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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:
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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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Police separate anti-immigration and anti-racism protesters across the country

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Police separate anti-immigration and anti-racism protesters across the country

Protesters have gathered across the country as groups demonstrated against asylum seeker housing and were met by anti-racism campaigners.

Demonstrations under the Abolish Asylum System slogan were held in England, Scotland and Wales, including in Bristol, Exeter, Tamworth, Cannock, Aberdeen, Mold, Perth, Nuneaton, Liverpool, Wakefield, Newcastle, Horley and Canary Wharf.

Counter-protests were also organised by campaign group Stand Up to Racism.

Police officers scuffle with demonstrators during protests at Castle Park in Bristol. Pic: PA
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Police officers scuffle with demonstrators during protests at Castle Park in Bristol. Pic: PA

In Bristol, mounted police separated the two groups in the Castle Park, with officers scuffling with protesters.

Police kept around 200 anti-immigration protesters draped in English flags away from roughly 50 Stand Up to Racism protesters in Horley, Surrey.

People take part in a protest outside the Sheraton Four Points Hotel in Horley, Surrey. Pic: PA
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People take part in a protest outside the Sheraton Four Points Hotel in Horley, Surrey. Pic: PA

One man, wearing a West Ham United football shirt, was held by police as he yelled: “You’re not welcome here, you’re not welcome here, you’re not welcome here” at anti-racism protesters.

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More on Migrant Crossings

Anti-immigration protesters also chanted: “Tommy, Tommy, Tommy, Tommy Robinson” in support of the far-right activist, whose real name is Stephen Yaxley-Lennon.

A confrontation between a protester and a counter-protester outside the Sheraton Four Points Hotel in Horley, Surrey. Pic: PA
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A confrontation between a protester and a counter-protester outside the Sheraton Four Points Hotel in Horley, Surrey. Pic: PA

The anti-racism protesters chanted “say it loud, say it clear, refugees are welcome here” and held signs calling for solidarity and to “stop deportations”.

The Stand Up to Racism protesters were shepherded into a smaller area as they continued to chant: “No hate, no fear, refugees are welcome here”, which was met with “No they’re f****** not” from the other side of the street.

People inside the hotel look at protesters outside the Radisson Hotel in Perth. Pic: PA
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People inside the hotel look at protesters outside the Radisson Hotel in Perth. Pic: PA

In Perth, protesters gathered outside the Radisson Hotel.

The anti-migration protesters held up signs with slogans such as “Perth is full – empty the hotels” and “get them out”.

People take part in a counter-protest outside the Radisson Hotel in Perth. Pic: PA
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People take part in a counter-protest outside the Radisson Hotel in Perth. Pic: PA

Stand Up to Racism Scotland said it had achieved “victory” in Perth, with more than 200 gathering to oppose the Abolish Asylum System demonstration.

In Liverpool, a dispersal order was issued to try and contain the protests.

Saturday’s events come amid continued tension around the use of the hotels for asylum seekers.

Regular protests had been held outside the Bell Hotel in Epping, Essex, which started after an asylum seeker housed there was charged with sexually assaulting a 14-year-old girl on 10 July.

Hadush Gerberslasie Kebatu, 38, was charged with trying to kiss a teenage girl and denies the allegations. He is due to stand trial later this month.

In the wake of those protests, Epping Forest District Council sought and won an interim High Court injunction to stop migrants from being accommodated there – a decision which the government is seeking permission to appeal.

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Reform UK’s new immigration plans would’ve been extreme just a few years ago

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Reform UK's new immigration plans would've been extreme just a few years ago

Mass deportations. Prison camps. Quitting the Refugee Convention and the UN Convention on Torture.

A shrug of the shoulders at the idea of the UK sending asylum seekers back to places like Afghanistan or Eritrea, where they could be tortured or executed.

“I’m really sorry, but we can’t be responsible for everything that happens in the whole of the world,” says Nigel Farage.

“Who is our priority?”

The Reform UK leader has been setting out his party’s new plans to address illegal migration in an interview with The Times newspaper – a set of policies, and a use of language, which would surely have been seen as extreme just a few years ago.

Only last autumn the Reform leader repeatedly shied away from the concept of “mass deportations”, describing the idea as “a political impossibility”.

But now he’s embraced Trump-style immigration rhetoric.

More on Asylum

It’s not surprising that Reform want to capitalise on the outpouring of public anger over the use of hotels to house asylum seekers. The policy was started by the previous Conservative government, in response to housing shortages – and Labour has failed to make significant progress on its promise to stop it.

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Asylum hotel protests set to rise

But all the major parties have shifted firmly to the right on this issue.

There’s been very little political criticism of the aggressiveness of Farage’s policy suggestions, and the premise that the UK should no longer offer sanctuary to anyone who arrives here illegally.

The Tory response has been to complain that he’s just copying the ideas they didn’t quite get round to implementing before calling the general election.

“Four months late, this big reveal is just recycling many ideas the Conservatives have already announced,” said Chris Philp MP, the shadow home secretary.

“Labour’s border crisis does urgently need to be fixed with tough and radical measures, but only the Conservatives have done – and will continue to do – the detailed work to deliver a credible plan that will actually work in practice.”

