UK’s Starmer warns of “painful” October budget to tackle public finances

LONDON — U.K. Prime Minister Keir Starmer on Tuesday told the nation that the upcoming October budget would be “painful,” as he paves the way for spending cuts to address what the government says is a £22 billion ($29 billion) financing shortfall.

“We have no other choice given the situation that we’re in,” Starmer said in a speech in the gardens of 10 Downing Street, the prime minister’s residence.

“Those with the broadest shoulders should bear the heavier burden, that’s why we’re cracking down on non-doms,” he added, referring to U.K. residents whose domicile is outside of the country for tax purposes.

“Those who made the mess should have to do their bit to clean it up, that’s why we’re strengthening the powers of the water regulator and backing tough fines on the water companies who have let sewage flood our rivers, lakes and seas,” Starmer said. “But just as when I responded to the riots, I’ll have to turn to the country and make big asks of you as well, to accept short-term pain for long-term good, the difficult trade-off for the genuine solution.”

Starmer’s Labour party took power in early July following a landslide election victory. The U.K. parliament is on a summer break between July 30 and Sept. 2, although the new government has been navigating challenges including a series of riots around the nation involving far-right groups and a capacity crisis in the prison system.

The Labour administration has meanwhile benefitted from the ongoing fall in inflation, which is hovering around 2%, from the start of interest rate cuts by the politically-independent Bank of England and from the economic return to growth for the past two successive quarters.

In its electoral manifesto, Labour said it would raise £7.35 billion ($9.71 billion) by 2028-29 to fund public services through measures including closing tax loopholes on nondomiciled individuals, removing tax breaks for independent schools, closing what has been described as a “tax loophole” for private equity investors, and introducing a “time-limited windfall tax” on oil and gas firms.

Starmer and Finance Minister Rachel Reeves have repeatedly stated they will prioritize economic growth and fiscal responsibility in their policymaking.

In his Tuesday speech, Starmer said the U.K.’s public finances were “worse than we ever imagined” and accused the previous government of masking a £22 billion “black hole.”

Labour announced the shortfall figure at the end of July and blamed it on overspending and poor budgeting by the previous Conservative government.

Former Finance Minister Jeremy Hunt in July wrote to Simon Case, the head of the British civil service, labeling Labour’s claims about the public finances “deeply troubling.”

Hunt said the alleged £22 billion gap differed from the “main estimates” for spending…