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Sir Keir Starmer will on Saturday warn angry business leaders and farmers that he will not retreat on the measures contained in last monthâ€s controversial £40bn tax-raising Budget.
The prime minister will insist that the Budget took “hard decisions†to underpin Britainâ€s growth prospects, the day after new figures revealed the UK economy barely grew in the third quarter and contracted in September.
Speaking at the Welsh Labour conference, Starmer will insist that the Budget — which included a £25bn national insurance contributions (NICs) hike for employers and a new inheritance tax regime for farmers — made the right calls and would stabilise the economy and public services.
“Make no mistake, I will defend our decisions in the Budget all day long,†Starmer will say, ahead of a planned protest by farmers next week and warnings from business leaders that the NICs rise will cost jobs.
“People will say we should turn back, thatâ€s enough, take your foot off the accelerator, youâ€ve made some tough decisions, itâ€s time to go more softly,†Starmer will say. “To tell you the truth, theyâ€ve already started.
“But you know me by now. You know that we will stay the course. We will stick to our long-term plan — our national missions for change.â€
Starmer, who wants Britain to have the fastest growth rates in the G7 advanced economies, faces an uphill task with new GDP figures showing the economy grew by just 0.1 per cent in the third quarter.
The countryâ€s sluggish growth has reignited a debate about whether Britain should rebuild its trade relationship with the EU, with both Rachel Reeves, chancellor, and Andrew Bailey, Bank of England governor, calling for a reset.
Reeves, speaking at the Mansion House on Thursday: “We face structural challenges, including those which have come from Brexit.â€
Meanwhile Bailey told City of London grandees: “The impact on trade seems to be more in goods than services. But it underlines why we must be alert to and welcome opportunities to rebuild relations while respecting the decision of the British people.â€
Labour officials in Number 10 and the Treasury insist that people should “not read too much†into the fact that Britainâ€s two leading policymakers had both called for a renewed effort to rebuild relations with the EU.
But Anand Menon, director of the UK in a Changing Europe think-tank, said: “If thatâ€s the case, they are being absolutely inept. It will spark a row and encourage pro-Europeans to ramp up pressure on the leadership.
“There is a bubbling sense on the Labour backbenches that Keir is being too cautious.â€
Stella Creasy, a leading pro-European Labour MP, said: “Europe wants to work with us but we should not try their patience.â€
Reeves and Starmer do not want to be in a position where they have to “choose†between a more protectionist US under President Donald Trump and the EU.
Reeves told the BBC on Friday: “Letâ€s not jump the gun. No tariffs have been imposed [by Trump]. So [we] will negotiate and work closely with President-elect Trump, always standing up for the British interest.â€
But Reeves has always been keen for an ambitious EU deal, such as aligning with Brussels rules for established industries such as the chemicals sector.
Such a deal could be hard to negotiate, given Starmerâ€s refusal to take Britain back into the EU single market or customs union, and his hesitancy to offer Brussels the youth mobility scheme it is seeking.
One senior government official noted that ministers would be guided by the facts and that while the US was important for British trade, so too was Europe: “Four out of five of our closest trading partners are in the EU.â€
