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Sir Keir Starmer has confirmed there will be tax rises in the budget to prevent a “devastating return to austerity” and rebuild public services.

In a speech in Birmingham, the prime minister also announced the £2 bus fare cap will rise to £3, while £240m will be injected into efforts to get people back to work.

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It follows weeks of speculation on how the government plans to grow the economy and close a £40bn blackhole in the nation’s finances when it delivers its first fiscal statement on Wednesday.

Giving a teaser of what is to come, Sir Keir said: “It is time to embrace the harsh light of fiscal reality.

“Stability to prevent chaos. Borrowing will drive long term growth. Tax rises to prevent austerity and rebuild public services.”

Sir Keir did not specify what tax rises would be included, but it is widely expected that employer national insurance will go up, alongside possible increases to capital gains and inheritance tax.

Ministers have been facing repeated questions about the government’s definition of “working people”, after Labour’s election manifesto pledged not to increase taxes on working people – explicitly ruling out a rise in VAT, national insurance and income tax.

Read more:
What is likely to be in the budget?
PM denies ‘waging war against middle Britain’

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Can tax rises in future budgets be ruled out?

Facing down critics, the prime minister said a return to austerity would be “devastating” and “disastrous”.

“This is not 1997 when the economy was decent, but public services were on their knees.

“And it’s not 2010 where public services were strong, but the public finances were weak.

“We have to deal with both sides of that coin. These are unprecedented circumstances.”

The Budget - a special programme on Sky News

Sir Keir said the budget, to be delivered by Chancellor Rachel Reeves, will include funding for local services to help get people back to work.

He said the UK is “the only G7 country for whom economic inactivity is still higher than it was before COVID”.

“That’s not just bad for our economy, it’s also bad for all those who are locked out of opportunity,” he said.

“So the chancellor will announce £240m in funding to provide local services that can help people back into work.”

Clearest indication yet that tax rises are coming


Liz Bates is a political correspondent

Liz Bates

Political correspondent

@wizbates

This may be the starkest terms we’ve ever heard the prime minister speak in as Wednesday’s defining budget looms.

He repeated the refrain of “tough choices” suggesting the pain inflicted by the cuts to the winter fuel allowance was just the beginning.

This is also the clearest expression ever that tax rises are coming, with Sir Keir Starmer describing them as necessary to prevent austerity.

What was also clear was his concept of “working people” – those who are just about getting by financially, and his determination to put them first.

It was resolute and determined, but as the budget approaches it does create a political risk, as those who don’t fit into that narrow category – business owners, pensioners, and others – are left wondering how hard they are going to be hit.

Taking questions afterwards, he confirmed reports that the £2 bus fare cap will go up by 50%.

He said the previous government only funded the current limit to the end of 2024 “and therefore that is the end of the funding in relation to a £2 capped fare”.

“I do know how much this matters, particularly in rural communities where there’s heavy reliance on buses,” he said.

“And that’s why I’m able to say to you this morning that in the budget we will announce there will be a £3 cap on bus fares to the end of 2025 because I know how important it is.”

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A ‘revenge’ reshuffle, the next budget and asylum – 30 things to watch for this upcoming political season

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A 'revenge' reshuffle, the next budget and asylum - 30 things to watch for this upcoming political season

We’re back. From Monday, MPs will stream under the portcullis back into the Commons chamber. But this is far from a straightforward autumn, with dangers for all the leaders lurking everywhere.

On the Politics at Sam and Anne’s podcast, released each morning at 7.45am, Anne McElvoy and I give the first guide of the day to what’s coming up.

To get you back in the mood, listen to our back-to-school episode and our “summer box set” deep dives on key issues, and listen daily from Monday.

👉Listen to Politics at Sam and Anne’s on your podcast app👈

Here are 30, no less, things to look out for the autumn, explaining why you can’t tune out from what promises to be a very exciting term.

1. Despite firm Downing Street denials before the summer that this would happen now, there’s highly likely to be a ministerial reset next week.

2. Although the cabinet is likely to be safe, and people like Bridget Phillipson were given personal guarantees from Sir Keir Starmer that they are going nowhere, some in Number 10 have been pushing that the whips should be included in the reshuffle after the welfare vote catastrophe before the summer.

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3. Find out the very latest when we return properly on Monday, Politics at Sam and Anne’s – back daily, in your feeds from 7.30am.

4. And it’s going to be a good one, since everyone expects it to be a “revenge” reshuffle – among the targets are thought to be some ministers actively believed to have been helping the welfare revolt, and loyalists want to see them sacked.

