Budget 2024: What are Labour’s fiscal rules and could Rachel Reeves change them to raise more money?
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.
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.
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.
Ukraine’s financial regulator has proposed taxing certain crypto transactions as personal income at a rate of up to 23% but excluding crypto-to-crypto transactions and stablecoins.
Crypto transactions would be taxed at 18% with a 5% military levy on top as part of the proposed framework, released on April 8 by Ukraine’s National Securities and Stock Market Commission.
NSSMC Chairman Ruslan Magomedov said in an April 8 statement that “the issue of crypto taxes is not a hypothesis, but a reality that is fast approaching.”
He added that the agency created the framework to help lawmakers make an “informed resolution” by considering each suggestion’s advantages and disadvantages because “these aspects can have a critical impact on the market and tax liability.”
Under the NSSMC’s proposed crypto framework, a tax will be applied when crypto is cashed out for fiat currency or exchanged for goods or services.
Crypto-to-crypto transactions wouldn’t be taxed, bringing Ukraine in line with other European countries, including Austria and France, as well as crypto-friendly jurisdictions like Singapore, the NSSMC said.
The regulator says it “makes sense” to exclude stablecoins backed by foreign currencies or only apply a 5% or 9% tax because Ukraine’s tax code already excludes income from transactions in “foreign exchange values.”
A translated excerpt of the NSSMC’s report said stablecoins backed by foreign currencies could be exempt from taxation. Source: NSSMC
Mining, staking, hard forks and airdrops
Other crypto-related activities, such as mining, staking and airdrops, are also addressed in the framework which floated a few options for taxation.
The NSSMC said crypto mining is generally considered a business activity, but there might be a general tax-free limit for certain crypto transactions, including mining.
Under the framework, staking could be considered as “business captive income” or only taxed if the crypto is cashed out for fiat currencies. While hard forks and airdrops could be taxed either as ordinary income or when the tokens are cashed.
Related: Ukraine officials get training on crypto and virtual assets investigation
The regulator suggests a tax-free threshold could help “relieve the burden on small investors” and is common in other jurisdictions.
Exemptions for donations, transfers between family members, and holders who keep their crypto for a set amount of time are also flagged as possibilities. However, the NSSMC says the exemption might not apply to non-custodial crypto wallets.
Last December, Daniil Getmantsev, head of the tax committee of Ukraine’s parliament, said a draft bill to legalize cryptocurrencies was under review and expected to be finalized early this year.
Ukrainian President Volodymyr Zelenskyy first signed a law establishing a legal framework for the country to operate a regulated crypto market in March 2022.
Magazine: New ‘MemeStrategy’ Bitcoin firm by 9GAG, jailed CEO’s $3.5M bonus: Asia Express
Digital asset manager 21Shares has filed with the US Securities and Exchange Commission to launch a spot Dogecoin exchange-traded fund, following similar filings from rivals Bitwise and Grayscale.
The 21Shares Dogecoin ETF would seek to track the price of the memecoin Dogecoin (DOGE), according to the firm’s April 9 Form S-1 registration statement. The Dogecoin Foundation’s corporate arm, House of Doge, plans to assist 21Shares with marketing the fund.
21Shares said Coinbase Custody would be the proposed custodian of its Dogecoin ETF but did not specify a fee, ticker or what stock exchange it would list on.
Source: James Seyffart
21Shares must also file a 19b-4 filing with the SEC to kickstart the regulator’s approval process for the fund.
DOGE currently has a $24.2 billion market cap and is the eighth-largest cryptocurrency by value. It was created in 2013 as a joke and is a fork of Lucky Coin, which itself is a fork of Bitcoin.
21Shares’ proposed Dogecoin ETF is the company’s latest effort to expand its spot crypto ETF offerings, which currently includes only a spot Bitcoin (BTC) and Ether (ETH) fund.
The issuer also filed with the SEC in February to launch a spot Polkadot (DOT) ETF and last year, it filed to create a spot XRP (XRP) ETF.