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Certainly, the ambition to arrest and deport everyone who arrives in a small boat – regardless of whether or not they have legitimate grounds for asylum – has clear echoes of the Tories’ Rwanda policy.

Despite spending £700m on the controversial idea, only four volunteers were ever sent to Kigali before it was cancelled by Sir Keir Starmer, who branded it a gimmick.

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Reform putting ‘wheels in motion’ for migrant hotel legal challenges

Labour have suggested they’ve diverted Home Office resources that were freed up by that decision into processing asylum claims more quickly and increasing deportations.

They’re hoping tougher action against the criminal gangs and the new “one in one out” deal with France will help deter the number of people crossing the Channel in small boats in the first place, currently at record levels.

But rather than offering any defence of the principle of offering asylum to genuine refugees – Labour’s Angela Eagle MP, the border security minister, has also focused on the feasibility of Farage’s policies.

“Nigel Farage is simply plucking numbers out of the air, another pie in the sky policy from a party that will say anything for a headline,” she said.

“We are getting a grip of the broken asylum system. Making sure those with no right to be here are removed or deported.”

Even the Liberal Democrats have taken a similar approach.

“This plan sums up Nigel Farage perfectly, as like him it doesn’t offer any real solutions,” they said.

“Whilst Farage continues to stoke division, we Liberal Democrats are more interested in delivering for our local communities.”

It’s been left to the Refugee Council to defend the principle of asylum.

“After the horrors of the Second World War, Britain and its allies committed to protecting those fleeing persecution,” said CEO Enver Solomon.

“The Refugee Convention was our collective vow of ‘never again’ – a legal framework ensuring that people who come to our country seeking safety get a fair chance to apply for asylum.

“That commitment remains vital today. Whether escaping conflict in Sudan or repression under regimes like the Taliban, people still need protection.

“Most find refuge in neighbouring countries. But some will seek sanctuary in Europe, including Britain.

“We can meet this challenge by upholding a fair, managed system that determines who qualifies for protection and who does not.”

But with Reform leading in the polls, and protests outside hotels across the country – politicians of all stripes are under pressure to respond to public frustration over the issue.

A recent YouGov poll found half of voters now believe immigration over the last ten years has been mostly bad for the country – double the figure just three years ago.

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While the government has made some progress in reducing the cost of asylum hotels – down from £8.3m a day in 2023/4 to £5.77m a day in 2024/5 – the overall numbers accommodated in this way have gone up by 8% since Labour took charge, thanks to the surge in new claims.

Sir Keir has previously said he won’t make a promise he can’t keep.

But current efforts to end the use of asylum hotels by 2029 are clearly not working.

That’s a credibility gap Farage is more than ready to exploit.

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Three people in a life-threatening condition after ‘arson attack’ at restaurant

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Three people in a life-threatening condition after 'arson attack' at restaurant

Three people are in a life-threatening condition after a suspected arson attack at a restaurant in Ilford, say police.

Five people – three women and two men – were injured in the fire, which broke out shortly after 9pm on Friday at Indian Aroma on Woodford Avenue, Gants Hill.

No arrests have been made.

Hospital porter Edward Thawe, 43, went to help with his son after hearing screams from his nearby home.

Woodford Avenue from above. Pic: UK News and Pictures
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Woodford Avenue from above. Pic: UK News and Pictures

He described the scene as “horrible” and “more than scary and the sort of thing that you don’t want to look at twice”.

He said: “I heard screaming and people saying they had called the police.”

He said he saw a woman and a severely burned man who may have been customers.

More on Metropolitan Police

He said the man’s “whole body was burnt”, including his shirt, but he was still wearing his trousers.

After being treated at the scene by paramedics from the London Ambulance Service, the victims were taken to hospital.

Indian Aroma in Ilford after the fire. Pic: UK News and Pictures
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Indian Aroma in Ilford after the fire. Pic: UK News and Pictures

Nine others were able to get out beforehand, London Fire Brigade (LFB) said in a statement.

“The brigade’s control officers received seven calls about the fire and mobilised crews from Ilford, Hainault, Leytonstone and Woodford fire stations to the scene. The fire was extinguished by 10.32pm,” said an LFB spokesperson.

“We understand this incident will cause concern within the community. My team of specialist detectives are working at speed to piece the incident together,” said Detective Chief Inspector Mark Rogers, of the Met’s Central Specialist Crime North unit.

“Locals can expect to see a large police presence in the area. If you have any concerns, please speak to those officers on the ground.”

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The London Ambulance Service told Sky News: “We sent resources to the scene, including ambulance crews, an advanced paramedic, an incident response officer and paramedics from our hazardous area response team.

Indian Aroma in Ilford after the fire. Pic: UK News and Pictures
Image:
Indian Aroma in Ilford after the fire. Pic: UK News and Pictures

“We treated five people for burns and smoke inhalation. We took two patients to a major trauma centre and three others to local hospitals.”

Health secretary Wes Streeting, who is the MP for Ilford North, posted on X to thank the emergency services for their response to the fire.

He also asked his constituents to “please avoid the area for now”.

Anyone with information is urged to contact the Met via 101, quoting 7559/22AUG. If you wish to remain anonymous, please speak with Crimestoppers on 0800 555 111.

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