Chancellor Rachel Reeves looking to ‘find £40bn’ in budget

Published

1 year ago

October 16, 2024

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Rachel Reeves is looking to fill a £40bn black hole in the country’s finances, Sky News understands.

According to people close to the budget, the gap in funding identified by the chancellor is more than twice what was previously thought.

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Ms Reeves has previously said the Conservatives left the new government with a £22bn shortfall, requiring “tough decisions” like axing the winter fuel payment.

This has led to speculation Labour may introduce measures such as a national insurance increase for employers to raise more cash.

The Treasury does not comment on budget speculation.

According to the Financial Times, the £40bn figure represents the funding the chancellor needs to protect key government departments from real terms spending cuts, cover the impact of the £22bn overspend from the last administration and build up a fiscal buffer for the rest of parliament.

The paper said she was eyeing big tax rises to patch up the NHS in particular.

However, the government has left itself with little wiggle room after ruling out a rise in national insurance, income tax and VAT in its manifesto.

Ministers have since said that this meant not “increasing tax on working people” – leaving the door open for the employer element of national insurance to go up.

Budget talk all spin – and we should be used to it

Jon Craig

Chief political correspondent

@joncraig

The “black hole” just got deeper. Or so the chancellor claims.

After telling us for weeks that the funding gap was £22bn, Rachel Reeves says it’s almost double that: £40bn. Fact? Or political propaganda?

She’s told the cabinet the £22bn “black hole inheritance” from the Tories needed to be filled “just to keep public services standing still”.

And Sir Keir Starmer told ministers – at a “political cabinet” with no civil servants present – that the budget would see “tough decisions so we can invest in the future”.

In other words, if the chancellor is to avoid big spending cuts in front line services like health and education, there’ll have to be more unpopular tax rises.

The timing of this apparent deepening of the “black hole” is highly significant. It comes as Labour faces accusations of breaking its manifesto pledge not to increase national insurance.

The new £40bn figure has emerged just hours before Sir Keir faces Rishi Sunak at prime minister’s questions and a potentially embarrassing onslaught over the national insurance tax hike.

A conspiracy theorist might even suggest the new £40bn claim was a cynical attempt by Downing Street to divert attention from the row over the PM meeting Taylor Swift and the star’s blue-light escort.

Shadow chancellor Jeremy Hunt has already claimed the £22bn figure is a lie. But then George Osborne accused Labour of leaving a £12bn black hole when he became chancellor in 2010.

It’s all spin, of course. We should be used to it by now. Reeves also told the cabinet the government can’t turn around 14 years of decline in one year or one budget.

Yet at the same time she said the budget would “protect working people, fix the NHS and rebuild Britain”. That’s an ambitious boast, if the “black hole” really is £40bn.

A one percentage point increase in the Class 1 rate could raise £8.45bn over the 2025 to 2026 tax year, and a two percentage point hike could raise £16.9bn, according to data compiled by HMRC and EY.

Meanwhile, introducing national insurance on employer pension contributions could raise around £17bn per year if taxed at the same 13.8% rate, according to the Institute for Fiscal Studies (IFS).

Experts have cautioned that any increase in employer national insurance would mean higher costs for businesses, which could impact their staff and customers.

Paul Johnson, director of the IFS, told Sky News on Tuesday night that the tax rise could lead to less pay rises and fewer jobs.

The influential thinktank estimates Ms Reeves may need to raise up to £25bn from tax increases if she wants to keep spending rising with national income, and honour Labour’s pledge not to return Britain to austerity.

As well as tax rises, there is also speculation Ms Reeves could change her fiscal rules to enable more borrowing.

It is thought the chancellor could change how debt is calculated, which could in turn alter how much debt the UK officially has and give Ms Reeves room to borrow more.

Politics

PM backs call for MP investigation into Prince Andrew’s housing arrangement

Published

2 hours ago

October 22, 2025

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PM backs call for MP investigation into Prince Andrew's housing arrangement

Sir Keir Starmer has backed a call for a Commons investigation into Prince Andrew’s housing arrangement.

The King’s brother is still living in the Royal Lodge, a 30-room Windsor mansion owned by the Crown Estate, despite relinquishing his Duke of York title last week.

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It has emerged he only pays a “peppercorn rent” on the property – a legal term used in leases to show that rent technically exists, so the lease is valid, but it’s nominal – often £1 a year or even nothing at all.

Liberal Democrat leader Sir Ed Davey has called for a select committee inquiry into the Crown Estate, in which Prince Andrew would be called to give evidence.

Speaking in Prime Minister’s Questions, Sir Ed said: “Given the revelations about Royal Lodge, does the prime minister agree that this House needs to properly scrutinise the Crown Estate to ensure taxpayers’ interests are protected.

