Sir Keir Starmer is set to launch a scathing attack on Reform UK’s economic proposals, warning that Nigel Farage’s “fantasy” policies could trigger a financial meltdown similar to the one that followed Liz Truss’s disastrous mini-budget.
The Prime Minister will specifically target Reform UK’s flagship pledge to raise the personal income tax allowance to £20,000 per year, a policy that economic analysts estimate could cost the Treasury between £50 billion and £80 billion annually.
The intervention comes as Labour seeks to position itself as the party of fiscal responsibility, drawing stark comparisons between Reform UK’s spending promises and the market turmoil that forced Truss from office after just 49 days.
“We’ve seen what happens when politicians make fantasy promises without showing how they’ll pay for them,” Starmer is expected to say. Liz Truss crashed the economy with her unfunded tax cuts, sending mortgages soaring and pensions plummeting. Now Nigel Farage wants to do it all over again.
Reform UK’s proposal to more than double the current personal allowance of £12,570 to £20,000 would take millions of workers out of income tax entirely. The party claims this would help address the cost-of-living crisis and benefit working people struggling with high inflation and stagnant wages.
However, Treasury analysis suggests the policy would create a massive hole in public finances at a time when the government is already grappling with high debt levels and pressure on public services.
This isn’t serious politics, it’s auction politics,” a senior Labour source said. “Farage is making promises he knows he’ll never have to keep, but the damage to confidence in British economic policy-making is real.”
The Institute for Fiscal Studies (IFS) has previously warned that raising the personal allowance to £20,000 would be “extraordinarily expensive” and would benefit higher earners more than those on low incomes, as many of the lowest paid already pay little or no income tax.
Paul Johnson, director of the IFS, noted: “While superficially attractive, such a dramatic increase in the personal allowance would cost tens of billions of pounds. The money would have to come from somewhere – either higher taxes elsewhere, more borrowing, or deep cuts to public services.”
Reform UK has defended its proposals, arguing that taking low and middle earners out of tax would boost economic growth by increasing consumer spending. The party claims the policy could be funded through a combination of cutting “government waste,” reducing foreign aid, and tackling benefit fraud.
A Reform UK spokesperson said: “The establishment parties have failed working people for decades. Our policies would put money back in the pockets of hardworking Britons and stimulate real economic growth, unlike Labour’s high-tax, low-growth agenda.”
However, economists have expressed skepticism about Reform UK’s funding proposals, noting that claimed savings from efficiency drives rarely materialize to the extent promised and that the sums involved would require fundamental changes to government spending.
The comparison to the Truss administration’s mini-budget is particularly potent given the lasting political damage it inflicted on the Conservative Party. The September 2022 fiscal event, which included unfunded tax cuts worth £45 billion, triggered a collapse in sterling, forced the Bank of England to intervene to protect pension funds, and led to a spike in mortgage rates that many homeowners are still feeling.
Starmer’s attack is part of a broader Labour strategy to paint Reform UK as economically irresponsible while presenting his own government as trusted stewards of the economy. Despite facing criticism over recent tax rises, Labour has emphasized its commitment to fiscal rules and economic stability.
The British people have learned the hard way what happens when politicians play fast and loose with the public finances,” Starmer will argue. “They won’t be fooled again by snake oil salesmen promising something for nothing.”
The debate over tax and spending promises comes as both major parties face pressure from Reform UK, which has been gaining in opinion polls by appealing to voters frustrated with the traditional Westminster parties.
Political analysts note that while Reform UK’s policies may appeal to voters feeling the squeeze from high taxes and living costs, the party faces the challenge of explaining how it would implement such dramatic changes without destabilizing the economy.
Dr. Emma Thompson, a political economist at the London School of Economics, commented: “Reform UK is tapping into genuine frustration about tax levels, but the scale of their proposals raises serious questions about deliverability. The Truss experience shows that markets won’t tolerate policies they see as fiscally irresponsible.
The controversy also highlights the ongoing debate about the appropriate level of taxation in Britain, with the tax burden set to reach its highest level since the Second World War. While all parties acknowledge voters’ desire for lower taxes, the constraints of public finances and demands on public services make dramatic cuts challenging.
As the political battle over economic policy intensifies, the ghost of the Truss mini-budget continues to loom large, serving as a cautionary tale about the consequences of promising more than the economy can deliver.
For Starmer, the attack on Reform UK serves multiple purposes: it positions Labour as the responsible choice on the economy, attempts to neutralize Reform UK’s appeal to disaffected voters, and reminds the public of the Conservatives’ recent economic mismanagement.
Whether voters will be swayed by these warnings or continue to be attracted to Reform UK’s bold promises remains to be seen, but the debate underscores the central importance of economic credibility in British politics following the turbulence of recent years.
Image credit: Keir Starmer by Simon Dawson / No 10 Downing Street, licensed under the Open Government Licence v3.0.
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