about the potential for more borrowing, Ms Reeves told BBC Radio 4’s Today programme: ‘We will take it up to the level that is needed to compete internationally.’
She gave the example of firms who wanted to build battery factories if they could get support.
But Ms Reeves told Times Radio on Monday: ‘I set out a set of fiscal rules and I will stick to those with iron discipline.’
They include paying for day-to-day expenditure through tax receipts, getting debt down as a share of the economy ‘and then only subject to that will we invest in things that are going to grow our economy’, Ms Reeves said.
‘We will only borrow if it is consistent with those fiscal rules,’ she said, adding that that could be ‘if debt is coming down by the end of the Parliament’.
IFS director Paul Johnson said it would be ‘very’ hard for whoever forms the next government to sustain public services without tax rises.
‘I’m not convinced that either a Labour or a Conservative government could do that,’ he said.
The IFS has warned that taxes, already at a post-war high, could need to increase further
‘The most recent budget red book suggests extremely tight spending plans after the next election, even though taxes are at quite a high, or very high, level.’
On Labour’s hopes of improving public services and welfare, he said: ‘That’s going to be very hard indeed, I think, without some tax rises, at least in the short run until and unless growth really does change.’
He added: ‘The markets might well allow some more borrowing. One thing that the markets are really keen on is seeing a stable government and I think on both sides we have seen more stability in recent years.
‘Labour have also said they want debt to be falling over the period of the Parliament. That is actually the big constraint here – debt is not really on course to fall over the next five years or so.’
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