Budget 2024: What are Labour’s fiscal rules and could Rachel Reeves change them to raise more money?

Published

3 weeks ago

October 13, 2024

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Chancellor Rachel Reeves will deliver her first budget at the end of October, providing the first chance for her to change the fiscal rules.

Upon entering government in July, the government said the Conservatives left it with a £22bn black hole, so the chancellor is expected to use the 30 October budget to raise some of that.

Ms Reeves said in November, when asked if she would consider changing the debt target, she was “not going to fiddle the figures or make something to get different results”.

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However, she is being urged to alter the rules to let the government access £57bn, according to the Institute for Public Policy Research (IPPR) thinktank.

And during Prime Minister’s Questions on 9 October, Sir Keir Starmer refused to answer if he agreed with the chancellor’s November statement, prompting some to speculate the government may change the fiscal rules.

Sky News looks at what a fiscal rule is, what the Labour government’s rules are and how they could change.

What are fiscal rules?

A fiscal rule is a limit or restriction governments put in place to constrain how much they can borrow to fund public spending.

They can be set by an independent body but since 1997 UK governments have set their own constraints.

Rules apply to the fiscal deficit – the gap between public expenditure and tax revenues in a year – the public debt – the total amount borrowed to finance past deficits – or public spending relative to GDP.

In 2010, the Office for Budget Responsibility (OBR) was set up to remove the Treasury’s ultimate control over the forecasts that underpin fiscal policy.

The Economics Observatory said the OBR’s creation means fiscal rules should be seen as an “expression of a government’s objectives, not something that dictates those objectives”.

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What are the current fiscal rules?

The Labour Party’s manifesto laid out the new government’s fiscal rules, describing them as “non-negotiable”. They are:

1) The current budget must move into balance so day-to-day costs are met by revenues

2) Debt must be falling as a percentage of GDP by the fifth year of the forecast – this was carried over from the Conservative government.

How could the fiscal rules change?

The rules themselves are not expected to change.

However, the chancellor could change how debt is calculated, which could in turn change how much debt the UK officially has and give Ms Reeves room to borrow more.

Ms Reeves told the Labour conference “borrowing for investment” is the only plausible solution to the UK’s productivity crisis.

By changing her definition of debt, she could find up to £50bn in additional headroom.

However, the Institute for Fiscal Studies (IFS) has warned against borrowing that much money.

Paul Johnson, director of the IFS, said Labour’s pledge not to increase income tax, national insurance or VAT, coupled with a promise to balance the current budget, means she will not be able to free up additional resources for day-to-day spending.

Quantitative Easing

An idea the chancellor is said to be weighing up is excluding the £20bn to £50bn annual losses being incurred by the Bank of England winding down its quantitative easing (QE) bond-buying programme.

Since the 2008 financial crisis, the Bank of England has repeatedly used QE to stimulate the economy and meet the 2% inflation target – creating £875bn of new money in 13 years.

During QE, the Bank buys bonds (debt security issued by the government) to push up their prices and bring down long-term interest rates on savings and loans.

Since November 2022, the Bank has been carrying out quantitative tightening, where it does not buy other bonds when bonds it holds mature, or by actively selling bonds to investors, or a combination of the two.

The aim is not to affect interest rates or inflation but to ensure it is possible QE can happen again in the future, if needed.

In February, the cross-party Treasury committee raised concerns quantitative tightening could have losses of between £50bn and £130bn and said it could have “huge implications” for public spending over the next decade.

Exclude new institutions

There are suggestions the chancellor could move GB Energy and the National Wealth Fund, both created by Labour, off the government’s books.

Andy King, a former senior official at the OBR, estimates that could unlock a further £15bn for borrowing.

Exclude projects

Another option would be to exclude certain projects from the debt calculation.

Government officials have said they are working on a plan to publish estimates for how much new capital projects could stimulate growth and how much money they would generate directly for the Treasury.

UK

Kemi Badenoch profile: Combative past of new Tory leader

Published

19 mins ago

November 2, 2024

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Many leading politicians are fond of talking about having been on a journey. But Kemi Badenoch’s journey has been longer and more eventful than most.

From the leafy London suburb of Wimbledon to Nigeria in West Africa and back to south London, and from the socialist hotbed of Sussex University to the rural idyll of Saffron Walden in Essex, she will hope her journey will ultimately take her to 10 Downing Street.

Along the way, this battling Boudica of the Conservative Party has earned a reputation for a combative and at times abrasive style of politics, aggressive even: someone who’d cross the road to have a fight.

Politics live: Reaction after new leader of opposition elected

“I am somebody who is very blunt,” she admitted when challenged about this reputation by Sophy Ridge on Sky News this week.

“I’m very forthright and I’m very confident as well. I’m not a wallflower.”

Now the Conservative Party members have voted to elect her as leader after strong performances in hustings and a TV debate which saw her recover from a gaffe-prone party conference.

In the three stages of the leadership contest, she gained momentum at the right time. Robert Jenrick was the candidate with momentum in the early rounds of voting by MPs in September.

