- Written by Paul Seddon
- Politics reporter
Rachel Reeves said Labor now intends to pay for NHS and school breakfast schemes through future savings for public spending if it wins power.
The party had planned to finance key policies by replacing the current UK tax system.
But Chancellor Jeremy Hunt announced the same move in Wednesday's Budget to fund National Insurance cuts.
His Labor counterpart, Ms Reeves, admitted it would force her to adjust her own plans.
Speaking to the BBC, she said Labor would “now use every pound” in the government's spending plans to fund policy.
She added: “But we will find this money, because it is a national priority, and a Labor Party priority.”
Labor had planned to raise an extra £2 billion compared to the government by replacing the “non-resident” rules for UK residents living abroad for tax purposes.
£365 million of this has been set aside to fund free school breakfast clubs for all primary school pupils in England, if she wins the next general election.
It has also allocated £1.5 billion to pay for extra appointments in NHS hospitals, £171 million for new CT scan machines, and £111 million for additional dentist appointments.
However, the Chancellor has now stolen politics to partially fund an additional 2p from the pound for National Insurance, a payroll tax, which Labor has said it supports.
Review of savings “organization”.
After the Budget on Wednesday, Ms Reeves ruled out a new wealth tax to make up for the shortfall it created in the party's spending plans.
It has now indicated that Labor plans to fund its proposals by saving for future government spending.
She told BBC Radio 4's Today programme: “We will review every pound spent, every tax collected, and make sure we can continue to fund those commitments.”
She added, “We will determine what savings we can make to finance this,” stressing that the party's electoral program “will be expensive and fully funded.”
But she did not provide further details, adding that the party would first need to study the government's plans “in an organized manner” before it would be in a position to do so.
Labor has a self-imposed rule that it will not borrow to finance day-to-day spending, and will aim to reduce debt as a share of the economy.
The party believes that this rule is essential to burnish its economic credibility with voters, but it will limit the room for maneuver available to it if it wins office, amid a background of slowing growth expectations.
Hunt plans to increase daily total government spending by 1% above the inflation rate each year until 2029, but unprotected departments could see spending cuts in real terms.
Paul Johnson, of the Institute for Fiscal Studies, a think tank, said Labor had made “life harder for itself” by accepting the cut in National Insurance, which costs the Treasury £10 billion a year.
Green spending pledge
“The opposition has been as shy as the chancellor in telling us what they actually intend to do on tax and spending after the election,” he said.
He added: “If I am skeptical of Mr Hunt's ability to stick to his current spending plans, I am at least skeptical that Rachel Reeves will oversee significant cuts to public service spending.”
As well as mimicking Labour's proposals on non-resident companies, the Chancellor also mimicked her plans to extend the windfall tax on the profits of energy and gas companies until 2029.
However, Labor insists its proposals would still increase government revenues in this area, as they would also increase taxes as well as close investment tax breaks, which it describes as “loopholes”.
Speaking on BBC Radio 2, Prime Minister Rishi Sunak said Labor had “not been honest” about how it would finance it, repeating an attack that the borrowing involved would force the party to tax.
But in an attempt to turn the tables on the government, Labor seized on Hunt's suggestion that the Conservatives would seek to abolish national insurance entirely in the future.
The party described the proposal as an “unfunded tax pledge” that would cost £46 billion annually to implement.
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