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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.

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Sir Keir Starmer congratulated Rachel Reeves after she addressed the Labour Party conference in Liverpool. Pic: PA
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Sir Keir Starmer and Rachel Reeves at the Labour conference. Pic: PA

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.

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Will Rachel Reeves U-turn on her budget promise?

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.

Ed Conway speaks to Bank of England governor Andrew Bailey after he announced interest rates would be cut
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Bank of England governor Andrew Bailey introduced quantitative tightening in 2022

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.

Read more:
How fiscal rules are impeding long-term investments – and what Rachel Reeves can do about it

Abolishing national insurance ‘could take several parliaments’

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.

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What will the budget include?

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.

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Big benefits cuts are imminent – here’s what to expect and why it could be just the start

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Big benefits cuts are imminent - here's what to expect and why it could be just the start

Those with “milder mental health” issues and “lower-level physical conditions” could see their disability benefits cut, as the government looks to shave £6bn off the welfare bill.

Liz Kendall, the work and pensions secretary, is expected to target sickness and disability benefit payments for savings on Tuesday, which comes ahead of the spring statement next Wednesday.

Politics latest: Welfare reforms ‘imminent’

Her welfare reform green paper will arrive after Downing Street insisted there is a “moral and an economic case for fixing our broken system”.

Government figures argue the rising sickness and disability bill, which has ballooned since the pandemic, is unsustainable and will “leave the welfare state losing legitimacy” in the eyes of the wider public if not dealt with.

The cuts come as the chancellor eyes a hole in the public finances on the back of lower than expected growth and rising borrowing costs, with the £9.9bn headroom she had at the budget in October now wiped out.

Rachel Reeves’ self-imposed fiscal rules mean day-to-day government spending must be covered by tax revenue by 2029-30, which leaves her needing billions of pounds in spending cuts (after ruling out further tax rises, her other option).

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Welfare reforms will ensure ‘trust in system’

What changes should we expect?

Ms Kendall is expected to target personal independence payments (PIP) – one of the main forms of disability benefits for those with long-term illnesses or disabilities – amid a spike in claimants.

The PIP bill has grown from £13.7bn a year before the pandemic to £21.8bn in the current financial year, and is set to increase to £34.1bn by the end of the decade.

The number of people claiming this disability benefit is projected to more than double from two million to 4.3 million.

The work and pensions secretary will tell MPs that Labour will protect those who have a serious condition and can’t work, and the government’s rowed back from plans to freeze PIP payments after backlash from its backbench MPs.

These payments are now expected to rise in line with inflation, but the eligibility criteria will be tightened to whittle back the number of people eligible to claim.

One government figure told me it would result in some conditions, such as “milder mental health” or “lower-level physical conditions”, being ineligible for PIP.

But they stressed that those with more severe conditions and who are never going to be able to work would be protected and cared for.

Read more:
Which benefits could be cut?

Why Labour MPs are so uncomfortable

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Why is there a surge in youth unemployment?

The key principles driving reforms

The changes are likely to draw criticism from some MPs, though one senior Labour source said they didn’t think there would be any ministerial resignations over the benefit announcements.

Another Labour figure told me they would be “massively shocked” if there were resignations.

However, a number of Labour MPs have voiced their concerns, as has the Manchester mayor Andy Burnham.

In a bid to assuage MPs, the work and pensions secretary is also expected to earmark £1bn of savings into employment support programmes as she frames the reforms around three clear principles.

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The first will be to prevent people from falling into long-term economic inactivity with a better support offer to get people back into work quickly.

The second will be to change the incentive systems to move people away from welfare dependency.

This could see Ms Kendall slash the highest level of incapacity benefit for working age people who have an illness or disability that limits their ability to work, while increasing the basic rate of support for those out of work (universal credit).

This is because the lower level of unemployment benefit has led to more people claiming for additional incapacity and disability benefits, while disincentivising them to try to find work.

The government will also announce a “right to try” scheme, allowing those on incapacity benefits to try returning to work without the risk of losing their benefits, as happens in the current system.

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Will there be a backlash over benefits?

‘I don’t think they go far enough’

But with one in 10 working age people claiming sickness benefits, and one in eight young people not in education, employment or training, the reforms on Tuesday could be just the start of bigger changes – and potentially bigger political battles.

The cost of long-term sickness and disability benefits for working-age people has risen by about £20bn since the pandemic to about £48bn, and is forecast to hit almost £100bn by 2030.

“People are trapped on benefits and the bill is getting out of hand,” said one government figure.

“We are currently spending more than three times the annual policing bill on these benefits. It’s getting out of hand.

“I don’t think the reforms go far enough, and I don’t think people have clocked the size of the numbers going on here.”

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Police searching for missing Cardiff woman launch murder investigation

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Police searching for missing Cardiff woman launch murder investigation

Detectives searching for a Cardiff woman who has been missing since last summer have launched a murder investigation.

Three arrests have previously been made in connection with the disappearance of Charlene Hobbs.

Charlene Hobbs. Pic: South Wales Police
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Pic: South Wales Police

Crimestoppers is now offering a reward of up to £20,000 for information that leads to the arrest and conviction of those responsible.

The last confirmed sighting of the 36-year-old, from Riverside, was a photograph taken on a mobile phone at a house in Broadway in the Adamsdown area of the city on 24 July last year.

