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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.

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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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Kalshi bettors put the odds of Trump creating a Bitcoin reserve in 2026 at roughly 70%.

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Sir Keir Starmer says Auschwitz visit ‘utterly harrowing’ as he vows to fight ‘poison of antisemitism’

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Sir Keir Starmer says Auschwitz visit 'utterly harrowing' as he vows to fight 'poison of antisemitism'

Sir Keir Starmer has called his visit to Auschwitz “utterly harrowing” and said he was determined to fight the “poison of antisemitism”.

The prime minister visited the former Nazi concentration camp where he laid a wreath ahead of the 80th anniversary of its liberation, during a trip to Poland to meet its political leaders.

After he and his wife Victoria, who is Jewish, visited the site, Sir Keir said: “Nothing could prepare me for the sheer horror of what I have seen in this place. It is utterly harrowing. The mounds of hair, the shoes, the suitcases, the names and details, everything that was so meticulously kept, except for human life.

“As I stood by the train tracks at Birkenau, looking across that cold, vast expanse, I felt a sickness, an air of desolation, as I tried to comprehend the enormity of this barbarous, planned, industrialised murder: a million people killed here for one reason, simply because they were Jewish.”

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Historians estimate about 1.1 million people, mostly Jews, perished in Auschwitz over less than five years as part of the Nazi’s extermination plan. The camp was liberated by the Soviet army on 27 January 1945.

Sir Keir, who was on his first trip there, said it was Lady Starmer’s second visit but it was “no less harrowing than the first time she stepped through that gate and witnessed the depravity of what happened here”.

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He added that their visit truly showed him how “this was not the evil deeds of a few bad individuals, it took a collective endeavour by thousands of ordinary people… in the hatred of difference”.

“The lessons of this darkest of crimes are the ultimate warning to humanity of where prejudice can lead,” he said.

British Prime Minister Keir Starmer and his wife Victoria Starmer visit the Memorial And Museum Auschwitz-Birkenau, a former German Nazi concentration and extermination camp, in Oswiecim, Poland January 17, 2025. REUTERS/Aleksandra Szmigiel
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Sir Keir and Lady Starmer laid a wreath at the concentration camp. Pic: Reuters

British Prime Minister Keir Starmer and his wife Victoria Starmer visit the Memorial And Museum Auschwitz-Birkenau, a former German Nazi concentration and extermination camp, in Oswiecim, Poland January 17, 2025. REUTERS/Aleksandra Szmigiel
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Pic: Reuters

The prime minister warned of the rising threat of antisemitism in recent years, including in the UK.

“The truth that I have seen here today will stay with me for the rest of my life,” he said.

“So too, will my determination to defend that truth, to fight the poison of antisemitism and hatred in all its forms, and to do everything I can to make ‘never again’ mean what it says, and what it must truly mean: never again.”

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No phones, a drone threat and strict rules: What it’s like to join the PM in Ukraine

British Prime Minister Keir Starmer and his wife Victoria Starmer visit the Memorial And Museum Auschwitz-Birkenau, a former German Nazi concentration and extermination camp, in Oswiecim, Poland January 17, 2025. REUTERS/Aleksandra Szmigiel
Image:
Pic: Reuters

British Prime Minister Keir Starmer and his wife Victoria Starmer visit the Memorial And Museum Auschwitz-Birkenau, a former German Nazi concentration and extermination camp, in Oswiecim, Poland January 17, 2025. REUTERS/Aleksandra Szmigiel
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Pic: Reuters

Sir Keir travelled to Poland from Kyiv after meeting President Volodymyr Zelenskyy there in his first trip to Ukraine since becoming prime minister.

He told Sky News’ political editor Beth Rigby, in Kyiv, the UK will play its “full part” in peacekeeping in Ukraine, including sending troops.

However, former senior military leaders have warned this may not be possible due to the army being at its smallest size for 200 years.