“The chancellor herself has said that the current arrangements are wrong.

“So will the prime minister support a select committee inquiry, so all those involved can be called for evidence, including the current occupant?”

Responding, Prime Minister Sir Keir Starmer said: “It’s important in relation to all Crown properties that there is proper scrutiny, and I certainly support that.”

A document from the Crown Estate, which oversees the Royal Family’s land and property holdings, shows Andrew signed a 75-year lease on the Royal Lodge in 2003.

It reveals he paid £1m for the lease and that since then he has paid “one peppercorn” of rent “if demanded” per year.

Andrew was also required to pay a further £7.5m for refurbishments completed in 2005, according to a report by the National Audit Office.

The agreement also contains a clause that states the Crown Estate would have to pay Andrew around £558,000 if he gave up the lease.

The royal is under pressure to do just that amid continued scrutiny over his relationship with paedophile financier Jeffrey Epstein.

There has also been fresh focus on his sex accuser Virginia Giuffre’s allegations, which Andrew denies, after the publication of her posthumous memoirs.

Senior Tory Robert Jenrick said it was “about time Prince Andrew took himself off to live in private” as “the public are sick of him”.

Asked about his living arrangement on Tuesday, Chancellor Rachel Reeves told the BBC: “I do think people should pay their way and pay their fair share.”

Politics

‘Man deported under ‘one in, one out’ scheme returns to UK in small boat

Published

2 hours ago

October 22, 2025

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'Man deported under 'one in, one out' scheme returns to UK in small boat

A migrant who was deported back to France under the government’s flagship “one in, one out” scheme has returned to the UK on a small boat.

The Iranian national was initially detained when he entered the UK on a small boat on 6 August. He was removed under the government’s deal with France on 19 September, and he returned on 18 October.

He has been detained once again, and Sky News understands that the government is set to expedite his removal back to France.

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The news comes as Sky News learns that more migrants have crossed the Channel on a small boat in 2025 so far than the entirety of 2024.

The “one in, one out” treaty with France allows the UK to return anyone who arrives in the UK on a small boat back to France, in exchange for France sending to the UK the same number of people who have never previously tried to enter illegally.

The man told The Guardian newspaper that he had been a victim of modern slavery at the hands of people smugglers in northern France.

“If I had felt that France was safe for me I would never have returned to the UK,” he claimed.

“When we were returned to France we were taken to a shelter in Paris. I didn’t dare to go out because I was afraid for my life. The smugglers are very dangerous. They always carry weapons and knives. I fell into the trap of a human trafficking network in the forests of France before I crossed to the UK from France the first time.

“They took me like a worthless object, forced me to work, abused me, and threatened me with a gun and told me I would be killed if I made the slightest protest. Every day and every night, I was filled with terror and stress. Every day I live in fear and anxiety, every loud noise, every shadow, every strange face scares me.

“When I reached UK the first time and Home Office asked what had happened to me I was crying and couldn’t speak about this because of shame.”

The UK government’s position is that France is a safe country.

‘Rwanda is further than France’

The aim of the agreement with France is to create a disincentive for migrants to make the dangerous crossing across the Channel. But Downing Street repeatedly refused to describe the scheme as a “deterrent” this afternoon, insisting that the scheme is among a number of measures the government is taking to stop small boat crossings.

A Home Office spokesperson said in a statement: “We will not accept any abuse of our borders, and we will do everything in our power to remove those without the legal right to be here.

“Individuals who are returned under the pilot and subsequently attempt to re-enter the UK illegally will be removed.”

Former Tory home secretary James Cleverly quipped on social media that “Rwanda is a lot further away than France”, arguing that had their embattled scheme got off the ground, it would have been harder for migrants to make the return journey.

The prime minister is hosting Western Balkans leaders on Wednesday as the government tries to crack down on people smuggling and illegal migration.

But despite various government efforts, Sky News understands that more migrants have crossed the English Channel in small boats so far this year than in the whole of 2024, Sky News understands

While the exact number of people who have made the crossing today is not set to be published until tomorrow, Home Office sources have confirmed that more than 36,816 people – the total for 2024 – have now crossed the Channel so far in 2025.

Home Secretary Shabana Mahmood said in a statement: “The previous government left our borders in crisis, and we are still living with the consequences. These figures are shameful – the British people deserve better.

“This government is taking action. We have detained and removed more than 35,000 who were here illegally. Our historic deal with the French means those who arrive on small boats are now being sent back.

“But it is clear we must go further and faster – removing more of those here illegally, and stopping migrants from making small boat crossings in the first place.

“And I have been clear: I will do whatever it takes to restore order to our border.”