Ms Hobbs, who has a distinctive dragon tattoo on her back, had her hair in a bun and was wearing a dark strapless top when the photo was taken.

The day before she was last seen, she was captured on CCTV at a Morrisons Local in Adamsdown.

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CCTV released in the search for Ms Hobbs

In a statement released through South Wales Police, Ms Hobbs’ family said: “We still hope that Charlene can be found safe and well.

“We are grateful for the support of Crimestoppers and the reward to help us find her, and hope that this will help people to come forward with information about what has happened to Charlene.”

Charlene Hobbs in a property in Broadway (left) and in Morrissons Local, Adamsdown (right). Pic: South Wales Police.
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Ms Hobbs at a property in Broadway, Adamsdown, left, and at a Morrisons Local in the area, right. Pics: South Wales Police

Detective Chief Inspector Matt Powell said: “We have always been determined to find Charlene alive and return her to her family, but despite a huge number of enquiries we have no proof that Charlene is alive.

“While I have always maintained an open mind, the lack of evidence that Charlene is alive means that we are now treating her disappearance as a murder investigation.

“We have spoken to more than 250 people, either known to Charlene or from areas where she is known to frequent, and no one can tell us where Charlene is or that she is alive, which of course we, her family and friends desperately want to hear.

“Several of those we have spoken to believe that she has died but no one has been able to provide any specific details.”

Read more from Sky News:
Lucy Letby: What we have learnt from the public inquiry
British woman missing in Thailand after diving boat fire

Police searching for Charlene Hobbs. Pic: South Wales Police
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Extensive searches have taken place for the missing 36-year-old. Pic: South Wales Police

Open land searches continue.  Pic: South Wales Police
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Pic: South Wales Police

Detectives and specialist search teams are continuing with extensive efforts to find Ms Hobbs and determine the circumstances around her disappearance.

DCI Powell added: “I still firmly believe that answers lie in the community, and that someone out there holds key information that will help us find Charlene.”

A 45-year-old man arrested in connection with the investigation remains on police bail.

A 43-year-old man and a 38-year-old woman have been released without charge.

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Decades on the beach – sex offender Richard Burrows’ life in hiding

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Decades on the beach - sex offender Richard Burrows' life in hiding

In Thailand, Richard Burrows found an escape – a place to hide for nearly 30 years.

After abusing children, he fled the UK to avoid prosecution. But the severity of his crimes didn’t push him to live a low-profile life – far from it.

In the sandy shores of Phuket, he became very well known and liked. Everyone there knew him as Peter Smith, an identity he stole from a passport that wasn’t his.

No one appeared to know where he had gone after he failed to attend the start of his trial over alleged child sex offences at Chester Crown Court in 1997.

His abuse spanned a wide period from the 1960s to the 1990s. Some of the offences occurred at a children’s school in Cheshire and others happened in the Midlands, through his involvement with the scouts.

But it would take 27 years for him to be caught, finally arrested at Heathrow Airport.

Richard Burrows asia feature -
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Richard Burrows was put on trial after years in Thailand

He had settled in Thailand with a familiar routine and a wide circle of acquaintances. He would regularly dine at a small roadside restaurant, often ordering fish and chips.

The owner Pakorn Sanwongwan says the man they knew was kind and generous. They had no idea of his past.

“I’m very shocked because from my perspective, he was a good person. For the past 24 years he had recommended our restaurant to lots of people and brought us new customers,” he said.

His wife Supaporn says they were shocked when just a few months ago he announced he was “going to the UK and never coming back”.

It’s easy to see how many people were duped. He kept the reality of what he’d done largely hidden. And his was not a life lived under the radar.

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Victim speaks out over sex attacker

He was involved in the local sailing community. His friends say he’d worked with local schools. And he’d worked in local media.

Burrows lived in a container, a short drive from the coastline. But things started to unravel when money ran thin.

He began opening up to a very small number of close friends, saying he needed to return to the UK to see family and was struggling financially.

“Ben”, not his real name, was among those close confidantes.

He said: “I knew him for 25 years. Only about three to four years ago, he started sort of revealing a few things that he’s not actually who his passport says he is and that he was searched by the UK authorities for some allegations, apparently, he’s done.”

Ben says he had no idea of the severity of the charges against him. The man he thought he knew was a kind soul, giving and supportive of many he met.

There were, he says, signs of his attraction to young people, but it didn’t raise alarm bells.

“Peter” had younger companions who cooked for him at home and he would finance the education of some of them, Ben told us.

“Obviously it was visible that he liked the younger generation. But that he would go for minors I would never have thought,” he said.

Richard Burrows asia feature -
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The container where Burrows lived in Thailand

All of the offences were committed during Burrows’ time in the United Kingdom, and no charges have been brought against him in Thailand.

If Ben knew the details of Burrows’ sordid past, he may have thought differently. But Burrows was living a lie, enjoying a secret life in the sun.

Remarkably, Burrows went undetected for decades – his visa based on a fake passport, consistently renewed.

It’s unclear what exactly motivated his attempt to move back to the UK, a move that would end in his arrest at Heathrow.

Some we spoke to said he had run out of money and that he wanted to see family. But some suspected he was trying to make peace with his past.

Finally, he has been brought to justice. But his victims were left to deal with the horrific aftermath of his abuse.

Whilst he is now behind bars, they will also have to wrestle with the fact their abuser was able to enjoy a free and full life for so long.

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