Sir Keir Starmer said he has “long believed in borrowing to invest”, which can act as a “catalyst” for private investment.
During a visit to New York where he is attending United Nations General Assembly meetings, the Prime Minister took questions from broadcasters about the country’s finances ahead of the Labour Government’s first budget on October 30.
Asked whether he was “talking the country down”, Sir Keir told the BBC: “I think if we’re going to have to take difficult decisions that we are, it’s important that we do the diagnosis.
“What’s the state of the country? What’s the state of the economy?
“And the two or three things I’d say that dominate are the £22 billion black hole, the Lord Darzi report into the NHS, which effectively said it was on its knees, and of course the terrible state of our prisons. Now you have to get the diagnosis right because then you’ve got to go on and say, right, it’s our responsibility.”
The Prime Minister added: “We have to have an accurate diagnosis of what the problem is, and then our job is to say, what are we going to do about it? Short-term, difficult decisions.”
He later said: “The purpose of the difficult decisions is to make sure we grow the economy – living standards: everyone better off, our public services back properly functioning, an NHS that’s on its feet, fit for the future, we can be proud of, and taking the necessary measures on border security and national security. That’s what you get for it but you won’t get there if you don’t do the difficult things first.”
On “tweaking” fiscal rules about how much the Government can borrow to invest in long-term spending, Sir Keir vowed not to “get ahead of the budget”.
He said: “There’s a difference between day-to-day spend and borrowing to invest, and I’ve always thought we should borrow to invest.
“But borrowing public investment has to come alongside private investment, to be a catalyst for it, if you like.
“What’s important is certainty, strategic direction, the partnership with business that we’ve been championing for some time.”
The Prime Minister told Channel 4 News: “I’ve always and long believed in borrowing to invest. I think it’s important to grow the economy.
“Our number one mission is to grow the economy, to make sure that by growing the economy, everybody is better off, living standards go up. That’s what I’m going to be judged on at the end of this term in Government and I know that.”
Labour activists at the party’s conference in Liverpool urged Chancellor Rachel Reeves to commit to “ending fiscal rules which prevent borrowing to invest” in her first budget.
Unite the Union moved the motion and its general secretary Sharon Graham said ahead of a non-binding vote on Wednesday that “fiscal rules are self-imposed and the decision to keep them is hanging like a noose around our necks”.
She earlier said: “Britain needs investment, not austerity mark two. We won’t get any gold badge for shaving peanuts off our debt.”
In her conference speech on Monday, Ms Reeves vowed: “Every choice we make will be within a framework of economic and fiscal stability. You’d expect nothing less.”
The Chancellor also told activists and delegates: “The Tories cling to the discredited trickle-down and trickle-out dogma that a strong economy can be built through the contribution of just a few people, a few parts of the country, or a few industries.
“Their ideas choked off investment, opened wide gaps between different parts of the country, and it suffocated growth and living standards. We will not make those mistakes.”
