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The Labour manifesto never did add up.

On the one hand, Keir Starmer vowed there would be “no return to austerity” under his government, while also insisting he had “no plans” to raise taxes beyond an £8bn raid on private equity, oil and gas companies, private school fees and non-doms to pay for more teachers and NHS appointments.

In reality, whoever won the election faced tens of billions of pounds in tough choices over tax and spending. But instead of levelling with us, the two main parties embarked in a “conspiracy of silence” in order to win votes.

On Wednesday, the truth will out, in a budget which will define Sir Keir Starmer’s first term in a way his manifesto did not.

Countdown to budget enters final stretch – Politics Latest

There will be huge tax rises and there will be changes in the fiscal rules to allow the chancellor to borrow more to invest in Britain’s crumbling infrastructure.

And we will finally find out which “working people” are the ones Sir Keir Starmer wants to protect as small and big businesses, property owners, shareholders – and perhaps “Middle England” too – braces itself for tax rises, and the government braces itself for the fall-out.

The prime minister set the hare running on who’s in the firing line for tax rises last week at the Commonwealth Heads of Government summit in Samoa when he told me “working people” were those who “go out and earn their living, usually paid in a sort of monthly cheque” but they did not have the ability to “write a cheque to get out of difficulties”.

He told me explicitly that “working people” who also owned assets, such as property or shares, did not fit his definition.

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What to expect from the budget

So business owners, property owners and Middle England do have some cause for alarm.

The pledge to “not increase national insurance, the basic, higher, or additional rates of income tax, or VAT” has been tweaked in recent weeks to a promise to “protect the payslips of working people”.

Employers are expecting an increase in national insurance contributions they must pay on wages – many will argue this is a flagrant breach of a manifesto pledge.

In another blow to employers, but a win for those struggling on low wages, Labour have also announced a 6.7% increase in the National Living Wage for over three millions workers next year, amounting to a pay boost worth £1,400-a-year for an eligible full-time worker.

Is this the moment the manifesto is revealed as a sham? Labour insiders insist not and point, again, to the “£22bn black hole” in the current financial year they discovered when their took office – and which ratchets up to a £40bn gap in the public finances over the course of the parliament – that they now have to plug.

Politically, they hope to blame the big tax rises and borrowing on the economic inheritance left to them by the Tories and buy some space with voters.

As one senior government figure put it to me: “The scale of the economic inheritance is bigger than thought and it has blown a political and economic hole in our first few months.”

This will be a message Rachel Reeves will want to land at the despatch box on Wednesday. But a public disillusioned with politicians might not see it like that as they watch a Labour chancellor, flanked by a prime minister who promised the opposite in the election, embark on a massive round of tax rises that but months ago they were told were not coming down the tracks.

Ms Reeves is set to deliver the budget from 12.30pm. Pic: Treasury
Image:
Ms Reeves is set to deliver the budget from 12.30pm. Pic: Treasury

Insiders acknowledge this is going to be a tax and spend budget that goes far beyond what we were told to expect when Labour were asking for votes.

But they hope what they can do with this big moment is to take it beyond the winners and losers and frame this first Labour budget in over 14 years as “forging a new settlement” for the people and the country.

To that end, this will be the “fixing the foundations and change” budget: “This is a new economic settlement from a government willing to investment and, in particular, borrow to invest, and that is a change and it will show a path towards long term growth.”

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Because, as we drill into who is a working person, and who is going to be hit with tax raises in this budget, there will also be a big story tomorrow about billions of investment in our country’s energy and transport infrastructure, into housing and hospitals and schools.

“If we get it right, on the evening of the budget, we want to be able to show that we protected your pay slip, are fixing the NHS and investing to rebuild Britain,” one senior figure explains. “What’s the alternative? Choice is going to feature very heavily in the chancellor’s speech. We have made our choices and we are asking business and the wealthiest to pay a bit more to grow our economy and protecting working people.”

And this new settlement, when it lands tomorrow, will be massive. The Chancellor Rachel Reeves intends to change her borrowing rules to allow up to £53bn more in borrowing to be spent on public services and infrastructure.

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Trailing the decision at the International Monetary Fund summit in Washington last week, the chancellor said she was making the change in order to take opportunities for the economy “in industries from life sciences to carbon capture, storage and clean energy to AI and technology”, as well as using borrowing to “repair our crumbling schools and hospitals”.

The danger for the chancellor is that what actually comes out the other side is anger over tax rises not flagged in the manifesto, or accusations that the government is being Janus-faced if it claims it’s protecting working people should it also, as speculated, extend the freeze on income tax thresholds beyond the 2028 deadline set by the last government, which would drag millions of workers into higher tax bands (and raise as much as £7bn a year for the government).

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Will there be ‘budget nasties?’

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How might the middle classes and wealthier voters respond to their incomes being squeezed? And how might business respond to being asked to pay billions more in taxes from a government that has been banging on about being pro-business for months?

It is going to be a difficult sell, no doubt. But this government is calculating that short-term pain now will translate into gains in the medium to long-term if Reeves can pull it off and kick-start economic growth.

The hope is that come the next Labour manifesto, the pledges on the NHS, economy, better housing and jobs have been met and the public can forgive the tax rises foisted on them to get there.

