More tax, more borrowing, more spending. This was a big budget by every measure, but will loom largest for businesses that will bear the brunt of the revenue raising.
Around £25bn of those tax rises will come from the 1.2 percentage point increase in employer national insurance contributions to 15%. This is a muscular hike even if it is in the middle of the speculated 1 percentage point to 2 percentage point range under consideration, and so could have been worse.
Accompanied by a 6% rise in the minimum wage and new employment rights legislation forecast to add £5bn to costs, businesses will be doing much of the heavy lifting demanded by Labour’s economic plan.
By contrast, there are no direct changes to personal taxes, and even a measure of good news, if that can be defined by the absence of the bad.
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3:09
Today’s budget marks Labour’s first since 2010
Tax thresholds will once more rise in line with inflation from 2028, after the chancellor decided not to extend the freeze for two years, forgoing the £9bn in the process.
Conversely, fuel duty remains frozen, and discounted. Rachel Reeves may be the first female chancellor, but she is just the latest to blink first when confronted by the motoring lobby.
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None of which means that “working people”, or taxpayers who happen to be employees if you prefer, will feel no pain from this budget.
Businesses large and small have warned they will have to find some of a projected 2% rise in payroll costs from staff, either from lower pay settlements, profits or fewer hires.
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The Office for Budget Responsibility (OBR) concludes it will be all three, stating: “We assume this lowers real wages and profits, and workers and firms reduce labour supply and demand in response, reducing labour supply by around 50,000 average-hours equivalents.”
The OBR forecasts that growth will also slow from its March budget assessment, levelling off at 1.6% in five years’ time, below the pre-financial crisis long-term average and probably not enough to satisfy Sir Keir Starmer’s mission to be the fastest growing economy in the G7.
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1:07
‘It’s a definitively Labour budget in terms of big tax and big spend,’ Rigby says
Labour’s promise for this budget extends beyond the five-year single election cycle, however. They argue the extra borrowing for investment, and improvement in public services that will come from extra spending, should be judged over the longer-term.
The dividends from today’s pain will be felt in improved public services, a healthier and better-paid workforce, including those returning to employment.
If that sounds fanciful on a day for the cold judgment of Treasury spreadsheets, it should be said Labour’s plan reflects economic orthodoxy.
From the greybeards advising Ms Reeves, including former Bank of England governor Mark Carney, to the IMF annual meeting in Washington last week, there is a consensus.
Public investment is a priority of boosting productivity and thus lifting the UK and a dozen developed nations like it out of stagnation.
The price of securing the market confidence necessary to deliver it is higher taxes and spending restraint, visible in the still-tight 1.5% settlements announced for the public sector.
Ms Reeves has swallowed that orthodoxy whole, and the UK is now set on a profoundly different economic course to that of the last 14 years.
Initially, only those with a body mass index of over 40 who have at least four other health problems linked to obesity will be eligible.
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0:21
Can you get pregnant when on weight loss drugs?
Some doctors have raised concerns about the additional workload this new programme will bring, while pharmacists fear it could lead to supply shortages.
Dr Claire Fuller from NHS England said: “We urgently need to address rising levels of obesity and prioritise support for those who are experiencing severe ill health – and greater access to weight loss drugs will make a significant difference to the lives of those people.”
She added: “While not everyone will be eligible for weight loss drugs, it’s important that anyone who is worried about the impact of their weight on their health discusses the range of NHS support available with their healthcare professional.”
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1:22
Weight loss drugs ‘changing way we see obesity’
The chairwoman of the Royal College of GPs welcomed NHS England’s decision to pursue a phased rollout, and said current workloads must be factored in to ensure the jabs can be prescribed safely.
Professor Kamila Hawthorne went on to say: “While weight loss medications have a lot of potential benefits for patients who are struggling to lose weight and who meet all the clinical criteria for a prescription, they mustn’t be seen as a ‘silver bullet’ to aid weight loss.
“We also need to see a focus on prevention, stopping people becoming overweight in the first place so they don’t require a medical intervention later.”
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9:19
‘How I tried to get weight loss drugs’
Her remarks were echoed by the National Pharmacy Association’s chairman Olivier Picard, who says “prescribing these medications alone misses the point”.
He argued that they need to be part of a comprehensive strategy that includes lifestyle coaching, exercise and nutritional guidance – but many GPs currently “lack the bandwidth” to provide this support.
“As a result, we could end up in a situation where patients are prescribed the medication, lose weight, and then experience rebound weight gain once the course ends – simply because the foundational lifestyle changes weren’t addressed,” Mr Picard added.
Estimates suggest about 29% of the adult population is obese.
Health Secretary Wes Streeting says the government “is determined to bring revolutionary modern treatments to everyone who needs them, not just those who can afford to pay”.
Metropolitan Police Commissioner Sir Mark Rowley says he is “shocked and frustrated” at a planned protest in support of Palestine Action.
The demonstration, due to take place in Westminster later, comes as the government moves to ban the group under anti-terror laws.
Activists from Palestine Action hit the headlines last week after targeting RAF Brize Norton and damaging two military aircraft in a significant security breach.
