Why Starmer’s going after the Lords

It’s not just the government that’s now beholden to forecasts from the Office for Budget Responsibility. Keir Starmer told the BBC that Labour doesn’t ‘quarrel with the number that the OBR put out as a target or trying to get the debt down’. So Starmer accepts that the government needs to find around £50 billion through spending cuts or tax rises to get debt falling as a percentage of GDP in the medium term. This applies not only to the current government, but to any government he may run in the future.

Of course, Labour stress that they would make ‘different choices’ to the Tories in how they close a fiscal gap of more than £50 billion. But they are not denying that it exists or proposing that another government could simply borrow more to fund more day-to-day spending. Starmer is not going to allow Rishi Sunak or Jeremy Hunt to accuse his party of heading for a repeat of Liz Truss’s mistakes: borrowing too much and risking a spike in interest rates.  

Labour may well make ‘different choices’ but there is no simple – or appealing – solution. Taxing the rich more won’t be enough. Labour’s plan to change the rules on non-domiciled taxation would raise only £3 billion. Furthermore, Labour has already committed that money to training more doctors. If Labour want to spend substantially more than the Tories, they will have to tax the middle class even more. 

It is important to note that there are more OBR forecasts on the way and the current one will almost certainly be wrong – though, worryingly, the OBR is considerably more optimistic than the Bank of England, which predicts eight consecutive quarters of negative growth, compared to the OBR’s five. If the Bank’s forecast turns out to be more accurate, the gap that the parties will need to close will be even bigger.