Labor leader Sir Keir Starmer has said he accepts there is a gap of £55 billion in public finances, a figure provided by the Office for Budget Responsibility (OBR).
Whether there is a “black hole” that needs to be filled with tax hikes or spending cuts has been a matter of debate.
Sir Keir said he did not dispute the OBR’s calculations.
He said Labor will try to “repair the damage” if it wins the next election.
Speaking to the BBC, Sir Keir said: “We have to rise to this challenge and that is why we are not arguing with the number that the OBR has given as a target or with trying to reduce the debt.”
Some economists, mostly left of center, have suggested that different approaches to calculating government finances would result in a much smaller deficit or no deficit at all.
Economic forecasting is notoriously difficult, and small changes in forecasts for economic growth or interest rates can have a big impact on what public finances will look like two or three years from now.
In addition, if the goal of reducing debt-to-economic output is extended beyond the Chancellor’s five years, it could also narrow the gap between government revenue and spending.
These calculations are important because they heavily influence whether the government believes it has room to spend more on public services like health and education, or whether it needs to raise taxes.
The Labor leader made it clear that he and shadow Chancellor Rachel Reeves would use the £55bn budget gap as the basis for their policies in any future manifesto.
This is the first time Sir Keir has publicly accepted the loophole and it will now put pressure on any future Labor government to adhere to policies consistent with the OBR figure.
Sir Keir blamed the current Conservative government for the budget gap.
“They have done tremendous damage to our economy, not just in the last 12 weeks but in the last 12 years,” he said.
He said a Labor government would “take different decisions” than the Conservative Party on spending and taxation.
“The Labor Party under my leadership is the party of sound money,” he added.
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