James Cleverly then had it after he stole the show at the conference “beauty contest”. But as party members cast their votes, the momentum appeared to be with Ms Badenoch.

It did not look that way at the conference in Birmingham, when she clumsily declared maternity pay was “excessive” and said some civil servants were so bad 10% of them should be in prison.

Ironically, given her maternity pay gaffe, the mother-of-three has benefited from a row over veteran Tory MP Sir Christopher Chope, a Jenrick backer, declaring: “You can’t spend all your time with your family at the same time being leader of the opposition.”

Wimbledon to Nigeria – and back again

Ms Badenoch’s background, however, is literally miles away – more than 3,000, in fact – from those of typical Conservative politicians. Her early years were spent in Nigeria, controversially described by David Cameron in 2016 as one of the most corrupt countries in the world.

Her Nigerian parents were comfortably middle class, “with a car and a driver”, she says. Father Femi was a GP with his own clinic, and her mother Feyi was an academic at the University of Lagos college of medicine.

But Ms Badenoch – full name Olukemi Olufunto Adegoke – was born in the private St Teresa’s Hospital in Wimbledon in January 1980 after her parents travelled to Britain and paid for private healthcare. It meant she had a British passport.

She then lived in Lagos until she was 16, when she returned to Wimbledon to take her A levels, in maths, biology and chemistry, living with her mother’s best friend “for a better future”, after arriving in the UK with just £100.

So she worked part-time in Wimbledon’s McDonald’s, cleaning toilets and “flipping burgers”, she says. Yet last month she was ridiculed by Labour MPs after saying: “I became working class when I was 16 working at McDonald’s.”

Next on her journey was Sussex University and a computer course. Here she had no time for the left-wing students she called “stupid lefty white kids” and later denounced Bob Geldof’s 2005 Live 8 charity concerts as patronising to Africans.

Working in banking, she joined the Conservative Party in that year, and though she was a massive Margaret Thatcher fan she became an early Cameroon.

She was on her way, becoming a member of the London Assembly and fighting Dulwich and West Norwood against Labour’s Tessa Jowell in the 2010 general election, coming third behind the Liberal Democrats.

Just like Mrs Thatcher nearly 60 years earlier, it was when she was a parliamentary candidate that Kemi met her husband, Cambridge-educated banker and party activist Hamish Badenoch.

He had been head boy at Ampleforth College, the catholic public school, a councillor in Merton, south London, and Conservative candidate in Foyle, in Northern Ireland, in the 2015 general election.

They were both born at the same hospital in Wimbledon, St Teresa’s, a year apart. After university Hamish worked in Malawi, Nigeria and Kenya before returning to London and Barclays, before his current job at Deutsche Bank.

Entry into politics

But the noughties saw two potentially embarrassing blemishes on Ms Badenoch’s upwardly mobile CV. One was her widely reported hacking of Harriet Harman’s website, revealed shortly after she became MP for Saffron Walden in 2017.

These days, she regards the incident as relatively trivial. “It was a summary offence at the time, the same as a speeding ticket,” she told Sophy Ridge this week. “It was actually something quite different from what the law is now.

“And this was something that happened ten years before I was a member of parliament. It was very amusing at the time. Now that I’m an MP, it’s a lot less amusing.”

The other, described in Lord Ashcroft’s biography, Blue Ambition, was a near-fight with a member of the public at Oxford Town Hall in 2006 during a Conservative party event.

After an argument between the pair, the woman slapped Ms Badenoch and then ran off. Ms Badenoch then chased her up some stairs and grabbed her by the hair and pulled her back, before letting go and the woman ran out of the town hall.

“I never saw her again, thank goodness,” she said, recalling the incident years later.

Once in parliament with a safe seat, now called North West Essex, Brexiteer Badenoch’s ascent up the ministerial ladder was swift: party vice-chair, children and families, international trade, Treasury, equalities and local government, before joining Liz Truss’s cabinet and continuing under Rishi Sunak.

In the 2019 Tory leadership contest, she backed Michael Gove, widely viewed by MPs as her long-term mentor. Then in 2022, after quitting along with umpteen other ministers triggering Boris Johnson’s downfall, she stood herself, coming fourth. But she had put down a marker.

As a cabinet minister, covering business and equalities at the same time, she has lived up to her reputation as a blunt-speaking – critics would say rude – political scrapper, with some fiery clashes with opponents, some Tories and even Dr Who.

Her handling of the Post Office Horizon scandal was fiercely criticised after she controversially sacked Post Office chairman Henry Staunton when he claimed he was told to “stall” compensation payments – and then had a public row with him.

Courting controversy

One of her most high-profile spats was with former Doctor Who star David Tennant, after he said at the British LGBT awards: “Until we wake up and Kemi Badenoch doesn’t exist any more – I don’t wish ill of her, I just wish her to shut up.”

She hit back on X: “I will not shut up. A rich, lefty, white male celebrity so blinded by ideology he can’t see the optics of attacking the only black woman in government by calling publicly for my existence to end.”

She has also been reprimanded by Caroline Nokes, then chair of the equalities committee and now – ominously for Ms Badenoch – a Commons deputy speaker.

