Budget leaves Labour seeking savings to fund pledges

Labour now intends to pay for its NHS and school breakfast plans through future savings to public spending if it wins power, Rachel Reeves has said.

The party had planned to fund the flagship policies by replacing the UK's current "non-dom" tax regime.

But Chancellor Jeremy Hunt announced the same move at Wednesday's Budget, to fund a cut to National Insurance.

His Labour counterpart Ms Reeves has admitted it will force her to tweak her own plans.

Speaking to the BBC, she said Labour would now "go through every pound" in the government's spending plans to fund the policies.

"But we will find that money, because it is a national priority, and its is a Labour priority," she added.

Labour had planned to raise an extra £2bn compared to the government by replacing "non-dom" rules for UK residents based overseas for tax purposes.

It had earmarked £365m from this to fund free school breakfast clubs for all primary school pupils in England, if it wins the next general election.

It had also set aside £1.5bn to pay for extra appointments in NHS hospitals, £171m for new CT scanners, and £111m for extra dentist appointments.

However, the chancellor has now stolen the policy to partially fund a further 2p in the pound cut to National Insurance, a payroll tax, which Labour has said it supports.

Speaking to BBC Radio 4's Today programme, Ms Reeves signalled Labour now plans to fund their plans through savings to future government spending, rather than an alternative tax rise.

"We will go through every pound spent, every tax raised, and make that sure we can continue to fund those commitments," she said.

"We will identify the savings we can make to fund this," she said, underlining the party's election manifesto would be "fully costed and fully funded".

But she did not offer further details, adding the party would first need to go through the government's plans in an "orderly way" before it would be in a position to do so.

Like the government, Labour has a self-imposed rule that public debt should always be falling as a share of predicted national income in five years' time.

The party sees the rule as key to burnishing its economic credibility with voters - but it will limit its room for manoeuvre if it wins office, amid the backdrop of sluggish growth forecasts.

Mr Hunt is planning to increase overall day-to-day government spending by 1% above inflation every year until 2029, but unprotected departments could see real-terms spending cuts.

Paul Johnson, from the Institute for Fiscal Studies think tank, said Labour had made "life more difficult for itself" by accepting the cut to National Insurance, which costs the Treasury £10bn a year.

"The opposition has been just as shy as the chancellor about telling us what they actually intend to do on taxes and spending after the election," he said.

"If I am sceptical about Mr Hunt's ability to stick to his current spending plans, I am at least that sceptical that Rachel Reeves will preside over deep cuts in public service spending," he added.

As well as copying Labour's proposals on non-doms, the chancellor also emulated its plans to extend the windfall tax on the profits of energy and gas firms until 2029.

Labour, however, insists its proposals would still raise more than the government in this area, as it would also raise the tax as well as closing tax allowances for investment, which it calls "loopholes".