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”.
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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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.
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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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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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2:23
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.
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.
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2:41
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.
A large part of Gatwick Airport’s South Terminal has been evacuated after a “suspected prohibited item” was discovered in luggage and a bomb disposal team has been deployed, police said.
Sussex Police said the explosive ordnance disposal team was being sent in “as a precaution” and a security cordon is in place.
The airport, which is the UK’s second busiest, said the terminal was evacuated after a “security incident”.
In a post on X, it said: “Safety and security of our passengers and staff remains our top priority.
“We are working hard to resolve the issue as quickly as possible.”
It said the North Terminal was still operating normally.
Footage on social media taken outside the airport showed crowds of travellers heading away from the terminal building.
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“Arrived at London Gatwick for routine connection. Got through customs to find out they’re evacuating the entire airport,” one passenger said.
“Even people through security are being taken outside. Trains shut down and 1,000s all over the streets and carparks waiting.”
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Another said passengers near the gates were being told to stay there and not go back to the departure lounge.
Gatwick Express said its trains were not calling at Gatwick Airport.
“Gatwick Airport will not be served until further notice,” it tweeted.
“This is due to the police and emergency services dealing with an incident at the airport.
“At present, the station and airport are being evacuated whilst the police are dealing with an incident. We would recommend delaying your journey until later this morning.”
It said local buses were also affected and would be unable to run to the airport.
This breaking news story is being updated and more details will be published shortly.
Hundreds of people affected by the Manchester Arena bombing cannot continue legal action against MI5, judges have ruled.
More than 300 people, including survivors and those bereaved by the 2017 attack at an Ariana Grande concert, brought a case to the Investigatory Powers Tribunal (IPT), claiming failures to take “appropriate measures” to prevent the incident infringed their human rights.
In a ruling on Friday, Lord Justice Singh and Mrs Justice Farbey said the cases could not proceed as they were brought too late.
Lord Justice Singh said: “We are particularly conscious of the importance of the rights concerned… We are also conscious of the horrendous impact of the atrocity on the claimants and their families.
“Any reasonable person would have sympathy for them.
“The grief and trauma which they have suffered, particularly where young children were killed, is almost unimaginable.
“Nevertheless, we have reached the conclusion that, in all the circumstances, it would not be equitable to permit the claims to proceed.”
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Lord Justice Singh acknowledged that while the tribunal “readily understand” why the legal claims were not filed until after the final report from the inquiry into the attack, “real expedition” was needed at that point.
The judge added: “We bear in mind the other matters that had to be investigated and arrangements which had to be put in place but, in our view, the filing of the proceedings was not given the priority which, assessed objectively, it should have been.”
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Had the claims gone ahead, the judge noted the security services would have needed to “divert time and resources to defending these proceedings rather than their core responsibilities” – which includes preventing future attacks.
Salman Abedi killed 22 people and injured hundreds when he detonated a rucksack bomb at the end of an Ariana Grande show at Manchester Arena on 22 May 2017.
Hudgell Solicitors, Slater & Gordon and Broudie Jackson Canter, three of the law firms representing complainants affected, said the ruling was “extremely disappointing” for their clients.
In a statement, the firms said: “Ever since the attack in May 2017, our clients have had to endure continued delays but have done so with great patience and understanding in the hope that by allowing all legal processes to be fully explored, transparency and justice would be achieved.
“It took almost six years for the failings of MI5 to be revealed, confirmed when the inquiry chair published his volume three findings in March 2023, in which he said MI5 had missed a ‘significant opportunity’ to prevent the attack.
“This report concluded that within this six-year period, the security service corporate witnesses X and J gave evidence on oath that had presented an inaccurate picture, and the same inaccurate picture had been presented to Lord Anderson when he compiled his report in December 2017.”
The law firms said following these findings, their clients believed the IPT would “provide the route to the formal vindication of their human rights”.
The firms added: “We are disappointed that time is one of the reasons now being used against them to prevent their claims progressing. Seven years have now passed since the atrocity in May 2017 – six years of that seven-year delay was caused by MI5.
“This judgment certainly doesn’t exonerate MI5. There were failings by MI5 and multiple other parties leading up to and on the actual evening of 22 May 2017 and collectively we continue to support our clients in their fight for full accountability and justice.”
The inquiry into the bombing found it might have been prevented if MI5 had acted on key intelligence received in the months before the attack.
The agency’s director-general, Ken McCallum, expressed deep regret that such intelligence was not obtained.
Two pieces of information about Abedi were assessed at the time by the security service to not relate to terrorism.
But inquiry chairman Sir John Saunders said, having heard from MI5 witnesses at the hearings, he considered that did not present an “accurate picture”.
Lawyers for those affected previously said the inquiry found there was a “real possibility” that one of the pieces of intelligence could have obtained information which may have led to actions preventing the attack.
And at the hearing earlier this month, Pete Weatherby KC, for those affected, described the IPT claims as “the next step” in vindication for his clients after the inquiry’s findings.
Many areas of Britain faced frosty and icy conditions this morning ahead of the arrival of Storm Bert tomorrow.
The Met Office said it expects the storm to bring “heavy rain, strong winds and disruptive snow to parts of the UK through the weekend” and potentially cause travel disruption and flooding.
Much of the UK experienced temperatures close to freezing last night, the Met Office said, with -6C (21.2F) recorded at Tulloch Bridge in Scotland.
Several yellow warnings for snow and ice were in place across the UK until 10am on Friday, while one covering parts of Scotland will remain in place until midday.
They came ahead of an amber warning for heavy snow and ice in place between 7am and 5pm on Saturday in central parts of Scotland.
The Met Office said 10-20cm of snow was likely on ground above 200m and there could be as much as 20-40cm on hills above 400m.
Several other yellow alerts for wind, rain and snow will also cover much of the UK.
Met Office meteorologist Honor Criswick said: “Through into Friday… snow showers are set to continue mainly around coastal areas though once again still a few feeding inland at times.
“There will also still be plenty of autumnal sunshine. Still feeling cold though, particularly in those brisk winds – once again we’re only looking at highs of around 5C, slightly higher in the southwest around 7C.
“Across the north those temperatures struggling to move past 2-3C.
“As we head into Friday evening, a change is on its way as we introduce Storm Bert moving its way in from the Atlantic. So we’ll see clouds spilling in from the southwest with outbreaks of rain – heavy at times by the time we reach Saturday morning.”
“Heavy” outbreaks of rain are likely throughout Saturday, “falling as snow” at times across parts of England and Scotland, Ms Criswick said.
More than 114 schools were shut in the Highland Council area on Thursday because of snow, almost 40 were shut in Aberdeenshire and 12 were closed in Moray.
In England, 89 schools were shut in Devon, 60 in Cornwall and 18 in Dorset, while in Wales 18 were closed in Denbighshire, 10 in Conwy and two in Wrexham.