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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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Can a trade deal with Trump save Starmer?

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Can a trade deal with Trump save Starmer?

👉 Click here to listen to Electoral Dysfunction on your podcast app 👈

With Ruth away, Beth and Harriet are joined by Salma Shah, a former Conservative special adviser from 2014-2018 and now a political commentator.

They unpack Donald Trump’s surprise UK trade deal announcement and what it means for Sir Keir Starmer, who’s also landed a deal with India and is gearing up for key EU negotiations.

But while the global optics look strong, the domestic mood is tense. Harriet has some advice for the Labour backbenchers who are unhappy over welfare cuts and the winter fuel allowance policy.

Also – does Sir Keir need a hand with his comms?

Come and join us live on Tuesday 20 May at Cadogan Hall in London, tickets available now: https://www.aegpresents.co.uk/event/electoral-dysfunction-live/

Remember you can also watch us on YouTube!

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Red Wall MPs should focus on two-child benefit cap rather than winter fuel, Harriet Harman says

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Red Wall MPs should focus on two-child benefit cap rather than winter fuel, Harriet Harman says

Red Wall MPs should push for the two-child benefit cap to be lifted rather than a reversal of the winter fuel payment policy, Baroness Harriet Harman has said.

Baroness Harman, the former Labour Party chair, told Sky’s Electoral Dysfunction podcast that this would hand the group a “progressive win” rather than simply “protesting and annoying Sir Keir Starmer” over winter fuel.

Earlier this week, a number of MPs in the Red Wall – Labour’s traditional heartlands in the north of England – reposted a statement on social media in which they said the leadership’s response to the local elections had “fallen on deaf ears”.

Follow live: UK-US trade deal

They singled out the cut to the winter fuel allowance as an issue that was raised on the doorstep and urged the government to rethink the policy, arguing doing so “isn’t weak, it takes us to a position of strength”.

Labour’s decision to means test the policy has snatched the benefit away from millions of pensioners.

But Baroness Harman said a better target for the group could be an overhaul of George Osborne’s two-child benefit cap.

More on Harriet Harman

The cap, announced in 2015 as part of Lord David Cameron’s austerity measures, means while parents can claim child tax credit or Universal Credit payments for their first and second child, they can’t make claims for any further children they have.

Labour faced pressure to remove the cap in the early months of government, with ministers suggesting in February that they were considering relaxing the limit.

Baroness Harman told Beth Rigby that this could be a sensible pressure point for Red Wall MPs to target.

She said: “It could be that they have a kind of progressive win, and it might not be a bad thing to do in the context of an overall strategy on child poverty.

“Let’s see whether instead of just protesting and annoying Sir Keir Starmer, they can build a bridge to a new progressive set of policies.”

Jo White, the Labour MP for Bassetlaw and a member of the Red Wall group, suggested that her party’s “connection” to a core group of voters “died” with the decision to means test the winter fuel payment for pensioners.

“We need to reset the government,” she told Electoral Dysfunction. “The biggest way to do that is by tackling issues such as winter fuel payments.

“I think we should raise the thresholds so that people perhaps who are paying a higher level of tax are the only people who are exempt from getting it.”

Pic: AP
Image:
Pic: AP

A group of MPs in the Red Wall, thought to number about 40, met on Tuesday night following the fallout of local election results in England, which saw Labour lose the Runcorn by-election and control of Doncaster Council to Reform UK.

Following the results, Sir Keir said “we must deliver that change even more quickly – we must go even further”.

Some Labour MPs believe it amounted to ignoring voters’ concerns.

Read more:
UK and US trade deal will save thousands of UK jobs – Starmer
Starmer faces rebellion from Labour MPs over welfare reforms

One of the MPs who was present at the meeting told Sky News there was “lots of anger at the government’s response to the results”.

“People acknowledged the winter fuel allowance was the main issue for us on the doorstep,” they said.

“There is a lack of vision from this government.”

Another added: “Everyone was furious.”

Downing Street has ruled out a U-turn on means testing the winter fuel payment, following newspaper reports earlier this week that one might be on the cards.

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US man who sent crypto to ISIS could serve prison till he’s 65

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US man who sent crypto to ISIS could serve prison till he’s 65

US man who sent crypto to ISIS could serve prison till he’s 65

A man from the US state of Virginia will spend over three decades behind bars after being convicted of sending crypto to the terrorist organization commonly known as the Islamic State of Iraq and Syria.

Federal Judge David Novak sentenced Mohammed Azharuddin Chhipa to 30 years and four months in prison on May 7 for sending over $185,000 to the Islamic State, the Department of Justice said on May 8.

Prosecutors said that from around October 2019 until October 2022, the 35-year-old Chhipa collected and sent money to female Islamic State members in Syria, which helped them escape prison camps and funded fighting.

The Justice Department said Chhipa would raise funds for the United Nations-designated terror organization through social media — receiving money online, or traveling hundreds of miles to accept donations in person. 

He’d convert the money into crypto and send it to Turkey for it to be smuggled to Islamic State members across the border in Syria, prosecutors said.

A federal jury convicted Chhipa in December, finding him guilty on a charge of conspiracy to provide support to a terrorist organization and four charges of providing and attempting to provide support to a terrorist organization.

US man who sent crypto to ISIS could serve prison till he’s 65
An undated picture of Chhipa, a naturalized US citizen born in India. Source: Alexandria Sheriff’s Office via TRM

“This defendant directly financed ISIS in its efforts to commit vile terrorist atrocities against innocent citizens in America and abroad,” Attorney General Pam Bondi said in a statement. “This severe sentence illustrates that if you fund terrorism, we will prosecute you and put you behind bars for decades.”

Chhipa tried to flee US during FBI probe

Prosecutors said that during the Federal Bureau of Investigation’s investigation into Chhipa, he tried to flee the country to escape prosecution and tried to hide his tracks through a series of actions seemingly aimed at confusing authorities.

According to a motion for detention filed in August, FBI agents searched Chhipa’s house on Aug. 2, 2019, and that night Chhipa drove to a bank, withdrew $1,800 from an ATM, and then went to a Taco Bell, where he paid a stranger for a ride to a relative’s house. The relative then drove him to a grocery store.

Related: US Treasury sanctions Myanmar militia group for alleged crypto scams

Three days later, prosecutors said Chhipa “purchased a series of bus tickets using variations and/or misspelling of his name and recently created email accounts.”

He then travelled from Virginia to Mexico and onto Guatemala. He then bought tickets to fly from Guatemala to Panama, then onto Germany, and then to Egypt, but an Interpol Blue Notice was issued, and he was returned to the US.

Magazine: Terrorism and the Israel-Gaza war have been weaponized to destroy crypto 

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