Jeremy Hunt shot Labour’s fox. Does Rachel Reeves have a plan B?

By abolishing non-dom status in his Budget, the chancellor has stolen the key source of revenue that Labour needed to pay for its manifesto promises, writes John Rentoul

Keir Starmer and his shadow chancellor, Rachel Reeves, will have to find new revenue streams to fund their election pledges (Aaron Chown/PA Wire)

Keir Starmer had an easy time with one of the most difficult gigs in modern politics. By convention, the leader of the opposition, rather than the shadow chancellor, responds to Budget speeches.

This means having to react to important announcements within minutes of their being made – and often means committing the opposition to support or oppose particular measures.

It was easier for Starmer this year for several reasons. One was that the Scottish National Party, fighting its guerrilla war against the Commons speaker who denied it a vote on its Gaza motion last month, forced a division immediately after the chancellor had spoken. That gave Starmer a valuable 15 minutes to prepare.

Another was that there was hardly anything in the Budget speech that had not been trailed or leaked in advance. Starmer had already decided, therefore, that he would announce that Labour supported the cuts to national insurance contributions, and the continued freeze in fuel duty.

A third reason was that the government is in such a difficult position. It is amazing what the confidence of a 20-point lead in the opinion polls can do for someone such as Starmer, who is not a natural Commons performer. Even though he stuck closely to his prepared text, the Labour leader was able to read it out with some brio.

Labour’s team had also done some good quickfire research, so that Starmer could point out that Jeremy Hunt had promised a “paperless NHS” 11 years ago, when he was health secretary. It made Hunt’s boast today of the NHS as “the largest digitally integrated health service in the world” ring hollow.

Even so, Starmer faced one big problem. Hunt confirmed in his speech that he was shooting Labour’s fox. He stole Labour’s policy of abolishing non-dom tax status, a source of revenue on which Rachel Reeves, the shadow chancellor, is relying to make Labour’s manifesto promises add up.

This theft had been advertised in advance, so Starmer was ready for it, too. Indeed, he had some fun with it. He welcomed Hunt “finally” accepting Labour’s argument which, he said, only left the question: “Why did they not do it earlier?”

Why, he asked, did the Tories “not stand up to their friends, funders and family” – this last a pointed reference to the prime minister’s wife’s non-dom status. This ungracious personal attack – Akshata Murty has given up some of the tax benefits of her status – was later deflected when it emerged that the prime minister had recused himself from the decision to abolish non-dom status.

Some pre-Budget leaks suggested that Hunt was going to shoot a second Labour fox, by increasing the windfall tax on oil and gas companies. Hunt did indeed announce that the windfall tax would be extended for another year, from 2028. But given how unlikely it is that the Tories will be in government at the time, it seems odd that Scottish Tories and the oil and gas companies are so upset about it. Labour’s policy of raising the rate of the tax from 75 per cent to 78 per cent would seem to be a more imminent threat.

But Starmer didn’t even mention the windfall tax. Labour seems worried that its green policies are an electoral liability, and doesn’t want to draw attention to them. But it will have to decide what to put in the manifesto.

And the immediate problem is that by copying the non-dom policy, the government has stolen £2.2bn a year that is no longer available to pay for Labour’s promises on the NHS.

Starmer said nothing about how Labour would plug this hole in its plans. He did not even pretend, as Wes Streeting, the shadow health secretary, did yesterday, that Reeves already had alternative plans to raise the money. “Everyone in Westminster knows Rachel Reeves is a chess player,” he told Andrew Marr on LBC. “She is already several moves ahead of the chancellor. It will cause us no grief whatsoever.”

This is brave talk because my sources suggest that Labour is having some difficulty in finding new tax “loopholes” that it can exploit to pay for Streeting’s promises of more doctors, nurses, GP appointments and CT scanners.

That may not be a problem for Labour today. For the moment, Starmer is content to condemn the “Tory chaos that dragged us into recession and loaded the tax burden onto the backs of working people”, and rely on cliches about the government having “maxed out the nation’s credit card”.

But it will not be long before he and Reeves will have to spell out how they will manage the public finances better. Perhaps he is relying on the voters simply deciding that it is “time for change”. Even so, Labour’s numbers will have to come closer to adding up than they now do.