Chancellor Rachel Reeves to change public finance rules to borrow more for investment
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
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.”
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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 taxpayers’ 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’s 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.”
UK
Newcastle: Three men arrested in connection with deadly house explosion and on suspicion of cannabis production
Three men have been arrested in connection with a deadly house explosion in Newcastle.
Seven-year-old Archie York and Jason Laws, who was in his 30s, were killed following the blast in Violet Close, in the Benwell and Elswick area of the city in October.
Police said at the time that six others were taken to hospital “with varying injuries” after the blast and subsequent fire.
Three men – two in their 30s and one in his 50s – have been arrested on suspicion of two counts of manslaughter, and the production of a Class B drug, namely cannabis, Northumbria Police said.
They all remain in police custody.
Detective Chief Inspector Katie Smith said: “This has been a truly tragic incident which resulted in the loss of two lives.
“As a result of our ongoing enquiries, three men have today been arrested in connection with the explosion.
“Our investigation will remain ongoing as we seek to provide answers to what has happened.
“We would continue to ask people to avoid speculation surrounding this incident both online and in the community.”
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From October: Deadly blast destroys Newcastle house
The blast tore through a row of six properties divided into two flats each.
Drone footage showed how six flats in the middle of the building appeared to have been completely destroyed by the explosion and fire, while piles of debris could be seen in the street outside.
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Superintendent Darren Adams, from Northumbria Police, said on the day of the fire: “As a result of the incident in the early hours of this morning, a seven-year-old boy has sadly passed away.
“Despite the efforts of the emergency services, he tragically died at the scene.
“This is a truly devastating outcome.”
Prince William has given an update on the Princess of Wales’s health, describing her as “amazing”.
Ahead of tonight’s Earthshot Prize awards in Cape Town, he was asked how his wife Kate was doing and replied: “She’s doing really well thanks. Hopefully she’s watching tonight and cheering me on.
“She’s been amazing this whole year and I know she’ll be really keen to see tonight be a success.”
Kate revealed in March she was having preventative chemotherapy following the discovery of pre-cancerous cells.
In September, she announced she had completed her treatment and said her focus now is on “staying cancer free”.
Throughout the year, Prince William hasn’t discussed his wife’s diagnosis, despite still continuing with his own public duties.
William and Kate at a community engagement last month. Pic: Andrew Parsons/Kensington Palace
William answered questions after taking part in rehearsals for tonight’s Earthshot Awards, the environmental prize he launched in 2021 to try to inject some optimism into the climate crisis debate.
Since he’s been in Cape Town he’s been spotted wearing a bracelet with the word ‘papa’ on it, given to him by his daughter Princess Charlotte.
He explained: “This is a relic from a Taylor Swift concert that my daughter decided that she wanted to create a bracelet for, and she gave it to me when I came away so I’ve promised her that I’d wear it and try not to lose it while I was out here.”
He also shared how he’s trying to make sure his three children feel involved in his environmental work, including doing things around the house.
The Prince of Wales in Cape Town today. Pic: PA
The prince said: “Every family tries to do what they can to help with the environment and we go through the basics of recycling and making sure we minimise water use, turning lights off when you leave the house. We’re sensible with what we do around the environment. I think every family has those conversations.
“The Earthshot is trying to be more global than that – we’re trying to do big-scale ambition and business. I’ve brought the children along on that journey and I hope they’re proud of what we are trying to do here which is to galvanise that energy and enthusiasm to make real impact.”
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Asked about the tough political climate for the environment right now, Prince William didn’t make any comment about the US election result and Donald Trump’s climate credentials, but said: “Everyone wants some hope and some optimism and Earthshot comes with urgent optimism.
“And as you’ll see tonight the amount of youth from Africa who will be in here – they’ll be letting you know and letting everyone know that it matters to them.
“Without them, the future is looking pretty bleak so these are the game changers, the innovators, the inventors who are going to make the world a better place for us in future.”
The annual Earthshot Prize awards five entrepreneurs, innovators, startups or conservationists with £1m each to help scale their ideas to tackle some of the world’s most pressing environmental issues.
This is the fourth year the awards have been held.
Sara Sharif’s father has told a court he did not beat the 10-year-old girl, claiming his wife was “very, very, crazy” and accusing her of abuse.
Taxi driver Urfan Sharif, his wife Beinash Batool and brother Faisal Malik are on trial at the Old Bailey accused of Sara’s murder in August last year.
Sara was found dead in bed at the family’s home in Woking, Surrey, after Sharif called police from Pakistan and said he had beaten her “too much”.
A post-mortem found dozens of injuries, including burns and human bite marks.
Giving evidence in court on Wednesday, Sharif said: “Everything happened at home while I was at work.
“I did not beat her, do anything to her.”
(L-R) Urfan Sharif, Beinash Batool and Faisal Malik deny murder. Pics: Surrey Police
In WhatsApp messages to her sisters, Batool claimed her husband had beaten his daughter “like crazy” over at least two years.
Sharif denied this and instead alleged his wife – who was Sara’s stepmother – was “very, very crazy”, highlighting video evidence allegedly showing she abused him.
He said he recorded the incidents “so that she (would) leave me alone” and “stop what she was doing”.
The taxi driver alleged his wife did not “care about anything at all” and claimed her family said: “Someone has done black magic on her.”
Sharif became emotional as he told jurors: “I used to jump through the kitchen window as she would lock the front door.
“Most of the time when she was angry, I jumped through the living room window.”
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The court was shown two videos from Sharif’s Google drive. One was filmed in February 2016 after his wife accused him of flirting with a hospital nurse, he said.
In the video, he could be heard saying: “You are pushing me. You are abusing me. Get off me.
“You are hitting me. I’m going to use this as evidence I’m telling you now.”
Batool demanded for him to stop filming and said: “I ain’t scared of you.”
Addressing what the video showed, Sharif told the court: “She kicked me. I ran to the other room, she is standing in front of the door so I cannot leave.”
A second video, dated 26 June 2019, saw Sharif repeatedly asking his wife to “let me go” before jumping out of a window.
He told jurors Batool “slapped” him, adding: “You have a choice either to fight with that person or leave.
“I tried to leave but she locked the front door. I jumped through the kitchen window.”
Sharif, 42, Batool, 30, and Malik, 29, deny murder and causing or allowing the death of a child between 16 December 2022 and 9 August 2023.
The trial continues.
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