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Rachel Reeves has defended her decision not to restore a cap on bankers’ bonuses, arguing businesses do not need “more chopping and changing”.

The shadow chancellor said that when the government scrapped the cap under Liz Truss, Labour did not “feel that was the right priority in that budget”.

But she said much stronger rules were now in place since the 2008 financial crash, when the cap was first introduced, and that it was no longer her priority to restore it.

“What I hear loud and clear from business is that what it will take to get them to invest in Britain is stability and the last thing they need is more chopping and changing,” she said.

“The chopping and changing has got to end if we’re going to give stability to business and that’s why we will not be bringing that back.”

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Shadow chancellor Rachel Reeves addressing 400 business leaders at the Kia Oval.
Pic: PA
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Shadow chancellor Rachel Reeves addressing 400 business leaders at the Kia Oval on 1 February 2024. Pic: PA

Addressing Labour’s business conference in central London this morning, Ms Reeves also announced she would not increase the headline rate of corporation tax of 25% during the first term of a Labour government but left the door open to changes in the rate in the future.

She said: “There have been 26 changes to our corporation tax arrangements in this parliament alone. We can’t go on like this.

“The next Labour government will make the pro-business choice and the pro-growth choice: We will cap the headline rate of corporation tax at its current rate of 25% for the next parliament.

“And should our competitiveness come under threat, if necessary we will act.”

Ms Reeves also said Labour would maintain full expensing and the annual investment allowance and would provide a “road map” for business taxation within the first six months of government.

Ms Reeves has sought to portray herself as pro-business during her time as shadow chancellor, in contrast to her predecessor John McDonnell, who led Labour’s economic policy when Jeremy Corbyn was the leader of the Opposition.

Will Labour stick to £28bn a year green pledge?

However, the shadow chancellor is facing scrutiny over Labour’s pledge to spend £28bn a year on green projects until 2030 if the party comes into power.

In a Q&A following her speech, Ms Reeves failed to commit to the policy, which some in Labour want Sir Keir Starmer to drop because it allows the Conservatives to cast doubt on the party’s commitment to fiscal discipline.

Asked by Sky News’s political editor Beth Rigby whether the pledge had become “an albatross around your neck” that “threatens to unravel all the hard work you’ve done to be trusted with economic competence”, Ms Reeves said there were “big opportunities to invest alongside business in the jobs and the industries of the future”.

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Will Labour spend £28bn?

But she said it was “absolutely essential that all of our policies are consistent with our fiscal rules” and that the green prosperity plan “was no exception to that”.

The shadow chancellor said that after the next budget, the party will “set out our plans and ensure they are consistent with our fiscal rules because they will always take precedence to guarantee the economic security of family finances and of businesses as well”.

Labour leader Sir Keir Starmer and shadow chancellor Rachel Reeves during a visit to the London Stock Exchange Group, to outline Labour's plans to bring growth and stability back to Britain's economy. Picture date: Friday September 22, 2023.
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Sir Keir Starmer and Rachel Reeves during a visit to the London Stock Exchange Group last year. Pic: PA

Tories attack Labour over bonus cap change

The cap on bankers’ bonuses was first introduced in the wake of the 2008 financial crisis to limit annual payouts to twice a banker’s salary, but it was scrapped by former chancellor Kwasi Kwarteng during Ms Truss’s short time as prime minister.

During Prime Minister’s Questions this week, Rishi Sunak seized on the issue to argue that voters “cannot trust a word he [Sir Keir Starmer] says”.

“I was genuinely surprised that, after recently and repeatedly attacking not just me but the government for lifting the bonus cap, the shadow chancellor has announced, just today, that she now supports the government’s policy on the bankers’ bonus cap.”

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Sunak: ‘It’s the same old Labour party’

Ms Reeves and other senior Labour figures had been vocal critics of the government’s decision to axe the cap during a cost of living crisis, saying only three months ago that the decision to allow unlimited bonuses to be earned again “tells you everything you need to know about this government”.

The issue has caused some division within Labour, with Anas Sarwar, the party’s leader in Scotland, previously criticising Ms Truss as a “Thatcher tribute act” who would rather “boost bankers’ bonuses than help those in need”.

He told reporters in Westminster today that he stood by his previous words but added: “You have got to look at it in the balance. We have got to inspire confidence for them to make the strategic investments, but we can’t return to a situation where they get away with it.

“I’m not here to defend bankers’ bonuses, I’m not here to defend banks. That is something the UK Treasury has got to keep an eye on.”

Stephen Flynn, the SNP’s leader in Westminster and Labour’s main opponent in Scotland, sarcastically praised Mr Sunak for convincing the Labour Party to agree to a “bleak future”, saying it was a “great achievement” for the government.

