Rachel Reeves today heaped blame on Brexit for the UK’s economic woes as she claimed Britain could reap ‘huge benefits’ from moving back closer to Brussels.
The Chancellor admitted that inflation was ‘too high’ but said this was partly due to Britain officially severing ties with the EU almost six years ago.
Ms Reeves attributed the vote to quit the EU as ‘a rejection of open borders’ as she claimed there was ‘public support’ for Labour‘s recent ‘reset’ agreement with Brussels.
Her comments come ahead of next month’s Budget, at which Ms Reeves is expected to unveil fresh tax rises as she scrambles to plug a huge hole in the public finances.
This could possibly include a manifesto-busting rise in income tax, while there is also widespread speculation about other revenue-raisers such as a ‘mansion tax’.
Ahead of the Budget on 26 November, Ms Reeves and fellow Cabinet ministers have been increasingly willing to pin blame for the UK’s ailing economy on Brexit.
As she braced Brits for tax rises, the Chancellor earlier this month claimed that leaving the EU had ‘compounded’ Britain’s productivity challenge.
Ms Reeves has also recently sought to blame austerity and the previous Tory government for the grim state of the UK economy.
But senior Conservatives have hit back at the Chancellor’s ‘rather pathetic excuse for her poor steering of the economy’.
Rachel Reeves is currently visiting Saudi Arabia as she attempts to push through a trade deal with countries in the Gulf Co-operation Council
Speaking at the Future Investment Initiative summit in Saudi Arabia on Tuesday, Ms Reeves said Brexit was to blame for high inflation in the UK.
Official figures released last week showed inflation remained at 3.8 per cent – almost double the Bank of England’s target of 2 per cent.
The Chancellor said the Government had feared its Brexit ‘reset’ deal with the EU, announced in May, would be ‘reopening that can of worms’.
But she claimed the agreement between Prime Minister Sir Keir Starmer and European Commission President Ursula von der Leyen had attracted public support.
‘If you look at the UK today, when we did that deal back in May with the EU, to take down some of those barriers and indeed to introduce an ambitious youth mobility scheme, there was public support for that,’ she told the event in Riyadh.
‘The sort of worry perhaps we had as a Government that reopening that can of worms of our relationship with the EU might be quite dangerous, actually the response has been very good.
‘For businesses, especially small businesses who have faced increasing red tape since we left the EU, for workers who are now locked out of the jobs market in Europe, there are obviously huge benefits from rebuilding some of those relations.
‘But also inflation is too high in countries around the world, including the UK.
‘One of the reasons for that is that there’s too much cost associated with trade with our nearest neighbors and trading partners.’
Ms Reeves is currently visiting Saudi Arabia as she attempts to push through a trade deal with countries in the Gulf Co-operation Council.
Speaking on ITV’s Peston show last night, Tory former Cabinet minister Esther McVey poured scorn on Ms Reeves’ attempts to blame Brexit for the UK’s economic troubles.
‘The reality is Rachel Reeves is single-handedly destroying our economy,’ she said.
‘She, at her last Budget, came forward with the biggest ever tax-raising Budget on record of £70billion taxing business.
‘She said ‘I’ll fix the foundations, I won’t be coming back’. She didn’t mention Brexit then, even though it would have been around for nine years.
‘But now, because she’s destroyed the economy and she’s coming back for another £30billion, she’s got to find other people to blame.’
Ms McVey added: ‘It’s a rather a pathetic excuse for her poor steering of the economy.’
The Chancellor spoke on Tuesday amid reports that she is facing a larger-than-expected downgrade to official productivity forecasts at next month’s Budget.
The Office for Budget Responsibility (OBR) watchdog is reportedly poised to cut its trend productivity forecast by about 0.3 percentage points in upcoming projections.
It is estimated this will open a fresh hole in the public finances of more than £20billion as Ms Reeves attempts to put together her latest fiscal package.
This will increase the size of her task in balancing the books and will put Britons on alert for even bigger tax hikes on 26 November.
One Labour official told the Financial Times there was ‘fury’ in No10 and the Treasury that the OBR has decided to deliver its productivity downgrade now, rather than before last year’s general election.
The Institute for Fiscal Studies think tank has said a 0.1 percentage point downgrade to the productivity forecast would increase public sector net borrowing by £7billion in 2029–30.
This means a 0.3 percentage point cut could create a £21billion hit for Ms Reeves, at a time when she is already thought to be facing a multi-billion pound spending hole.
A Treasury spokesperson said: ‘We won’t comment on speculation ahead of the OBR’s forecast, which will be published on November 26.’
The Chancellor on Monday acknowledged the OBR was likely to downgrade its productivity forecasts due to the UK’s ‘very poor’ record.
Speaking at a separate event in Riyadh, Ms Reeves also said she was ‘of course’ looking at tax increases – as well as spending cuts – in her bid to balance the books.
She reiterated the need to meet Budget rules requiring her to bring down borrowing and debt – with enough room to spare in case of unexpected problems in the future.
Ms Reeves last week declined to rule out an income tax rise at the Budget.
Asked about reports that the Treasury is in active discussions over raising the rate, the Chancellor said on Friday she would ‘continue to support working people by keeping their taxes as low as possible’.
She added she was still ‘going through the process’ of writing her Budget.
Housing Secretary Steve Reed on Monday repeatedly refused to rule out a ‘mansion tax’ being imposed by the Chancellor.
It was this weekend revealed how Ms Reeves could hit those with homes worth more than £2million with a punitive levy in the Budget .
Under the proposals, reported by the Mail on Sunday, the owners of properties worth £2million and above would face a charge of 1 per cent of the amount by which the property exceeds that value.
That would mean the owners of a £3million property would face a bill of £10,000 every year.
But the plans have been widely condemned by property experts and a former Bank of England governor.