“Loyalists called Josh” will be promoted, said one aide, waspishly.

5. Having redeployed the Number 10 principal private secretary, the official who helps filter advice to Sir Keir, this critical role is now expected to be filled by Dan York Smith, a longtime Treasury aide.

This matters because for many years, this Treasury official was in charge of the budget process and subsequently worked on tax policy. So, Number 10 cannot pretend it doesn’t have the expertise in the run-up to the budget.

6. Indeed, the date of the budget might come next week. The Office for Budget Responsibility (OBR) needs at least 10 weeks’ notice.

By my calculations, that would seem to take us to the second week of November, just past half term. Here’s hoping there’s no clash.

7. You can hear more about Chancellor Rachel Reeves’ challenges in the budget in an economics and Treasury special of the Politics at Sam and Anne’s podcast featuring Ed Conway, part of our summer deep dive into key issues facing the government.

8. The OBR’s twice-yearly assessments have turned into hideous trials for Reeves, since she repeatedly decided to borrow so close to tight self-imposed limits.

Reeves could decide this autumn to move from two to one OBR assessments a year – if you don’t ask the question, you can’t get a bad answer.

9. At the start of the summer, economists were suggesting the OBR would say at the November budget that there is a £20-30bn black hole to meet her fiscal rules. Over the summer, that seems to have extended to £40-50bn. Thankfully for ministers, nobody knows – yet.

10. The Treasury has adopted a position of refusing to shut down any idea being floated to raise money in the budget. Therefore, EVERY idea is being treated with equal prominence and horror.

Whether or not people – eg house movers – start adjusting behaviour because of the speculation.

11. First quote to bookmark, Rachel Reeves in response to suggestions that the answer is a wealth tax on 1 August: “In the budget last year, we got rid of the non-domicile status in our tax system, so people who make Britain their home have to pay their taxes here.

“We increased taxes on private jets, on second homes, and increased capital gains tax (CGT), so I think we’ve got the balance right in terms of how we tax those with the broadest shoulders.”

12. Second quote to bookmark: After the Tories suggested Labour might scrap the capital gains tax exemption on primary residences before the election, Sir Keir said in June 2024 that he could “absolutely” guarantee that they would not.

“This was just a desperate story by the Tories in relation to capital gains tax on primary residences,” he said, adding: “There was never a policy so it doesn’t need ruling out, but let’s rule it out in case anybody pretends that it was.”

A Labour spokesman went further, saying that Labour would not put CGT on primary residences and said: “It’s a bad idea.” Put this point in your favourites.

13. Neither the main parties will be returning to Westminster with too much of a spring in their step. This week’s YouGov/Sky News poll put Reform UK on 28%; Labour on 20%; the Tories on 17%; Lib Dems on 16% and the Greens – mid leadership contest until next Tuesday – on 11%.

The Labour figure is their lowest so far this parliament (and indeed, lowest since 2019).

14. The conference season hits with a bang. Next Friday and Saturday is Reform UK in Birmingham, 5 and 6 September. The Trades Union Congress (TUC) is the following week, Sunday 7 to Wednesday 10 September.

Labour conference begins the following Sunday – the 27th – in Liverpool, Greens on 3 October and Tories begin on 5 October in Manchester.

15. There will be extra episodes of Politics at Sam and Anne’s over the conference season. We are going to do Sunday lunchtime episodes at Labour and Tories, since everyone’s weeks start a day earlier.

There’ll be quick turnaround episodes after the key speeches. Make sure you keep coming back to our podcast feed.

16. Of all the different conferences, the Tories’ feels like it could be the most consequential. It’s Kemi Badenoch’s first as leader – the leadership contest was underway last time.

She’s likely to announce a policy of leaving the European Convention on Human Rights (ECHR) and pausing the various refugee conventions signed after the Second World War, although Nigel Farage has stolen her thunder.

Even front benchers were unimpressed with her “wasted” summer – talking about her loss of faith rather than hammering Labour and Reform UK on the economy. It needs to go well for her.

17. And in the middle of this is Donald Trump’s state visit from 17 September to 19 September, while the UN General Assembly (which may have Angela Rayner rather than Sir Keir attending) is 23-27 September, and the European Political Community is in Budapest on 2 October. The Commons is back after conference season on 13 October – which feels late.

18. Migration, asylum and deportation have dominated the summer. Home Secretary Yvette Cooper did manage a holiday – but has lots to do.

Asylum seekers who are refused sanctuary in Britain are seeing their appeals take an average of 54 weeks to be heard.

