Rachel Reeves 'will impose another tax raid or increase borrowing' in wake of Iran war, Shadow Chancellor warns
Mel Stride told LBC the Chancellor has left herself with “very little room for manoeuvre” because of the way she “mismanaged the economy”.
Rachel Reeves will hike taxes on working people or increase borrowing to fix the “fragile” economy in the wake of the Middle East war, Shadow Chancellor Mel Stride has told LBC.
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Oil and gas prices have skyrocketed in recent weeks amid the ongoing conflict - hitting motorists as they fill up at the pumps and potentially pushing up domestic energy bills later this year.
Ms Reeves this week warned the economic challenges from the Iran war may be “significant” as she mulls measures to address the crisis.
Speaking to Nick Ferrari at Breakfast, Mr Stride said that whatever the Chancellor does to address this, she has left herself with “very little room for manoeuvre” because of the way she “mismanaged the economy”.
He said this is not least the case on inflation, which “remains well above target for this government."
It comes as UK inflation flatlined at 3% last month prior to the impact of the conflict despite Labour vowing to bring this down, figures released today revealed.
Read more: Rachel Reeves has no one to blame for the impending tax rises but herself, writes Mel Stride
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Mr Stride warned the most likely strategy Ms Reeves will take will involve digging deeper into working people’s pockets.
“The way that this government operates whenever there's a squeeze on its fiscal position or a requirement to step in and help out in some way, is it turns either to borrowing or to taxing people even more,” he told Nick.
He added: “What they should be doing is controlling government spending. So what they should be doing is, for example, getting the welfare bill down, getting people off benefits and into work.
“And by doing that, they can make the savings to help people out.
“But I fear that what the Chancellor is going to be doing is coming back for yet more tax or increasing borrowing at a time when she's created a very fragile economy, a very high level of debt that, I'm afraid, isn't going to really be able to provide much firepower when it comes to helping people out.”
Mr Stride argued that the Government should instead be controlling spending with measures such as “getting the welfare bill down, getting people off benefits and into work.”
“By doing that, they can make the savings to help people out,” he said.
The Chancellor faced backlash as she announced tax rises amounting to £26 billion in the Budget as she battled a downgrade in forecast economic growth.
Labour vowed to limit tax rises to £8.5 billion in its 2024 general election manifesto, instead vowing to crack down on tax dodgers and avoiders, energy firms, billionaires and wealthy foreigners living in Britain.
As war rages in Iran, the Chancellor said she will hold meetings later this week with supermarkets and banks “to discuss how they can further support their customers” as fighting continues.
She told the Commons: “I can confirm to the House that we are aiming to conclude negotiations with the EU this year on the sanitary and phytosanitary agreement which will directly impact food prices in our shops.
“And I have asked officials to look at where there are targeted reductions to agri-food tariffs, which can help bring down food prices too, balancing this with implications on domestic producers and food security.
Ms Reeves will also give the Competition and Markets Authority the power to “crack down on price gouging” amid surging prices, she announced.
She has also said work is under way on targeted help for households when the current energy price cap expires at the end of June and global prices could push up domestic bills.
She told MPs: “Contingency planning is taking place for every eventuality so that we can keep costs down for everyone and provide support for those who need it most, acting within our iron-clad fiscal rules to keep inflation and interest rates as low as possible.
“This is not a war that we started, nor is it a war that we joined… but it is a war that will have an impact on our country.“The challenges may be significant but I promise to do what is right and fair, being responsive in a changing world and responsible in the national interest.”
The Chancellor indicated she is looking at targeted support rather than the blanket approach to energy bill help offered by then-prime minister Liz Truss in the wake of Russia’s attack on Ukraine.
That gave the support to the “wealthiest of households” and “left us with high levels of national debt, a cheque written then for a bill that is still being paid today”, she said.