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Starmer and Zelenskyy lay flowers at memorial

In Poland, he is expected to discuss the new UK-Poland treaty with his counterpart Donald Tusk, which will support both countries working together to protect Europe from Russian aggression and work together to tackle people smuggling gangs.

Karen Pollock, chief executive of the Holocaust Educational Trust, said the charity was “grateful to Sir Keir for leading the way in ensuring that the horrors of the past are always remembered”.

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No phones, a drone threat and strict rules: Beth Rigby on what it’s like to join the prime minister in Ukraine

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No phones, a drone threat and strict rules: Beth Rigby on what it's like to join the prime minister in Ukraine

No phones or other devices, strict reporting rules, bombed-out buildings, and a drone threat – Beth Rigby shares what it’s like to join the prime minister Sir Keir Starmer in Ukraine.

Sky News’s political editor said “the whole experience was absolutely fascinating” on the Electoral Dysfunction podcast, but added the nature of Sir Keir‘s visit to the war-ravaged country meant the government “had to keep it very tight”.

“If it became known more widely than a very, very tight group of people that he was going to make the trip, the trip gets pulled for security reasons.”

Reporting from Ukraine, Sky News joined the prime minister as he signed a 100-year “friendship” deal to guarantee Britain’s support for Kyiv.

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Sky cameras filmed Sir Keir laying a wreath with Ukrainian President Volodymyr Zelenskyy, after a Russian drone was shot down over the presidential palace while they held meetings.

In an interview, the prime minister told Ms Rigby that the UK would play its “full part” in peacekeeping in Ukraine and that the drone threat was “a reminder of what Ukraine is facing every day”.

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The prime minister’s first stop while in Ukraine was at a hospital, where he and reporters saw a major burns unit up close.

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Watch Beth Rigby’s full interview with the PM here

Ms Rigby said: “There was an ICU you could go in… There were two gentlemen, two guys, and they were having physio treatment, and they were very happy to be filmed, and they… talked to the prime minister about their experiences and… their skin was just covered in burns, scars.

“After, I did the pool clip with him [Sir Keir], and I was like, ‘how was it?’ He just said, ‘it’s really hard to see this.’

“It really hammers home what it is, and I think he kept referring to the hospital throughout every visit of the day.”

Sir Keir Starmer meets with a Ukrainian man who suffered burns

Speaking to Labour peer Harriet Harman and former Scottish Conservatives leader Baroness Davidson on the podcast, Ms Rigby said that in order to make the trip, “we had to give in all our devices” as “for security reasons, you can’t take your devices into Ukraine”.

While riding trains across the country, she said “you get some basic food, and you get a little bunk”. Strict reporting rules also apply, so Sky could not report on Sir Keir’s whereabouts “until after he’s left”.

“We went to a hospital, and I can’t tell you what hospital it was, but we weren’t allowed to report that until the prime minister left the location,” she said.

“So, it just gives you a sense of the amount of security around these visits.”

Beth Rigby interviewing Sir Keir Starmer in Kyiv

During a visit to a drone manufacturer, Ms Rigby added that Ukrainians “brought the drones from where they’re actually manufactured” but did not allow cameras into the site.

“They placed them in a hall, which they made to look like an underground car park, right? You weren’t allowed to film outside. You couldn’t film the steps,” she said.

“You couldn’t film anything that might allow anyone to understand where the location might have been… This is the extent to which they try and disguise the movement and what they’re doing.”

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Ms Rigby then said she and others were taken on “a little tour where 100 yards or so down from where Zelenskyy’s offices in the centre of Ukraine is a bombed-out car and a building that has been bombed, and the top floor is destroyed”.

“That happened on 1 January,” she said. “And the reason that they are showing him that is to reiterate to all of us that… Russia is not completely destroying the centre of Kyiv, but the threat is ever-present.”

The prime minister is now in Poland, where he will kickstart talks on a new security pact to protect the UK’s national security.

During his visit, Sir Keir will also meet Polish businesses, including the firm InPost which has announced it will invest a further £600m into the UK in the next five years to grow its operations.

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