There were 50,976 outstanding appeals as of March, which is almost double the number compared with 2024, and seven times higher than in 2023 on top of the almost 79,000 asylum claims awaiting an initial decision.

As of March, there were a total of 106,771 asylum seekers in receipt of taxpayer-funded support, including 32,345 in hotels. Asylum seekers received this support for an average of 413 days.

Taxpayers coughed up £3.1bn for hotel accommodation for asylum seekers in 2023-24, which equated to about £8m a day. Phew.

19. Some of the migrants detained before deportation to France are appealing on human rights grounds, delaying the first individuals going back.

Separately, the Home Office is waiting for the outcome of its appeal against Epping Forest District Council after the High Court ruled that migrants must be removed from the Bell Hotel after the council claimed it had become a “feeding ground for unrest”.

Finally, the Home Office is waiting for the French government to change maritime law to empower French police to tackle migrants in the Channel, but the government may collapse before it can.

20. While Reform UK has pledged to leave the ECHR and the Tories are likely to follow suit at conference, Labour moves are much more limited. Yvette Cooper is reviewing Article 3 (privacy) and Article 8 (family life). Will we hear the outcome of that at Labour conference?

21. Also this autumn, from the Home Office, you’re going to see two other big things. There’s the (delayed) strategy to halve violence against women and girls. There wasn’t much money for this extremely ambitious target in the spending review, but charities are still being told to think big.

22. There’s also going to be a police white paper. This needs to generate a reform plan, which can form part of a pitch to the Treasury for more money for policing in the budget. Could this include force consolidation? Not yet clear.

23. You can hear more about all the challenges in home affairs with veteran home affairs journalist and one-time Labour adviser Danny Shaw on a Politics at Sam and Anne’s special. Shaw is far from clear that the French plan will work as a deterrent, and points out that the rest of the EU has to agree to make the plan permanent.

24. French President Emmanuel Macron will recognise a Palestinian state on 24 September, just after Donald Trump’s departure from the UK after a state visit.

Officials believe Sir Keir will hold true to his pre-summer ultimatum to Israel and recognise a Palestinian state at the same time – but the politics of this is tricky and will put him at odds with Trump during the state visit.

25. US network CBS has reported that the US has stopped sharing Ukraine intelligence with the Five Eyes network, including Britain. This will be high on the agenda for the state visit when Sir Keir meets Trump.

US Director of National Intelligence Tulsi Gabbard said in a memo that all information on Russia-Ukraine peace negotiations be withheld from US allies, and talks were reportedly classed as “NOFORN” by US intelligence, meaning no foreign dissemination. Gabbard subsequently denied this.

26. In other foreign news for the autumn, the European Commission has to determine its mandate for the new deal with the UK, which will bring our SPS – food and agriculture safety – rules in line within the bloc, and consequently mean less friction in trade.

There’s a “common understanding” but no final decision on the EU side. EU relations minister Nick Thomas-Symonds, who is leading on this, thinks he can complete negotiations by 2027. Will he succeed?

27. Health Secretary Wes Streeting had a better summer than most. He got the 10-year NHS plan out of the door pre-summer, although the NHS finances remain in a terrible state.

But he managed at least to pause the resident (junior) doctors’ strikes. While there isn’t a resolution, this is a start. Can he follow through?

28. Education Secretary Bridget Phillipson has a much trickier autumn ahead. She will oversee reform of Special Educational Needs and Disabilities (SEND) which – if mishandled – could lead to the biggest clash with Labour MPs since the welfare revolt.

It may not – but we haven’t heard much detail or pitch rolling. They want to “tilt (special needs) back to the mainstream” – with Canada as a model. It’s “going to take years”, and there is no overnight fix, I’m told. But this is delicate and MPs are worried.

There’s also a wider white paper that seeks to boost extra-curricular activities, and Phillipson will continue her focus on early years, although nursery funding remains a contentious area.

29. …deep breath. There’s also a curriculum review, seeking to embed “oracy, criticality and digital skills”, while the delayed new Ofsted grading system comes in.

Also, they’re working on how to improve university funding sustainability – which sounds like annual inflation increases in tuition fees.

30. Will the Lords kill the Assisted Dying Bill? This will come down firstly to arcane rules on timing in the Lords. There are two sitting Fridays a month.

But then, even if it manages to pass the Lords, there are currently no further sitting Fridays in the Commons scheduled for this session, so the government will come under pressure to put on some extras – but have said they won’t intervene to give it more time.

One senior government figure (who backs it) told me they thought the chances of it passing are worse than 50/50.

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