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At least 13 people may have taken their own lives linked to Post Office scandal, public inquiry finds

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At least 13 people may have taken their own lives linked to Post Office scandal, public inquiry finds

At least 13 people may have taken their own lives after being accused of wrongdoing based on evidence from the Horizon IT system that the Post Office and developers Fujitsu knew could be false, the public inquiry has found.

A further 59 people told the inquiry they considered ending their lives, 10 of whom tried on at least one occasion, while other postmasters and family members recount suffering from alcoholism and mental health disorders including anorexia and depression, family breakup, divorce, bankruptcy and personal abuse.

Follow latest on public inquiry into Post Office scandal

Writing in the first volume of the Post Office Horizon IT Inquiry report, chairman Sir Wyn Williams concludes that this enormous personal toll came despite senior employees at the Post Office knowing the Horizon IT system could produce accounts “which were illusory rather than real” even before it was rolled out to branches.

Sir Wyn said: “I am satisfied from the evidence that I have heard that a number of senior, and not so senior, employees of the Post Office knew or, at the very least, should have known that Legacy Horizon was capable of error… Yet, for all practical purposes, throughout the lifetime of Legacy Horizon, the Post Office maintained the fiction that its data was always accurate.”

Referring to the updated version of Horizon, known as Horizon Online, which also had “bugs errors and defects” that could create illusory accounts, he said: “I am satisfied that a number of employees of Fujitsu and the Post Office knew that this was so.”

The first volume of the report focuses on what Sir Wyn calls the “disastrous” impact of false accusations made against at least 1,000 postmasters, and the various redress schemes the Post Office and government has established since miscarriages of justice were identified and proven.

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‘It stole a lot from me’

Recommendations regarding the conduct of senior management of the Post Office, Fujitsu and ministers will come in a subsequent report, but Sir Wyn is clear that unjust and flawed prosecutions were knowingly pursued.

“All of these people are properly to be regarded as victims of wholly unacceptable behaviour perpetrated by a number of individuals employed by and/or associated with the Post Office and Fujitsu from time to time and by the Post Office and Fujitsu as institutions,” he says.

What are the inquiry’s recommendations?

Calling for urgent action from government and the Post Office to ensure “full and fair compensation”, he makes 19 recommendations including:

• Government and the Post Office to agree a definition of “full and fair” compensation to be used when agreeing payouts
• Ending “unnecessarily adversarial attitude” to initial offers that have depressed the value of payouts, ⁠and ensuring consistency across all four compensation schemes
• The creation of a standing body to administer financial redress to people wronged by public bodies
• Compensation to be extended to close family members of those affected who have suffered “serious negative consequences”
• The Post Office, Fujitsu and government agreeing a programme for “restorative justice”, a process that brings together those that have suffered harm with those that have caused it

Regarding the human impact of the Post Office’s pursuit of postmasters, including its use of unique powers of prosecution, Sir Wyn writes: “I do not think it is easy to exaggerate the trauma which persons are likely to suffer when they are the subject of criminal investigation, prosecution, conviction and sentence.”

He says that even the process of being interviewed under caution by Post Office investigators “will have been troubling at best and harrowing at worst”.

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‘Hostile and abusive behaviour’

The report finds that those wrongfully convicted were “subject to hostile and abusive behaviour” in their local communities, felt shame and embarrassment, with some feeling forced to move.

Detailing the impact on close family members of those prosecuted, Sir Wyn writes: “Wives, husbands, children and parents endured very significant suffering in the form of distress, worry and disruption to home life, in employment and education.

“In a number of cases, relationships with spouses broke down and ended in divorce or separation.

“In the most egregious cases, family members themselves suffered psychiatric illnesses or psychological problems and very significant financial losses… their suffering has been acute.”

The report includes 17 case studies of those affected by the scandal including some who have never spoken publicly before. They include Millie Castleton, daughter of Lee Castleton, one of the first postmasters prosecuted.

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Three things you need to know about Post Office report

She told the inquiry how her family being “branded thieves and liars” affected her mental health, and contributed to a diagnosis of anorexia that forced her to drop out of university.

Her account concludes: “Even now as I go into my career, I still find it so incredibly hard to trust anyone, even subconsciously. I sabotage myself by not asking for help with anything.

“I’m trying hard to break this cycle but I’m 26 and am very conscious that I may never be able to fully commit to natural trust. But my family is still fighting. I’m still fighting, as are many hundreds involved in the Post Office trial.”

Business Secretary Jonathan Reynolds said the inquiry’s report “marks an important milestone for sub-postmasters and their families”.

He added that he was “committed to ensuring wronged sub-postmasters are given full, fair, and prompt redress”.

“The recommendations contained in Sir Wyn’s report require careful reflection, including on further action to complete the redress schemes,” Mr Reynolds said.

“Government will promptly respond to the recommendations in full in parliament.”

