But Jeremy Hunt, the shadow chancellor, said that raising employer NICs was a “jobs tax that is paid by working people”, which would mean “fewer jobs and lower wages”, as employers would pass on the effects to those they employed in the form of lower wages or redundancies. He cited the Institute for Fiscal Studies as saying the rise would be a “straightforward breach” of promises.
While she is bound to face a backlashes over tax rises, Reeves is determined to portray the budget as the launch of a period of huge “national renewal” that will tackle the legacy of chaos left by the Tories – a £22bn black hole in current spending – through tough decisions on tax, while changing the fiscal rules to allow £50bn of extra borrowing for capital projects to reverse a decline in infrastructure across the public sphere.
As part of the twin-track approach, £1.4bn will be directed towards “rebuilding crumbling schools”, with 50 schools rebuilt a year. Hospital rebuilding projects are expected to be announced alongside these in the budget. Reeves says such schemes would not be possible without changing the fiscal rules, and makes clear she expects the Tories to oppose such changes in the aftermath of the budget.
Sensing the opportunity to open a new dividing line with the Conservatives, Reeves says: “If they oppose our new fiscal rules next week, they will basically be saying they support the current path of decline. We are happy to have that debate. We are on the right side of it.”
She adds: “I think the big divide in politics after this is going to be whether you are in favour of investment or whether you are in favour of decline.
“We inherited a plan from the previous government in which public sector net investment, capital investment, would be falling sharply over the course of this parliament, and that would mean scores of hospitals not built. It would mean massive opportunities to grow our economy in the digital and energy sector would be missed and those jobs would go elsewhere.”
She spells out how she sees two types of investment as crucial to transforming the country, as a direct result of reforming borrowing rules.
The first will be projects that “crowd in” big private sector investment alongside public funding, such as the plan recently announced for £21bn of public investment in carbon capture and storage alongside billions of pounds of private investment. There will be other such public-private models in the energy, digital, science and transport sectors, to be announced in the budget.
The second type of investment will be in “the public realm”, with the rebuilding of urgently needed schools and hospital buildings.
New and developing industries also offer huge opportunities that invite investment, she says.
“This is a new settlement on Wednesday to rebuild our country and seize the massive opportunities in technology and energy that are out there. There is a global race on for those jobs and we need to seize them for Britain. If we can unlock that investment, public and private, then we can do great things as a country again.”
Reeves says that while she will not be lifting the two-child benefit cap that is blamed for plunging thousands more young people into poverty, she will be taking other actions to alleviate child poverty.
“We are a good Labour government, and good Labour governments lift children out of poverty and fix the National Health Service. I hope that people can see that I am starting to turn the corner.”
