In an upcoming speech, Prime Minister Keir Starmer is set to emphasize Labour’s economic plans, arguing that enhancing public services is more vital for working people than lowering taxes. This address will take place in the West Midlands as the Chancellor, Rachel Reeves, prepares to unveil a significant budget that includes substantial tax increases and spending cuts.

During his speech on Monday, Starmer will pledge to face “the harsh light of fiscal reality.” As voters anticipate the budget, senior Labour officials are expressing concern about potential backlash for increasing national insurance contributions, a promise they made to avoid during the election campaign.

Starmer will counter these concerns by asserting that working people deserve better public services, stating, “It is working people who pay the price when their government fails to deliver economic stability. They’ve had enough of slow growth, stagnant living standards, and crumbling public services.” He plans to convey a message of accountability and long-term planning, urging the party to tackle difficult decisions head-on to avoid further decline.

The budget is expected to include a notable rise in national insurance contributions imposed on employers, projected to generate at least £8.5 billion. Additional tax increases will also be on the table, including potential VAT on private schools, higher capital gains tax on sold shares, and inheritance tax on certain agricultural properties. This is aimed at addressing a £22 billion shortfall in public finances that Reeves has attributed to the previous government. Furthermore, she aims to secure an extra £18 billion specifically for enhancing public services, including a planned annual increase of 4.5% for the NHS.

Reeves will also announce reductions in the operational budgets of several key departments, including Justice, Transport, and Housing. The strategy involves redefining the government’s notion of debt to accommodate an additional £50 billion in borrowing for capital investments by the end of the parliamentary term, while committing to a borrowing limit of £20 billion to £25 billion beyond current forecasts to reassure financial markets.

The additional funds will be allocated to various projects, including £1.4 billion for repairing school buildings, establishing carbon capture sites in northern England, and completing the high-speed rail connection with Old Oak Common. Interestingly, these funds will not be directed towards expanding freeports, as recent comments from Downing Street about unveiling new sites have been clarified as errors.

Amid concerns regarding Labor’s promise not to tax working people, ministers have been engaged in a debate over who qualifies as “working people.” Starmer clarified this term as referring to those earning income through labor rather than from investments. Education Secretary Bridget Phillipson reassured the public that the budget will not result in higher taxes reflected in their paychecks, acknowledging the financial pressures many face.

Starmer is expected to redefine this narrative on Monday by stating, “We choose a different path: honest, responsible, long-term decisions in the interests of working people.” Reflecting on the current economic climate, he noted, “This is not 1997 or 2010; these are unprecedented circumstances.”

Although efforts have been made to prepare the public for the upcoming budget, some cabinet members remain apprehensive about its potential impact on the party’s polling performance. Concerns have been raised particularly regarding the possibility of lifting the £2 cap on local bus fares, which may have a direct effect on everyday lives.

In a bid to fend off criticism ahead of the budget announcement, the Prime Minister emphasized that if opponents want to criticize their chosen path, they should articulate an alternative. He challenged them to specify which public services they would cut if they consider the state too large, and to clarify how they would ensure economic growth for working people without supporting the proposed infrastructure investments. As the debate unfolds, new analyses from the Office for Budget Responsibility are expected to provide further context to the challenges ahead.