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Labour has pledged to bolster the power of the UK’s economic watchdog to prevent a repeat of the “disastrous mistakes” of Liz Truss’s mini-budget.

Labour leader Sir Keir Starmer has vowed to introduce legislation that would allow the Office for Budget Responsibility (OBR) to independently publish their own impact assessment of any major and permanent tax and spending changes.

His shadow chancellor, Rachel Reeves, said it meant that “never again” can the “disastrous mistakes” of the former prime minister be repeated, ahead of the first anniversary of her “fiscal event”.

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The mini-budget last September spooked the markets and sparked a huge economic fallout, pushing up government borrowing costs and putting certain pension funds on the brink of collapse.

One of the reasons for the markets’ reaction was that Ms Truss and her chancellor, Kwasi Kwarteng, refused to publish the OBR’s independent forecasts for the public finances alongside the plans.

The party said under its plans, ministers would be forced to open their books to the forecasters – though any government wanting to disregard them could seek to reverse the legislation.

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It said families and businesses are “still paying the price” for her “crashing the economy” – with households coming off fixed rate mortgages paying an average of £220 more a month and inflation forecast to be the highest in the G7.

They have billed their proposal as a “fiscal lock” which would ensure fiscal stability by:

  • Amending the legal framework governing the OBR to guarantee that where a fiscal event makes permanent tax and spending changes over a certain threshold, the fiscal watchdog can independently publish a forecast of the impact
  • Setting out the threshold in a revised charter of budget responsibility, that would be voted on in Parliament
  • Ensuring that in the event of an emergency where changes must be introduced at speed and a forecast cannot be produced in time, the OBR would be allowed to set a date for when it can publish its forecast
  • Setting out a fixed timetable for budgets that would say major fiscal decisions are announced by the end of November each year, allowing businesses and families four months to prepare for the new tax year and avoiding major changes to policy at the last minute
  • Annual autumn budgets would be followed by a spring update in early March providing an updated forecast and minor policy changes

James Murray, Labour’s shadow financial secretary to the Treasury, told Sky News this morning it was “absolutely crucial to legislate because we all remember what happened a year ago”.

He accused the Tories of having “set the economy on fire” with the mini-budget that “sidelined the OBR”.

“Never again should a prime minister and a chancellor be able to play fast and loose with public finances and damage the economy and household budgets in the way they have,” he added.

Speaking ahead of a visit with the Labour leader to the London Stock Exchange on Friday, the shadow chancellor said: “The economic damage done by the Conservatives’ mini-budget was nothing short of disastrous and Britain is still paying the price, with higher mortgages, higher energy bills and higher prices in the shops.

“As chancellor, my mission will be to bring stability back to our economy because that is the only way we can bring growth back. Never again can a prime minister or chancellor be allowed to repeat the disastrous mistakes of last year’s mini-budget.

“Labour will introduce a new fiscal lock to strengthen the UK’s financial stability to prevent the turmoil we witnessed this time last year. Labour will ensure stability returns to our economy and on that rock of stability working people will be better off.”

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Truss ‘tried to fatten and slaughter the pig’

Labour has been seeking to pitch itself as fiscally prudent, prioritising stabilising the economy over big spending commitments in a move that has angered some unions and those on the left.

They have sought to weaponise the anniversary of the Truss mini-budget to hammer home their message of fiscal responsibility, while highlighting the government’s record on the economy.

Ms Truss’ £45bn package of unfunded tax cuts, which she admitted would primarily have benefited the wealthy, sent the pound tumbling, interest rates soaring and culminated with the Bank of England having to intervene to prevent pension markets from collapsing.

Although she rowed back on her measures and sacked her chancellor, Kwasi Kwarteng, it was not enough to save her administration from collapsing and she resigned after just 49 days in the job – making her the shortest serving prime minister in British history.

She is still facing criticism over her actions, with the former Bank of England governor Mark Carney this week accusing her of turning Britain into “Argentina on the Channel” instead of “Singapore on the Thames”.

But Ms Truss has remained unrepentant, blaming “institutional bureaucracy” for her downfall.

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Bank chiefs to Reeves: Ditch ring-fencing to boost UK economy

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Bank chiefs to Reeves: Ditch ring-fencing to boost UK economy

The bosses of four of Britain’s biggest banks are secretly urging the chancellor to ditch the most significant regulatory change imposed after the 2008 financial crisis, warning her its continued imposition is inhibiting UK economic growth.

Sky News has obtained an explosive letter sent this week by the chief executives of HSBC Holdings, Lloyds Banking Group, NatWest Group and Santander UK in which they argue that bank ring-fencing “is not only a drag on banks’ ability to support business and the economy, but is now redundant”.