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Sir Mark said that – until this happens – the force has “no power in law” to prevent the protest from taking place, but lawbreakers will be “dealt with robustly”.
He added: “This is an organised extremist criminal group, whose proscription as terrorists is being actively considered.
“Members are alleged to have caused millions of pounds of criminal damage, assaulted a police officer with a sledgehammer and last week claimed responsibility for breaking into an airbase and damaging aircraft.
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“Multiple members of the group are awaiting trial accused of serious offences.”
Image: Trump’s golf course in Ayrshire was vandalised by Palestine Action. Pic: PA
Over the weekend, Business Secretary Jonathan Reynolds said he could not rule out the possibility of a foreign power being behind Palestine Action.
Any move to proscribe the group must be debated and approved by MPs and peers.
Speaking to Sunday Morning With Trevor Phillips on Sky News, former justice secretary Lord Charlie Falconer suggested that vandalising aircraft would not solely provide legal justification for such a move.
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2:45
Plans to ban activist group criticised
Lord Falconer said: “I am not aware of what Palestine Action has done beyond the painting of things on the planes in Brize Norton, they may have done other things I didn’t know.
“But generally, that sort of demonstration wouldn’t justify proscription so there must be something else that I don’t know about.”
Palestine Action has staged a series of protests in recent months – spraying the offices of Allianz Insurance in London, and vandalising Donald Trump’s golf course in Ayrshire.
Sir Keir Starmer has said stability in the Middle East is “a priority” following US strikes on Iran’s nuclear facilities, as the world has reacted to the attack.
The prime minister also called on Iran to “return to the negotiating table” to “reach a diplomatic solution to end this crisis”.
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2:30
US strikes on Iran explained
In a statement, Sir Keir said: “Iran’s nuclear programme is a grave threat to international security.
“Iran can never be allowed to develop a nuclear weapon, and the US has taken action to alleviate that threat.
“The situation in the Middle East remains volatile and stability in the region is a priority.
“We call on Iran to return to the negotiating table and reach a diplomatic solution to end this crisis.”
The UK was not involved in the strikes but was informed about them in advance by the US, Business Minister Jonathan Reynolds told Sky News’ Sunday Morning with Trevor Phillips.
Sir Keir and Foreign Secretary David Lammy had been pushing for a diplomatic solution. On Thursday, the prime minister warned of a “real risk of escalation” in the conflict.
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3:34
Trump: Iran strikes ‘spectacular success’
The US struck three sites in Iran early on Sunday morning, with Donald Trump boasting the country’s key nuclear sites were “completely and fully obliterated” in an address to the nation from the White House and warned there could be further strikes if Iran retaliates.
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1:20
‘Trump’s bold decision will change history’
Netanyahu praises Trump
Israel‘s Prime Minister Benjamin Netanyahu praised Mr Trump for the strikes, saying: “Your bold decision to target Iran’s nuclear facilities with the awesome and righteous might of the United States will change history…
“History will record that President Trump acted to deny the world’s most dangerous regime the world’s most dangerous weapons.”
UN secretary-general ‘gravely alarmed’ by US attack
But UN secretary general Antonio Guterres said he was “gravely alarmed by the use of force” by the US against Iran.
“This is a dangerous escalation in a region already on the edge – and a direct threat to international peace and security. There is a growing risk that this conflict could rapidly get out of control – with catastrophic consequences for civilians, the region, and the world.”
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European Union foreign policy chief Kaja Kallas urged all sides to step back and return to the negotiating table. “Iran must not be allowed to develop a nuclear weapon,” she said in a post on X.
“I urge all sides to step back, return to the negotiating table and prevent further escalation,” she said, adding that EU foreign ministers will discuss the situation tomorrow.
Image: Cuba’s President Miguel Diaz-Canel. Pic: Reuters
How the world reacted to the strikes
Cuba’s President Miguel Diaz-Canel said on X: “We strongly condemn the US bombing of Iran’s nuclear facilities, which constitutes a dangerous escalation of the conflict in the Middle East.
“The aggression seriously violates the UN Charter and international law and plunges humanity into a crisis with irreversible consequences.”
Venezuela’s foreign minister Yvan Gil said his country’s government “condemns US military aggression” and “demands an immediate cessation of hostilities”.
In a statement, an Australian government spokesperson said Iran’s nuclear and ballistic missile programme “has been a threat to international peace and security”.
Image: Japan’s Prime Minister Shigeru Isiba. Pic: Reuters
Japan’s Prime Minister Shigeru Ishiba said it is “crucial that there be a quick de-escalation of the conflict”.
Italy’s foreign minister Antonio Tajani said after the attack that his country’s government hopes “a de-escalation can begin and Iran can sit down at the negotiating table”.
The US attack came after more than a week of strikes by Israel, which have significantly degraded Iran’s air defences and offensive missile capabilities, and damaged its nuclear enrichment facilities.
Israel’s strikes on Iran have killed at least 865 people and wounded 3,396 others, according to the Washington-based group Human Rights Activists. The group said of those killed, 365 were civilians and 215 were security force personnel.