During a bad-tempered and shouty row at a hearing of Ms Nokes’ committee, Ms Badenoch accused the left-wing Labour MP Kate Osborne of lying in a row about trans issues.

Last year she infuriated Commons Speaker Sir Lindsay Hoyle by issuing a written statement on scrapping EU laws after Brexit rather than making a full Commons statement to MPs.

After she told the speaker she was sorry the timing of the announcement was “not to your satisfaction”, Sir Lindsay bellowed at her: “Who do you think you’re speaking to?”

It’s clashes like these on her long political journey that have led to claims that Ms Badenoch could start a fight in an empty room.

She is, after all, an aggressive, confrontational anti-woke crusader who takes no prisoners. And that’s just what her supporters say!

Sir Keir Starmer, beware.

UK

Four girls suffer ‘potentially life-changing injuries’ in bathroom of Brighton fast-food restaurant

Published

2 hours ago

November 2, 2024

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Four girls suffer 'potentially life-changing injuries' in bathroom of Brighton fast-food restaurant

Four girls have suffered serious burns in the bathroom of a Brighton fast-food restaurant.

Emergency services were called at 8.28pm on Thursday, which was also Halloween, to reports of a fire at a Wendy’s restaurant on Western Road, Brighton.

The four 12-year-old girls suffered “potentially life-changing” injuries, according to Sussex police, and were taken to hospital.

They remain in serious but stable conditions.

Sussex Police and the fire service are still looking into the cause of the incident, but said no fireworks were involved.

The incident was accidental, according to the fire and rescue service, and members of the public were not at risk.

Three fire engines, an aerial appliance and specialist officers attended.

The police force said they would not release more information at this time as they are “being sensitive towards the injuries of the people involved”.

“Our thoughts are with those recovering from this incident in our Brighton restaurant,” a spokesperson for Wendy’s said.

“The safety of our customers and employees is our highest priority. We are continuing to work with the local police authorities on their investigation.”

UK

Kemi Badenoch wins race to be next Tory leader

Published

2 hours ago

November 2, 2024

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Kemi Badenoch wins race to be next Tory leader

Kemi Badenoch has won the race to be the next leader of the Conservative Party.

The 44-year-old North West Essex MP has been declared the winner of the months-long contest, beating Robert Jenrick.

Ms Badenoch received 53,806 votes to Mr Jenrick’s 41,388.

Politics latest: Reaction after new leader of the opposition revealed

Ms Badenoch has served as shadow business and trade secretary since the Conservative Party lost the general election in July and Rishi Sunak said he would stand down as leader, triggering the campaign.

Her campaign was called Renewal 2030 and has targeted the next election for the Tories to return to power.

Ms Badenoch has been criticised at times for her outspoken approach, with opponents jumping on comments she has made about subjects such as maternity pay, gender equality and net zero.

But she has long been popular among the party membership, and previously ran to be leader in 2022.

It is not clear who her shadow cabinet will be made up of, but she has suggested that all those who ran to be leader against her should be involved.

However, James Cleverly revealed the day before the results that he would be returning to the backbenches.

Speaking after her win, Ms Badenoch thanked the other candidates, saying the party had come through the campaign “more united”.

The new leader went on to say the party’s first duty as opposition was to hold Labour to account – and also to prepare for government by the time of the next election.

She then went on to criticise previous Conservative administrations.

Ms Badenoch said: “Our party is critical to the success of our country.

“But to be heard, we have to be honest, honest about the fact that we made mistakes, honest about the fact that we let standards slip.

“The time has come to tell the truth, to stand up for our principles, to plan for our future, to reset our politics and our thinking, and to give our party and our country the new start that they deserve.

“It is time to get down to business. It is time to renew.”

In total, around 132,000 members of the Conservative Party were eligible to vote in the leadership election – a noticeable fall from the 172,000 in the contest in 2022 which Liz Truss won.

The turnout was also down – 72.8% in 2024 vs 82.2% in 2022 – with around 40,000 members not voting.

Prime Minister Sir Keir Starmer said: “Congratulations, Kemi Badenoch, on becoming the Conservative Party’s new leader.

“The first black leader of a Westminster party is a proud moment for our country.

“I look forward to working with you and your party in the interests of the British people.”

Ellie Reeves, who is chair of the Labour Party, delivered a more political attack: “It’s been a summer of yet more Conservative chaos and division.

“They could have spent the past four months listening to the public, taking responsibility for the mess they made and changing their party.

“Instead, Kemi Badenoch’s election as leader shows they’re incapable of change.

“Meanwhile, the Labour Government is getting on with fixing the foundations of our economy and cleaning up the mess the Tories left behind.”

Liberal Democrat leader Sir Ed Davey congratulated Ms Badenoch as well for her election – before adding that the Tories are still “too divided, out-of-touch and unable to accept Conservative failures over the past years”.

Richard Tice, the leader of the Conservative Party, did not congratulate her and instead attacked Ms Badenoch for her record – saying “she has failed the British public before and she will fail them again as leader of the Conservative Party”.