Related: Dogecoin millionaires are buying dips as DOGE price eyes 30% rally
The recent surge in crypto ETF filings reflects a “spaghetti cannon approach” from issuers testing which products the new SEC leadership might approve, Bloomberg ETF analyst James Seyffart said in February.
“Issuers will try to launch many many different things and see what sticks,” Seyffart said.
Seyffart and fellow Bloomberg ETF analyst Eric Balchunas said in February that there is a 75% chance that the SEC will approve a spot Dogecoin ETF this year, while the betting platform Polymarket currently gives approval odds of 64%.
21Shares and House of Doge partner for DOGE funds in Switzerland
21Shares also said on April 9 that it partnered with House of Doge to launch a fully backed Dogecoin exchange-traded product on Switzerland’s SIX Swiss Exchange.
The 21Shares Dogecoin product will trade under the ticker “DOGE” with a 2.5% fee.
21Shares president Duncan Moir said that Dogecoin “has become more than a cryptocurrency: it represents a cultural and financial movement that continues to drive mainstream adoption, and DOGE offers investors a regulated avenue to be part of this exciting project.”
Magazine: Memecoin degeneracy is funding groundbreaking anti-aging research
Update April 10 at 1:41am UTC: This article has been updated to include more background on Paul Atkins before becoming SEC chair.
The US Senate has confirmed US President Donald Trump’s nominee, Paul Atkins, as chair of the Securities and Exchange Commission in a 51-45 vote largely along party lines.
Atkins’ confirmation on April 9 comes after Trump named the pro-crypto former Wall Street consultant to lead the agency late last year. Atkins also served as an SEC commissioner between 2002 and 2008, during the global financial crisis.
”A veteran of our Commission, we look forward to him joining with us, along with our dedicated staff, to fulfill our mission on behalf of the investing public,” the agency’s commissioners wrote in an April 9 statement.
Atkins founded financial consulting firm Patomak Global Partners in 2009, specializing in regulatory compliance and risk management, and served as co-chair of crypto advocacy group Token Alliance between 2017 and late 2024.
After he’s sworn in, Atkins will take over from Mark Uyeda, who has been the SEC’s acting chair since Jan. 20, after former chair Gary Gensler stepped down. Gensler’s tenure saw the SEC launch multiple lawsuits and investigations against crypto firms over alleged breaches of securities laws.
Source: Cynthia Lummis
Senate Banking Committee Chairman Tim Scott expressed confidence that Atkins would continue the SEC’s crypto-friendly approach that it has taken under the Trump administration.
“Atkins will also provide regulatory clarity for digital assets, allowing American innovation to flourish, and ensuring we remain competitive on the global stage.”
Under Trump, the SEC created a Crypto Task Force to consult with the industry on regulation and dropped several crypto-related investigations and enforcement actions undertaken by the Gensler-led SEC.
Atkins is expected to take a different approach, telling a Senate confirmation hearing in March that a top priority of his at the SEC would be “to provide a firm regulatory foundation for digital assets through a rational, coherent, and principled approach.”
Atkins’ confirmation delayed by disclosures
Atkins’ confirmation was reportedly delayed due to several financial disclosures he needed to file as a result of marrying into a billionaire family.
Related: No crypto project has registered with the SEC and ‘lived to tell the tale’ — House committee hearing
He married Sarah Humphreys Atkins in 1990 — whose family is tied to TAMKO Building Products LLC, a manufacturer of residential roofing shingles that turned over $1.2 billion in revenue in 2023, Forbes reported in December. The couple have a reported combined net worth of at least $327 million.
Some of those financial disclosures revealed that Atkins owned up to $6 million worth of crypto-related investments, including crypto custody platform Anchorage Digital and blockchain tokenization platform Securitize, Fortune reported last month.
Magazine: SEC’s U-turn on crypto leaves key questions unanswered
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