Reeves alleges £71bn black hole in Tory costings and ‘second mortgage bombshell’

11 June 2024, 17:44

Rachel Reeves delivers her response to the Tory manifesto
General Election campaign 2024. Picture: PA

Labour’s shadow chancellor accused Rishi Sunak of ‘cosplaying Liz Truss’ by making unfunded commitments.

Rachel Reeves has claimed the Conservative manifesto contains £71 billion of unfunded commitments and could result in “a second Tory mortgage bombshell” as the parties continue to clash over tax and spend.

Labour’s shadow chancellor raised the spectre of former prime minister Liz Truss’s calamitous mini-budget as she held a rebuttal press conference hours after Rishi Sunak launched his party’s General Election policy document.

The Prime Minister on Tuesday unveiled a £17.2 billion package of tax cuts, including a further 2p reduction in employees’ national insurance.

Ms Reeves said Labour analysis suggested the Tory plans required an extra £17.4 billion of borrowing in 2029-30, and a total of £71 billion over the whole five-year period.

That could result in the Bank of England putting up interest rates by 56 basis points, resulting in someone with an 85% mortgage on the average house in England facing £4,800 in extra mortgage payments over the five years.

She told the central London presser: “The consequence of an increase in day-to-day borrowing to fund the commitments made in this manifesto would amount to a second Tory mortgage bombshell, because higher borrowing at this scale would force the Bank of England to increase interest rates.

“The result would be an increase in the average mortgage totalling £4,800 over the course of the parliament.”

Labour’s warning of a steep rise in mortgage costs appears to be the party’s counterpart to the Tories’ claim that a government led by Sir Keir Starmer would hike taxes by £2,000 – a much-disputed figure that has been criticised by the UK statistics watchdog.

Labour’s analysis makes a series of assumptions to estimate the cost that might be attached to the Tory policies.

The Conservatives hit back by accusing the shadow chancellor of “confusing facts and fiction on numbers”.

Prime Minister Rishi Sunak at his party's campaign launch
Prime Minister Rishi Sunak launched the Conservatives’ General Election manifesto at Silverstone racing track (James Manning/PA)

Ms Reeves also sought to draw comparisons between Mr Sunak and Ms Truss, whose 2022 mini-budget sent the value of the pound tumbling and mortgage rates soaring due to the market’s adverse reaction to its £45 billion of unfunded tax cuts.

She said: “He (Mr Sunak) said he was the antidote to Liz Truss. Instead, he’s cosplaying Liz Truss by again doing what the Conservatives did in that mini-budget with £71 billion of unfunded commitments.”

The former Bank of England economist warned that after the mini-budget “mortgage rates spiralled and people found themselves paying – the 1.5 million re-mortgaging this year alone – paying £240 extra”.

“So we know what happens when unfunded commitments are made: you can’t believe that those commitments are actually going to happen, but what you can guarantee is the financial market turbulence and the higher mortgage rates that they bring.”

Ms Reeves also said that the £12 billion of welfare savings the Tories claimed would pay for their tax cuts had either already been accounted for by the Office for Budget Responsibility or could not be delivered.

A Conservative spokesman said: “Once again Reeves is confusing facts and fiction on numbers.

“Rachel Reeves’s chaotic and panicked dossier is full of complete nonsense and capped off with the extraordinary claim that it will cost the taxpayer £5.7 billion to cut the civil service back to pandemic levels.”

Labour is set to launch its own manifesto on Thursday.

By Press Association