The CEOs’ letter represents an unprecedented intervention by most of the UK’s major lenders to abolish a reform which cost them billions of pounds to implement and which was designed to make the banking system safer by separating groups’ high street retail operations from their riskier wholesale and investment banking activities.

Their request to Rachel Reeves, the chancellor, to abandon ring-fencing 15 years after it was conceived will be seen as a direct challenge to the government to take drastic action to support the economy during a period when it is forcing economic regulators to scrap red tape.

It will, however, ignite controversy among those who believe that ditching the UK’s most radical post-crisis reform risks exacerbating the consequences of any future banking industry meltdown.

In their letter to the chancellor, the quartet of bank chiefs told Ms Reeves that: “With global economic headwinds, it is crucial that, in support of its Industrial Strategy, the government’s Financial Services Growth and Competitiveness Strategy removes unnecessary constraints on the ability of UK banks to support businesses across the economy and sends the clearest possible signal to investors in the UK of your commitment to reform.

“While we welcomed the recent technical adjustments to the ring-fencing regime, we believe it is now imperative to go further.

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“Removing the ring-fencing regime is, we believe, among the most significant steps the government could take to ensure the prudential framework maximises the banking sector’s ability to support UK businesses and promote economic growth.”

Work on the letter is said to have been led by HSBC, whose new chief executive, Georges Elhedery, is among the signatories.

His counterparts at Lloyds, Charlie Nunn; NatWest’s Paul Thwaite; and Mike Regnier, who runs Santander UK, also signed it.

While Mr Thwaite in particular has been public in questioning the continued need for ring-fencing, the letter – sent on Tuesday – is the first time that such a collective argument has been put so forcefully.

The only notable absentee from the signatories is CS Venkatakrishnan, the Barclays chief executive, although he has publicly said in the past that ring-fencing is not a major financial headache for his bank.

Other industry executives have expressed scepticism about that stance given that ring-fencing’s origination was largely viewed as being an attempt to solve the conundrum posed by Barclays’ vast investment banking operations.

The introduction of ring-fencing forced UK-based lenders with a deposit base of at least £25bn to segregate their retail and investment banking arms, supposedly making them easier to manage in the event that one part of the business faced insolvency.

Banks spent billions of pounds designing and setting up their ring-fenced entities, with separate boards of directors appointed to each division.

More recently, the Treasury has moved to increase the deposit threshold from £25bn to £35bn, amid pressure from a number of faster-growing banks.

Sam Woods, the current chief executive of the main banking regulator, the Prudential Regulation Authority, was involved in formulating proposals published by the Sir John Vickers-led Independent Commission on Banking in 2011.

Legislation to establish ring-fencing was passed in the Financial Services Reform (Banking) Act 2013, and the regime came into effect in 2019.

In addition to ring-fencing, banks were forced to substantially increase the amount and quality of capital they held as a risk buffer, while they were also instructed to create so-called ‘living wills’ in the event that they ran into financial trouble.

The chancellor has repeatedly spoken of the need to regulate for growth rather than risk – a phrase the four banks hope will now persuade her to abandon ring-fencing.

Britain is the only major economy to have adopted such an approach to regulating its banking industry – a fact which the four bank chiefs say is now undermining UK competitiveness.

“Ring-fencing imposes significant and often overlooked costs on businesses, including SMEs, by exposing them to banking constraints not experienced by their international competitors, making it harder for them to scale and compete,” the letter said.

“Lending decisions and pricing are distorted as the considerable liquidity trapped inside the ring-fence can only be used for limited purposes.

“Corporate customers whose financial needs become more complex as they grow larger, more sophisticated, or engage in international trade, are adversely affected given the limits on services ring-fenced banks can provide.

“Removing ring-fencing would eliminate these cliff-edge effects and allow firms to obtain the full suite of products and services from a single bank, reducing administrative costs”.

In recent months, doubts have resurfaced about the commitment of Spanish banking giant Santander to its UK operations amid complaints about the costs of regulation and supervision.

The UK’s fifth-largest high street lender held tentative conversations about a sale to either Barclays or NatWest, although they did not progress to a formal stage.

HSBC, meanwhile, is particularly restless about the impact of ring-fencing on its business, given its sprawling international footprint.

“There has been a material decline in UK wholesale banking since ring-fencing was introduced, to the detriment of British businesses and the perception of the UK as an internationally orientated economy with a global financial centre,” the letter said.

“The regime causes capital inefficiencies and traps liquidity, preventing it from being deployed efficiently across Group entities.”

The four bosses called on Ms Reeves to use this summer’s Mansion House dinner – the City’s annual set-piece event – to deliver “a clear statement of intent…to abolish ring-fencing during this Parliament”.

Doing so, they argued, would “demonstrate the government’s determination to do what it takes to promote growth and send the strongest possible signal to investors of your commitment to the City and to strengthen the UK’s position as a leading international financial centre”.

