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Rachel Reeves will rewrite the government’s fiscal rules in next week’s budget to allow her to increase borrowing for public investment by around £50bn.

Speaking to Sky News in Washington DC, the chancellor said that the self-imposed rule under which borrowing must be falling by the fifth year of economic forecasts will be redefined from the current measure of public sector net debt.

Ms Reeves would not be drawn on what measure will replace the current rule but there is speculation that she will favour using public sector debt net of financial liabilities (PSNFL).

Under this definition, investments such as the government’s student loans book are defined as assets rather than liabilities, which on current measures would allow a further £53bn of borrowing.

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The chancellor said the second fiscal rule, under which day-to-day spending must be funded from government revenue rather than borrowing, would be unchanged.

Growing consensus

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Ms Reeves cited support for increasing the debt threshold from leading British economists, as well as the International Monetary Fund, which this week said public investment should be protected and was “badly needed” in the UK.

She insisted the change was necessary to end years of declining public investment and deliver on Labour‘s promise to deliver growth.

“Under the plans that I have inherited from the previous Conservative government, public sector net investment as a share of our economy was due to decline steeply during the course of this parliament,” she said.

“I don’t want that path for Britain when there are so many opportunities in industries from life sciences to carbon capture, storage and clean energy to AI and technology, as well as the need to repair our crumbling schools and hospitals.”

Read more on the budget:
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Chancellor Rachel Reeves looking to ‘find £40bn’ in budget

Ms Reeves denied that she was effectively fiddling the rules to get around her manifesto pledge not to increase income tax, VAT or national insurance.

“The rule that really bites is the first rule, the stability rule, to get day-to-day spending funded by tax receipts. That’s something that the previous government weren’t even trying to achieve and we will show in the budget next week how we will deliver on that promise.

“The second role is about being responsible. By seizing the opportunities, but doing it in a way where we are making sure we’re getting value for money for every pound of taxpayer’s money spent.

“Of course we’ll put guardrails in place to ensure that every pound of taxpayers’ money that is spent is spent wisely, and will involve the National Audit Office and the Office of Budget Responsibility in that.”

The first test of the change in the debt rule will be the reaction of bond markets, which rose slightly on Thursday following reports of Ms Reeves’ plans.

Taken together, the redefined fiscal rules set the terms of a budget that is likely to see tax rises and public spending cuts balanced by more freedom to borrow.

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Tax rises not ruled out

Ms Reeves did not rule out a raft of tax rises, including adding national insurance to employers’ pension contributions, from which public sector employers may be exempt.

“I was clear in the statement I made to the House of Commons in July that there will be difficult decisions in this budget around spending, welfare and taxation. But the precise details I will set out to the House of Commons next week.

“I will be a responsible chancellor. I will be honest and transparent about the challenges we face, but also how we’ll fix them to wipe the slate clean after the mismanagement we’ve seen in the last few years under the Conservatives.”

Gareth Davies, shadow exchequer secretary, said: “Before the election Rachel Reeves promised that she would not ‘fiddle’ the fiscal rules, and now it seems she is going to do exactly that. Remarkably she is announcing this not to Parliament, but to the IMF in advance of the budget.

“This is already having real world effects, with borrowing costs rising. This uncertainty over additional borrowing risks interest rates staying higher and for longer. It’s families up and down the country who would pay the price.”

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Water companies blocked from using customer cash for ‘undeserved’ bonuses

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Water companies blocked from using customer cash for 'undeserved' bonuses

Nine water companies have been blocked from using customer money to fund “undeserved” bonuses by the industry’s regulator.

Ofwat said it had stepped in to use its new powers over water firms that cannot show that bonuses are sufficiently linked to performance.

The blocked payouts amount to 73% of the total executive awards proposed across the industry.

The regulator has prevented crisis-hit Thames Water, Yorkshire Water, and Dwr Cymru Welsh Water from paying £1.5m in bonuses from cash generated from customer bills.

It said a further six firms have voluntarily decided not to push the cost of executive bonuses worth a combined £5.2m on to customers.

Instead, shareholders at Anglian Water, Severn Trent, South West, Southern Water, United Utilities and Wessex will pay the cost.

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David Black, chief executive of Ofwat, said: “In stopping customers from paying for undeserved bonuses that do not properly reflect performance, we are looking to sharpen executive mindsets and push companies to improve their performance and culture of accountability.

“While we are starting to see companies take some positive steps, they need to do more to rebuild public trust.”

The announcement came in an Ofwat update on firms’ financial resilience and bonuses.

Industry lobby group Water UK said: “Almost all water company bonuses are already paid by shareholders, not customers.

“All companies recognise the need to do more to deliver on their plans to support economic growth, build more homes, secure our water supplies and end sewage entering our rivers.

“We now need the regulator Ofwat to fully approve water companies’ £108bn investment plans so that we can get on with it.

“Ofwat’s financial resilience report provides yet more evidence that the current system isn’t working, with returns down to 2% and eight companies making a loss.

“It is clear we need a faster and simpler system which allows companies to deliver for customers, the environment and the country.”

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Google could be forced to sell its Chrome browser over internet search monopoly claims

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Google could be forced to sell its Chrome browser over internet search monopoly claims

Google must sell its Chrome browser to restore competition in the online search market, US prosecutors have argued.

The proposed breakup has been floated in a 23-page document filed by the US Justice Department.

It also calls for lawmakers to impose restrictions designed to prevent its Android smartphone software from favouring its own search engine.

If the rules were brought in, it would essentially result in Google being highly regulated for 10 years.

Google controls about 90% of the online search market and 95% on smartphones.

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Grieving parents tell Ofcom to ‘step up’ over social media content

Court papers filed on Wednesday expand on an earlier outline for what prosecutors argued would dilute that monopoly.

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Google called the proposals radical at the time, saying they would harm US consumers and businesses and shake American competitiveness in AI.

The company has said it will appeal.

The US Department of Justice (DoJ) and a coalition of states want US District Judge Amit Mehta to end exclusive agreements in which Google pays billions of dollars annually to Apple and other device vendors to be the default search engine on their tablets and smartphones.

Google will have a chance to present its own proposals in December.

A trial on the proposals has been set for April, however President-elect Donald Trump and the DoJ’s next antitrust head could step in.

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Dozens of partners take early retirement from accountancy giant PwC

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Dozens of partners take early retirement from accountancy giant PwC

Dozens of partners at PricewaterhouseCoopers (PwC), Britain’s biggest accountancy firm, will next month take early retirement as its new boss takes steps to boost its performance.

Sky News has learnt that PwC’s 1,030 UK partners were notified earlier this week that a larger-than-usual round of partner retirements would take place at the end of the year.

Sources said the round would involve several dozen partners – who command average pay packages of about £1m – leaving the firm.

PwC named about 60 new partners earlier this year under Marco Amitrano, who was appointed as its new UK boss in the spring.

Mr Amitrano is understood to have informed partners about the changes in a voice memo, although one insider disputed the idea that the numbers involved were “significant”.

The partner retirements come as the big four audit firms contend with a sizeable bill from increases in the Budget in employers’ national insurance contributions.

It emerged this week that Deloitte is cutting nearly 200 jobs in its advisory business, according to the Financial Times.

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An ongoing shake-up of the audit profession is not being restricted to the big four firms, with Sky News revealing on Wednesday that Cinven, the private equity firm, was in advanced talks to buy a controlling stake in Grant Thornton UK.

The deal, which is expected to value Grant Thornton at somewhere in the region of £1.5bn, was announced on Thursday morning.

PwC declined to comment.

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