You remember that “dire economic inheritance” the new government keeps talking about?
Earlier in the summer Rachel Reeves produced a document suggesting the state of Britain’s economy and public finances was so dismal – so much worse than expected – that she would be forced into introducing significant measures (which read: lots more tax rises) in this autumn’s budget.
The only thing is, much of the economic news since then has been, well, not dire in the slightest. Inflation is still low – so much so that earlier this month the Bank of England cut interest rates.
More compellingly, the latest estimates of gross domestic product (GDP) – the broadest measure of economic activity – show that far from being in recession, the UK is growing at a decent whack.
Indeed, having been the second-slowest growing economy in the group of seven leading industrialised nations in 2023, Britain is, at least over the first six months of 2024, the fastest growing member of the G7.
Image: Reeves is expected to announce a budget including more taxes and more spending cuts
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2:49
Do Labour’s claims stack up?
So a lot of people have been scratching their chins and wondering whether the new government might be overstating it a bit.
Might they just be making a political point, aimed at their predecessors in government?
Well, this morning we had the latest public finances numbers and here the picture is considerably closer to the Reeves version than those other bits of data.
The key thing here is to look beneath the overall borrowing figures. There you see a couple of key bits of information.
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First, despite the fact that the economy is growing faster than expected, it’s not resulting in a big windfall of tax revenues (as often happens).
Instead, according to the Office for National Statistics figures, revenues are basically in line with where the Office for Budget Responsibility (OBR) expected them to be around now.
The OBR forecast back in March that by now (or rather, by July – the figures we got today) the government would have collected around £327bn in tax revenues. Instead it has collected only £326bn – a little bit less. So no big windfall.
But now look at the amount it’s spending, and the story is slightly more stark. The OBR thought the government would have spent around £396bn by this point in the year.
Instead, it’s already spent £405bn.
So it’s making less than expected and spending more than expected. And that overspend might not sound much, at £9bn.
But consider that £9bn happens to be precisely the amount of “headroom” the government has before it breaks its fiscal rules and you see the issue.
And this, bear in mind, is only the data for the first four months of the fiscal year. If these trends continue, the gap could get bigger still.
So on the face of it, today’s public finance numbers provide a clear rationale for the course of action the chancellor has (according to those I talk to in Whitehall) already decided upon: more taxes and more spending cuts in this October’s budget.
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However, it’s worth saying there is one other way for the chancellor to create extra headroom against her fiscal rules, which is to change the particular measure she’s judging that headroom against.
A lot of economists believe the net debt statistic she inherited from the Conservatives is the wrong one to use in her fiscal rules – and that she should use the country’s total national debt, not excluding any debt owned by the Bank of England.
Long story short, if she uses this other measure (and I’m told this is something she is considering) then she suddenly has a lot more headroom.
Even so, don’t expect her to change the tune at the budget in October. There will be more bad news to come.
The mistaken release of an asylum seeker who was jailed for sexual offences has prompted widespread condemnation – and an extensive police operation.
Hadush Gerberslasie Kebatu, 38, had assaulted a 14-year-old girl and a woman in Epping, about a week after he had crossed the Channel and arrived in the UK by boat.
Last night, the teenager’s father was visibly upset as he turned up at HMP Chelmsford – asking for answers on how Kebatu was freed just one month into a 12-month sentence.
He did not want to speak on camera – but told Sky correspondent Mollie Malone that he was “frustrated” at the thought of the Ethiopian national being back on the streets.
“The justice system has let us down,” he said.
Footage has emerged that appears to show Kebatu in Chelmsford town centre following his release – dressed in prison clothes and clutching his belongings in a see-through bag.
He then headed to the railway station and boarded a train bound for London’s Liverpool Street, which departed at 12.41pm yesterday.
The Liberal Democrat MP for Chelmsford, Marie Goldman, told Sky presenter Barbara Serra she was “appalled, frustrated and angry about how this could possibly happen in the first place”.
She said it is clear something went “fundamentally wrong” at HMP Chelmsford – and her constituents are “fed up” with systems not working and underinvestment.
“It just destroys trust at a time when emotions are riding high. We’ve seen protests over the past few weeks and months, and there’s a lot of fear out there,” Ms Goldman added.
“It is so easy to lose trust and really hard to gain it – we need the government to get a grip on this.”
Image: Protests were held at The Bell Hotel for several weeks
Shadow home secretary Chris Philp described Kebatu as a “dangerous illegal immigrant” – and said his premature release shows “staggering incompetence”.
He told Sky News: “We also need an urgent apology from Home Secretary Shabana Mahmood and Justice Secretary David Lammy who have presided over this fiasco.”
Mr Lammy, who also serves as deputy prime minister, has said he is “appalled” and “livid on behalf of the public that Kebatu is at large”.