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Public finances in ‘relatively vulnerable position.’, OBR warns

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Public finances in 'relatively vulnerable position.', OBR warns

The UK’s public finances are in a “relatively vulnerable position”, the government’s official forecaster has warned.

The Office for Budget Responsibility (OBR) cited a drag from successive economic shocks, recent U-turns on spending cuts and higher-than-expected policy commitments.

It sounded alarm over the projected path for debt as a result, in its annual fiscal risks and sustainability report.

It saw total debt above 270% of gross domestic product (GDP) by the early 2070s – up from a current level of 96.5% – declaring that rising debts have led to “a substantial erosion of the UK’s capacity to respond to future shocks”.

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The OBR’s report highlighted damage from the COVID pandemic and cost of living crisis that followed Russia’s invasion of Ukraine.

But it raised fears that past and current government policies were further harming the sustainability of the public finances.

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The report said that the pension triple lock, for example, was now estimated to cost £15.5bn annually by 2029-30.

That was “around three times higher than initial expectations”, it said.

The lock, which rises each year in line with inflation, wage growth or 2.5% – whichever is higher – had risen by more than the 2.5% base in eight of the 13 years of operation to date, the report stated.

The watchdog said it reflected more volatile inflation than expected.

It also picked up on the latest government U-turns over planned welfare and winter fuel payment cuts in the face of rebellions by Labour MPs.

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Welfare U-turn ‘has come at cost’

The decisions are expected to leave Chancellor Rachel Reeves facing a black hole of £6.75bn while weaker-than-expected economic growth could add a further £9bn to that sum in the run-up to the autumn budget, according to Sky News projections that see a void of around £20bn.

The OBR highlighted future risks from rising defence spending and the impact of climate change.

Public sector pay demands could also prove a drag, with resident doctors voting in favour of strikes over pay.

While ministers acknowledge damage to the public purse from the U-turns, Ms Reeves has repeatedly ruled out a new wave of borrowing to fund a spending spree.

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Could the rich be taxed to fill black hole?

As such, the government has not ruled out the prospect of some form of wealth tax to help meet its commitments despite the top 1% of earners contributing almost a third of all income tax already – on top of other targeted taxes such as capital gains.

The report said: “Efforts to put the UK’s public finances on a more sustainable footing have met with only limited and temporary success in recent years in the aftermath of the shocks, debt has also continued to rise and borrowing remained elevated because governments have reversed plans to consolidate the public finances.

“Planned tax rises have been reversed, and, more significantly, planned spending reductions have been abandoned.”

Shadow chancellor Mel Stride said of the report: “The OBR’s report lays bare the damage: Britain now has the third-highest deficit and the fourth-highest debt burden in Europe, with borrowing costs among the highest in the developed world.

“Under Rachel Reeves’ economic mismanagement and Keir Starmer’s weak leadership, our public finances have become dangerously exposed – vulnerable to future shocks, welfare spending rising unsustainably, taxes rising to record highs and crippling levels of debt interest.

“Labour’s recklessness risks it all – your pension, your job, your home, your savings.”

A Number 10 spokesman said: “We recognise the realities set out in the OBR’s report and we’re taking the decisions needed to provide stability to the public finances.”

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UK to miss deadline to agree steel and aluminium tariffs

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UK to miss deadline to agree steel and aluminium tariffs

The UK will miss the White House-imposed deadline to agree a trade deal on steel and aluminium this week, according to insiders from government and industry.

Donald Trump had insisted that unless Britain could finalise the details of its metals trade deal with the US by 9 July, he would raise the tariffs faced by steel and aluminium imports from the 25% the UK currently pays to the 50% paid by other countries. If it could seal the deal, those tariffs could drop to zero.

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However, despite weeks of negotiations and promises that the deal would be completed by the end of June, talks have foundered on two key issues. First, the US is insisting that only steel “melted and poured” in the UK (in other words, forged in blast furnaces or electric arc furnaces) can be included in the deal. However, one of Britain’s biggest steel exporters to the US, Tata Steel, is not melting and pouring its UK steel because of the closure of its blast furnaces.

Second, the US is wary of the fact that while the government has taken control of British Steel, which operates Britain’s last remaining blast furnaces in Scunthorpe, the company itself still legally has Chinese owners.

Government insiders have told businesses they still expect to have a deal done by the end of this month, and that they are confident the White House will not impose the 50% tariffs for the time being. They say one of the chief challenges they face is that the administration is so overwhelmed by attempts to negotiate with other countries that they lack the bandwidth to deal with the small print on Britain’s deal.

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Inside the UK’s last blast furnaces

“As far as the Americans are concerned, the UK is already a done deal,” said one person close to the negotiations. The problem is that while a deal has been done on car and aerospace exports to the US, the metals element of the trade agreement is still some way from being signed. In the meantime, steel exports continue to incur tariffs – albeit lower than those imposed on other countries around the world.

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