Chancellor Rachel Reeves has said the date for the Government’s first budget will be announced before the Commons summer recess and spoke of “short-term political pain to fix Britain’s foundations”.
In her first major speech as Chancellor, Ms Reeves said she would assess the “spending inheritance” left behind by the Conservatives.
She said: “We face the legacy of 14 years of chaos and economic irresponsibility.
“That is why over the weekend I instructed Treasury officials to provide an assessment of our spending inheritance so that I can understand the full scale of the challenge and I will present this to Parliament before the summer recess.”
Ms Reeves said the Treasury analysis she has seen over the weekend shows that if the economy had grown at the average rate of OECD economies during the last 14 years, the UK’s economy today would be £140 billion bigger, with £58 billion more for public services.
“That is why growth is so crucial, not just for driving up living standards but also for having the money for public services,” she said.
The Chancellor said there would be major changes to speed up infrastructure projects and unlock private investment and that the Government would make “tough” choices to fix the UK’s economy.
She said: “The question is not whether we want growth, but how strong is our resolve?
“How prepared are we to make the hard choices and face down the vested interests?
“How willing, even, to risk short-term political pain to fix Britain’s foundations?”
Ms Reeves said she would “do things properly when it comes to our budget” and ask the Office for Budget Responsibility (OBR) to produce a forecast and then produce the budget in the autumn.
“But we will set out the date for that budget before summer recess,” she said.
Prime Minister Sir Keir Starmer is expected to cut short the summer break and have MPs sit until July 31.
Ms Reeves also said the budget would provide the “first steps” to improving growth, adding that she “means business”.
She said: “I know we can’t turn things around overnight, we face a dire inheritance, but this is our downpayment.
“These are the first steps that we will take to bring that growth back to the economy and I’m determined to work, as are all of my colleagues, to do that, to unlock the private sector investment we need to grow our economy.”
Sir Keir’s administration has made faster economic growth, and the tax revenues that would flow from it, a key plank of its strategy to fund public services which are struggling for cash.
The Labour manifesto committed to wholesale planning reforms to make it easier to build and a greater focus on driving through key infrastructure projects which have become mired in delays and boost housebuilding.
The manifesto pledged to “immediately” update the National Policy Planning Framework to undo changes made by the Conservatives, including restoring mandatory housing targets.
The party also plans to allow building on some green belt land.
Ms Reeves said the Government would review green belt boundaries to prioritise brownfield and so-called grey belt land to meet housebuilding targets.
The Chancellor said the Government faced trade-offs in its decisions on infrastructure and housing and that she recognised there would be opposition.
“We must acknowledge that trade-offs always exist. Any development may have environmental consequences, place pressure on services and rouse voices of local opposition, but we will not succumb to a status quo which responds to the existence of trade-offs by always saying no,” Ms Reeves said
In response, Mike Childs, head of science, policy and research at Friends of the Earth, said that although much of the designated green belt bordering towns and cities “isn’t exactly a haven for wildlife”, it did serve a vital purpose in preventing urban sprawl and that building on it should be a “last resort”.
She also said in her speech that Labour will not use its large majority to renege on its tax promises.
The Chancellor said: “Over the weekend, I made clear to Treasury officials that the manifesto commitments that we were elected on will be kept safe and they will be delivered on.
“That includes robust fiscal rules and it includes our commitments to no increases in national insurance and the basic, higher or additional rates of income tax or VAT.”
With forecasts for the public finances indicating a squeeze of up to £20 billion in spending on departments where budgets are not protected, Labour will rely on increased growth to keep its twin promises of not returning to austerity and avoiding tax hikes beyond the measures it has already announced.
She sought to reassure investors that “Britain is a place to do business”.
“To investors and businesses who spent 14 years doubting whether Britain is a safe place to invest, then let me tell you, after 14 years, Britain has a stable Government. A Government that respects business, wants to partner with business and is open for business. In an uncertain world, Britain is a place to do business,” Ms Reeves said.
Ms Reeves has previously branded the planning system “the greatest single obstacle” to economic success.
Labour’s manifesto committed to a 10-year infrastructure strategy to guide investment plans and give the private sector certainty about the project pipeline and the creation of a National Infrastructure and Service Transformation Authority to oversee schemes.
The manifesto also promised to update planning policy to make it easier to build laboratories, digital infrastructure and gigafactories as well as 1.5 million homes.
The Institute for Government (IfG) think tank had called on Ms Reeves to commit to a series of changes, including a multi-year spending review and a wider mandate for the OBR.
IfG deputy economist Tom Pope said: “She has already made welcome commitments to strengthening the role of the OBR and holding only one major fiscal event each year.
“But she should go further, including by reforming the fiscal rules and committing to a new approach to spending reviews, if she wants to deliver on the new Government’s missions and break the cycle of excessive and unstrategic policy tinkering that has undermined her predecessors.”
