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Starmer asked to set out a plan to tackle the ‘dark cloud’ on public finances
The Institute for Fiscal Studies says the Labor leader must be transparent with the public – Ewan Bootman/Anadolu via Getty Images
Sir Keir Starmer must prioritize setting out the Labor Party’s spending plans as “dark clouds” hang over Britain’s public finances, the Institute for Fiscal Studies (IFS) has warned.
The think tank said that with limited borrowing space and already high taxes, the public must be informed of the Labor Party’s spending plans as the July general election approaches.
“There are cuts on the way and the main parties make absolutely no sense about where they might fall,” the IFS said.
Labor has been cautious in setting out its precise spending plans, but the IFS said Sir Keir and Rachel Reeves, the shadow chancellor, must be transparent with the public.
He added: “For a party to take power and then declare that things are ‘worse than expected’ would be fundamentally dishonest.
“The next government does not need to take office to ‘open the books’; these books are published transparently and are available for everyone to inspect.”
Rishi Sunak called early elections on Wednesday after inflation fell close to the Bank of England’s 2% target and economists said Britain’s growth was becoming “gangbusters”.
However, official data published on Friday, which recorded a sharp drop in retail sales in April, threatens to undermine the strength of the recovery.
Sales volumes fell 2.3% between March and April, according to the Office for National Statistics, amid unusually wet weather for the month.
Compared to April of the previous year, sales fell 2.7%.
This represents the sharpest drop since December, when the economy was still in recession.
Clothing retailers have suffered a drop in sales of more than 10% compared to April 2023, with sales of household goods falling by more than 6% and even grocery stores feeling the pinch with a drop of 2.8%. % in supermarkets and food stores.
Peter Arnold, chief economist at EY in the UK, said retail data, combined with weak business surveys, indicate the economy is slowing from the strong growth spurt at the start of the year.
“It’s clear that the retail sector is still struggling to generate much momentum,” he said, predicting a slowdown in GDP growth from the impressive 0.6% expansion in the first quarter of 2024.
It suggests that households are not yet making the most of falling inflation, rising incomes and the boost from national insurance cuts, opting instead to save their money or spend it elsewhere.
Mortgage holders may also be struggling with higher payments as the Bank of England has kept interest rates at a 16-year high of 5.25%.
Online retail spending in April also fell, decreasing 1.2% compared to March.
Overall, retail sales are still 3.8% below their pre-Covid level.
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Weaker growth threatens to worsen the Government’s financial position, as does any delay in interest rate cuts by the Bank of England, which are now expected in November rather than July as previously forecast.
In its report, the IFS said that weak growth and sustained high borrowing costs are “the worst of both worlds”.
He added: “For a Chancellor aiming to reduce debt as a fraction of national income, things have probably never been so bad.”
The IFS said the Government also faces rising compensation costs, particularly for victims of the infected blood scandal.
“The fiscal outlook may even have deteriorated since the spring, as central banks have indicated they intend to keep interest rates higher for longer, and the scale of the bill for various compensation schemes has become apparent,” analysts said.
The Government tried to highlight the differences between its financial plans and those of the Labor Party.
Jeremy Hunt, the chancellor, said last week that tax rises would occur if a Labor government was elected “as surely as night follows day”, while he said the Conservatives would aim to reduce the tax burden over time .