Starmer talked endlessly about it being a change election and it will be this be this budget, not his manifesto, that proves the point.

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No 10 backs Chancellor Rachel Reeves and says she ‘is going nowhere’ after tearful appearance in Commons

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No 10 backs Chancellor Rachel Reeves and says she 'is going nowhere' after tearful appearance in Commons

Rachel Reeves has not offered her resignation and is “going nowhere”, Downing Street has said, following her tearful appearance in the House of Commons.

A Number 10 spokesperson said the chancellor had the “full backing” of Sir Keir Starmer, despite Ms Reeves looking visibly upset during Prime Minister’s Questions.

Politics latest: ‘A moment of intense peril’ for PM

A spokesperson for the chancellor later clarified that Ms Reeves had been affected by a “personal matter” and would be working out of Downing Street this afternoon.

Politics latest: Reeves looks visibly upset in Commons

UK government bond prices fell by the most since October 2022, and the pound tumbled after Ms Reeves’s Commons appearance, while the yield on the 10-year government bond, or gilt, rose as much as 22 basis points at one point to around 4.68%.

Downing Street’s insistence came despite Sir Keir refusing to guarantee that Ms Reeves would stay as chancellor until the next election following the fallout from the government’s recent welfare U-turn.

Tory leader Kemi Badenoch branded the chancellor the “human shield” for the prime minister’s “incompetence” just hours after he was forced to perform a humiliating U-turn over his controversial welfare bill.

Emotional Reeves a painful watch – and reminder of tough decisions ahead

It is hard to think of a PMQs like it – it was a painful watch.

The prime minister battled on, his tone assured, even if his actual words were not always convincing.

But it was the chancellor next to him that attracted the most attention.

Rachel Reeves looked visibly upset.

It is hard to know for sure right now what was going on behind the scenes, the reasons – predictable or otherwise – why she appeared to be emotional, but it was noticeable and it was difficult to watch.

To read more of Ali Fortescue’s analysis, click here

Speaking at Prime Minister’s Questions, Ms Badenoch said: “This man has forgotten that his welfare bill was there to plug a black hole created by the chancellor. Instead they’re creating new ones.”

Turning to the chancellor, the Tory leader added: “[She] is pointing at me – she looks absolutely miserable.

“Labour MPs are going on the record saying that the chancellor is toast, and the reality is that she is a human shield for his incompetence. In January, he said that she would be in post until the next election. Will she really?”

Not fully answering the question, the prime minister replied: “[Ms Badenoch] certainly won’t.

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Welfare vote ‘a blow to the prime minister’

“I have to say, I’m always cheered up when she asks me questions or responds to a statement because she always makes a complete mess of it and shows just how unserious and irrelevant they are.”

Mrs Badenoch interjected: “How awful for the chancellor that he couldn’t confirm that she would stay in place.”

The prime minister’s watered-down Universal Credit and Personal Independent Payment Bill, aimed at saving £5bn, was backed by a majority of 75 in a tense vote on Tuesday evening.

A total of 49 Labour MPs voted against the bill – the largest rebellion in a prime minister’s first year in office since 47 MPs voted against Tony Blair’s Lone Parent benefit in 1997, according to Professor Phil Cowley from Queen Mary University.

After multiple concessions made due to threats of a Labour rebellion, many MPs questioned what they were voting for as the bill had been severely stripped down.

They ended up voting for only one part of the plan: a cut to Universal Credit (UC) sickness benefits for new claimants from £97 a week to £50 from 2026/7.

Ms Badenoch said the climbdown was proof that Sir Keir was “too weak to get anything done”.

Read more:
The PM faced down his party on welfare and lost
Labour welfare cuts ‘Dickensian’, says rebel MP

Ms Reeves has also borne a lot of the criticism over the handling of the vote, with some MPs believing that her strict approach to fiscal rules has meant she has approached the ballooning welfare bill from the standpoint of trying to make savings, rather than getting people into work.

Experts have now warned that the welfare U-turn, on top of reversing the cut to winter fuel, means that tax rises in the autumn are more likely – with Ms Reeves now needing to find £5bn to make up for the policy U-turns.

Asked by Ms Badenoch whether he could rule out further tax rises – something Labour promised it would not do on working people in its manifesto – Sir Keir said: “She knows that no prime minister or chancellor ever stands at the despatch box and writes budgets in the future.

“But she talks about growth, for 14 years we had stagnation, and that is what caused the problem.”

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Brazil’s 17.5% crypto tax: How the new rules hurt small investors most

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Brazil’s 17.5% crypto tax: How the new rules hurt small investors most

Brazil’s 17.5% crypto tax: How the new rules hurt small investors most

Brazil’s new 17.5% flat crypto tax replaces previous exemptions and now applies to all digital asset gains.

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Bybit, OKX expand crypto services in Europe under MiCA

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Bybit, OKX expand crypto services in Europe under MiCA

Bybit, OKX expand crypto services in Europe under MiCA

Bybit and OKX have both launched MiCA-compliant crypto exchanges in the EU, marking a significant push into Europe’s newly unified regulatory landscape.

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