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Post Office to unveil £1.75bn banking deal with big British lenders

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Post Office to unveil £1.75bn banking deal with big British lenders

The Post Office will next week unveil a £1.75bn deal with dozens of banks which will allow their customers to continue using Britain’s biggest retail network.

Sky News has learnt the next Post Office banking framework will be launched next Wednesday, with an agreement that will deliver an additional £500m to the government-owned company.

Banking industry sources said on Friday the deal would be worth roughly £350m annually to the Post Office – an uplift from the existing £250m-a-year deal, which expires at the end of the year.

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The sources added that in return for the additional payments, the Post Office would make a range of commitments to improving the service it provides to banks’ customers who use its branches.

Banks which participate in the arrangements include Barclays, HSBC, Lloyds Banking Group, NatWest Group and Santander UK.

Under the Banking Framework Agreement, the 30 banks and mutuals’ customers can access the Post Office’s 11,500 branches for a range of services, including depositing and withdrawing cash.

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The service is particularly valuable to those who still rely on physical cash after a decade in which well over 6,000 bank branches have been closed across Britain.

In 2023, more than £10bn worth of cash was withdrawn over the counter and £29bn in cash was deposited over the counter, the Post Office said last year.

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A new, longer-term deal with the banks comes at a critical time for the Post Office, which is trying to secure government funding to bolster the pay of thousands of sub-postmasters.

Reliant on an annual government subsidy, the reputation of the network’s previous management team was left in tatters by the Horizon IT scandal and the wrongful conviction of hundreds of sub-postmasters.

A Post Office spokesperson declined to comment ahead of next week’s announcement.

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Trump trade war: How UK figures show his tariff argument doesn’t add up

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Trump trade war: How UK figures show his tariff argument doesn't add up

As Chancellor Rachel Reeves meets her counterpart, US Treasury secretary Scott Bessent to discuss an “economic agreement” between the two countries, the latest trade figures confirm three realities that ought to shape negotiations.

The first is that the US remains a vital customer for UK businesses, the largest single-nation export market for British goods and the third-largest import partner, critical to the UK automotive industry, already landed with a 25% tariff, and pharmaceuticals, which might yet be.

In 2024 the US was the UK’s largest export market for cars, worth £9bn to companies including Jaguar Land Rover, Bentley and Aston Martin, and accounting for more than 27% of UK automotive exports.

Little wonder the domestic industry fears a heavy and immediate impact on sales and jobs should tariffs remain.

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Chancellor’s trade deal red lines explained

American car exports to the UK by contrast are worth just £1bn, which may explain why the chancellor may be willing to lower the current tariff of 10% to 2.5%.

For UK medicines and pharmaceutical producers meanwhile, the US was a more than £6bn market in 2024. Currently exempt from tariffs, while Mr Trump and his advisors think about how to treat an industry he has long-criticised for high prices, it remains vulnerable.

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The second point is that the US is even more important for the services industry. British exports of consultancy, PR, financial and other professional services to America were worth £131bn last year.

That’s more than double the total value of the goods traded in the same direction, but mercifully services are much harder to hammer with the blunt tool of tariffs, though not immune from regulation and other “non-tariff barriers”.

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How US ports are coping with tariffs

The third point is that, had Donald Trump stuck to his initial rationale for tariffs, UK exporters should not be facing a penny of extra cost for doing business with the US.

The president says he slapped blanket tariffs on every nation bar Russia to “rebalance” the US economy and reverse goods trade ‘deficits’ – in which the US imports more than it exports to a given country.

Read more: Could Trump tariffs tip the world into recession?

That heavily contested argument might apply to Mexico, Canada, China and many other manufacturing nations, but it does not meaningfully apply to Britain.

Figures from the Office for National Statistics show the US ran a small goods trade deficit with the UK in 2024 of £2.2bn, importing £59.3bn of goods against exports of £57.1bn.

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IMF downgrades UK growth forecast

Add in services trade, in which the UK exports more than double what it imports from the US, and the UK’s surplus – and thus the US ‘deficit’ – swells to nearly £78bn.

That might be a problem were it not for the US’ own accounts of the goods and services trade with Britain, which it says actually show a $15bn (£11.8bn) surplus with the UK.

You might think that they cannot both be right, but the ONS disagrees. The disparity is caused by the way the US Bureau of Economic Analysis accounts for services, as well as a range of statistical assumptions.

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“The presence of trade asymmetries does not indicate that either country is inaccurate in their estimation,” the ONS said.

That might be encouraging had Mr Trump not ignored his own arguments and landed the UK, like everyone else in the world, with a blanket 10% tariff on all goods.

Trade agreements are notoriously complex, protracted affairs, which helps explain why after nine years of trying the UK still has not got one with the US, and the Brexit deal it did with the EU against a self-imposed deadline has been proved highly disadvantageous.

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