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Labour’s October Budget Risks Return to Austerity, Campaigners Warn – Amid Reports of Major Spending Cuts

Chancellor Rachel Reeves is being urged to borrow to invest amid claims that billions of pounds in cuts to investment is planned

Shadow Chancellor Rachel Reeves is reportedly pushing departments to slash infrastructure spending. Photo: Karl Black/Alamy Live News

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There are renewed concerns that Labour’s first Budget this month could trigger a fresh round of austerity cuts, as campaigners urge the Chancellor to borrow to invest in rebuilding Britain’s public services. 

It comes as the Guardian reports that despite Rachel Reeves‘ conference speech promise to boost investment to stimulate growth, cabinet members are being told to find potential cuts amounting to billions of pounds from infrastructure projects over the next 18 months. 

According to Government sources cited by the paper, as part of the October 30 spending review, ministers have been tasked with showing how they could reduce their annual capital spending – i.e. infrastructure and investment plans – by up to 10%. 

It is a stark contrast to suggestions last week that the Treasury is set to change its fiscal rules, to allow the Government to borrow to invest in job-creating industries and infrastructure. Unions such as Unite welcomed the reports. 

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Both Reeves and Prime Minister Keir Starmer in their Labour conference speeches last week ruled out a “return to austerity”. But that narrative conflicts with some reports since – plus the billions of pounds of cuts already planned. 

The Equality Trust has launched a petition calling on the Government to reject austerity measures in the October budget. 

Addressed to Starmer and Reeves, it argues that over a decade of austerity under the Conservatives pushed public services to their limits and left communities at a breaking point.

It points to recent Government decisions, such as cuts to winter fuel payments and £5.5 billion in other spending cuts this financial year, as indications that the pattern of austerity may continue.

Many of the initial savings this year come through cancelling long-delayed Conservative transport and hospital projects from the last Government. However, the Chancellor has already pencilled in £8.1 billion in “savings” next year too.

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Challenging the fiscal rules Labour has signed up to which they claim prevent public investment, the petition argues that these constraints were “made up by politicians and badly designed”. 

Those rules dictate that Government debt “must be falling as a share of the economy by the fifth year of the [budget] forecast”. 

During the General Election, the Scottish National Party and others warned that Labour sticking to its fiscal rules would lead to more austerity, with the independent Institute for Fiscal Studies forecasting £18 billion worth of public sector cuts by 2030, or real-terms cuts to public investment of 2.6% per year over this parliament. 

The Equality Trust has joined unions and progressive think tanks in urging the Government to rule out more austerity, and tax the rich to boost spending. 

Priya Sahni-Nicholas, Co-Executive Director of the Equality Trust told Byline Times: “Here are three things that are breaking records right now: monthly temperatures; foodbank use; and shareholder payouts. We all understand that our system is broken. It’s also very clear that you cannot solve the crises the UK is trapped in without investing in people.

“We’ve been here before – declaring that austerity is over will not somehow exempt you from the effects of cutting investment. It would be a disaster to continue the policy that has encouraged massive inequality…

“People need warm, safe homes; to be able to access healthcare, education, and opportunities; and to live in communities that can thrive in a sustainable, equal society.” 

SNP Westminster Deputy Leader Pete Wishart MP said people in Scotland would be “appalled at the miserable choice on offer at Westminster,” claiming the two biggest UK parties were “wedded to austerity cuts, Brexit and long-term decline”.

“On the one hand, we’ve got free gear Keir and his Labour ministers lining their pockets with more than £800,000 of freebies, while imposing austerity cuts on the rest of us. 

“On the other hand, we have a dreadful Tory leadership contest with bottom of the barrel candidates that make Boris Johnson look almost competent by comparison,” he added. 

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Last week, Unite union leader Sharon Graham said: “The country can’t take a further round of austerity. Our public services have been cut to the bone and are crumbling. Ruling it out is the totally right decision. Yet, actions speak louder than words, this commitment must mean no more public sector cuts.”

According to the Equality Trust, the rules prioritise short-term spending cuts over long-term investment, trapping the UK in a vicious cycle of cuts, inequality, and decline. The charity cites economists who maintain that these rules can be rewritten to allow for greater public investment.

Reeves is reportedly considering changing how Government debt is measured to free up room for extra investment, while still sticking to Labour’s official pledge to get debt falling.

The petition also highlights the stark wealth inequality in the UK, with the ultra-rich amassing staggering amounts of money over the past decades, particularly during the pandemic and cost-of-living crisis. 

Research by the Equality Trust’s has found that billionaire wealth increased by over 1,100% since 1990 and grew by £150 billion between 2020 and 2022. Meanwhile, companies like British Gas and the Big Six Banks have been making record profits, and shareholder dividends hit an all-time high last quarter.

A recent report from Tax Justice UK argued that £60 billion could be raised annually in closing tax loopholes affecting the wealthiest, such as limiting reliefs on inheritance tax and pension contributions.   

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The petition calls on the Chancellor to increase taxes on income from wealth, close loopholes exploited by the richest, introduce windfall taxes on the profits of big banks and oil and gas companies, and implement an annual wealth tax of 2% on assets over £10 million.

The petition also highlights the massive cost of austerity to society, citing research from the London School of Economics (LSE) that found 190,000 excess deaths caused by austerity. And the Institute for Fiscal Studies calculated that failing to invest and poor growth has led to an economic gap of £11,000 GDP per head as of June 2024.

Sahni-Nicholas added: “Public support is very clearly behind investing to achieve [Labour’s goals] and taxing the rich to help fund it. The fact that lobbying from the richest looks set to prevent it shows how entrenched our inequality of income, wealth and power is.”

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Josiah Mortimer also writes the On the Ground column, exclusive to the print edition of Byline Times.

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