Rachel Reeves, the shadow chancellor, will use a speech on Wednesday to commit a future Labor government to strict borrowing limits designed to protect public finances, allowing it to lay the foundations for a growing economy. As the candidates vying to replace Boris Johnson as prime minister promise billions of pounds in tax cuts without it being clear how they will be funded, Reeves will argue that “the tables have turned” on fiscal credibility. “Any lingering sense that the Conservatives are the party of fiscal responsibility has been shattered in recent days,” he will say. Two former Tory chancellors and a former senior civil servant at the Treasury have hit out at leadership rivals amid an apparent bidding war over tax cuts in the first week of the contest. Top economists have said sweeping cuts would risk fueling higher levels of inflation, while either increasing government borrowing or requiring sharp cuts to public services. Nadhim Zahawi, who took over as chancellor last week, announced tax proposals as part of his leadership bid worth around £50bn a year – almost equal to the entire schools budget – while Sajid Javid, the former health secretary, made promises worth around £40bn a year. Rishi Sunak, the former chancellor and early front-runner in the race, issued a coded attack on his opponents, describing the unrealistic tax plans as “comfort fairy tales” that would ultimately burden future generations. Reeves’ announcement comes as Labor tries to bury questions about its financial credibility left over from the 2008 financial crisis and dragged down by the Conservatives during Jeremy Corbyn’s time as opposition leader. Labor said the Tory leadership candidates’ tax promises would destroy the government’s own fiscal rules and create a £24bn budget deficit, pushing the national debt to 84% of GDP by 2026-27. Reeves will say a Labor government would stick to fiscal rules that would include a pledge to only borrow to invest, while pledging to reduce the national debt as a share of the economy. Subscribe to First Edition, our free daily newsletter – every morning at 7am. BST The shadow chancellor will tell an event organized by the Resolution Foundation in London: “I have set the fiscal rules that will bind the next Labor government. Rules to which I will adhere with iron discipline.” Reeves will argue that the Conservatives are failing to put forward serious plans to help people struggling amid the cost of living crisis. “[Instead] We are presented with the astonishing spectacle of a Tory raffle of tax cuts – with no explanation of what public services will be cut or how else they would be paid for. “The level of unfunded tax cuts imposed this week would blow a huge hole in the public finances. Every Conservative leadership candidate supported the government’s budget rules when they were passed into law in January, but now they are ready to flame them.”