He confirmed a full investigation is being launched, adding: “He should be deported back to Ethiopia after the sexual assaults that he’s committed.”
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0:58
Manhunt continues for Kebatu
Extensive policing operation under way
Multiple forces are now involved in the manhunt for Kebatu – including Essex Police, the British Transport Police and the Metropolitan Police in London.
Policing commentator Graham Wettone told Sky presenter Gillian Joseph that detectives will be carefully piecing together his movements after walking free from HMP Chelmsford.
“All these forces will now be looking at the CCTV from the train itself – trying to locate him on the train and trying to identify at which stop he went off at, and where he went from that station,” he explained.
Mr Wettone said information from Essex Police’s initial investigation – including the contacts, friends and associates he had at the Bell Hotel – will also be a factor.
Questions will also be asked of the prison authorities: “Has he had any visits or phone calls? Has he got any friends or family in the country?”
He added that additional officers will have been allocated to the manhunt: “The Met will have some significant resources looking for him – maybe the Territorial Support Group or additional borough-based officers in and around Liverpool Street first of all.”
The British Transport Police could also be involved in further inquiries if Kebatu ended up travelling on the Underground.
“It really depends on where that thread goes – if they can locate where he got off, and then where he went to,” Mr Wettone said.
“This work is very, very fast-paced – there are detectives and intelligence officers working in the background, chasing up on leads and updating the teams on the ground.”
Experts are warning that without “fast changes” the UK could run out of drinking water in the future.
The first seven months of 2025 were the driest since 1976, with reservoirs across England only 56.1% full on average, according to the Environment Agency.
“I think that we do need to worry about the fact that there is this possibility we could run out,” Hannah Cloke, professor of hydrology from Reading University, told Sky News.
“It’s only if we start thinking like that, that we’re going to start conserving our water, otherwise we just take it completely for granted.
“It is all of our fault, we have not been paying attention to what’s going on… we need some very fast changes to the way that we are using water and the way that we’re storing water in order to stop this being a problem in the future, because our summers are only going to get hotter.”
By 2050, the government says that England could face a shortfall of five billion litres of water every day.
‘Growing pressure’ on water system
A Department for Environment, Food and Rural Affairs spokesperson said: “This government recognises the growing pressure on our water system and is taking decisive action.
“We’re delivering over £104bn of private investment to fix leaking pipes, build nine new reservoirs and secure our water supply for the future.”
Latest figures suggest that around 2,690 megalitres of water is lost every day in England through leaks – the equivalent of 1,076 Olympic-sized swimming pools.
Image: There is far less water in Rutland Reservoir this year
‘We have invested an extra £10m’
“Leaks are a really important issue for us. We have invested an extra £10m just to deal with the weather that we’ve seen this summer,” said Dr Geoff Darch, head of strategic asset planning for Anglian Water.
Anglian Water is also hoping to build two new reservoirs in the East of England.
“We don’t want to stop people using water, it is absolutely essential for everything that we need it to do,” Dr Darch said.
“But I think we’ve got to a point now where we have to realise that water is a precious resource, it’s something that we all have to look after so that we have it for future generations and for the environment and with climate change and drought, we will need more reservoirs.”
Image: The government claims it is fast-tracking new reservoirs to address the problem
Concerns about ‘whole system starting to collapse’
In August, the UK received just 62% of its average rainfall, according to the Met Office, which is leading a group of residents to monitor their water stocks closely.
“We collect all our own water from the rain, and so if we don’t have the rain that’s a significant issue,” explained Simon Tilly, director of the Hockerton eco housing project in Nottinghamshire.
He told Sky News they were working together to use less water.
“I suppose I’m most concerned about the whole system starting to collapse. There’s potential for longer droughts and us having a lot of water stress, there’s potential for a lot of floods when the drought finishes… and just generally that system going into random patterns where we’re getting more droughts and more floods,” he added.
A woman in a “life-threatening” condition is “under police watch” in hospital after a nine-year-old girl was found dead in an Oxfordshire village.
Police were called to a property in Middle Street in Islip at 11.15am on Tuesday following reports that three children had been assaulted.
The nine-year-old girl was pronounced dead at the scene. Her family is being supported by specially trained officers.
A girl, a boy and the 49-year-old woman were found injured, with police taking them to hospital for treatment.
The two children have since been discharged.
Detective Inspector Amy Fox said: “First and foremost, our deepest sympathies are with the child’s family, friends and all who knew and loved her. This is an unimaginable tragedy and we are doing everything we can to support those affected.
“A 49-year-old woman from Oxfordshire was taken to hospital in a life-threatening condition and is currently under police bed watch.
“We are not currently seeking anyone else in connection with this incident.”