Could Rachel Reeves’s budget ‘jiggery-pokery’ scare investors?
Budgets are all about numbers.
In the coming 24 hours, we’ll be engulfed with all sorts of figures – about the state of the economy, about the size of the deficit, about the fiscal rules the new chancellor is planning to introduce in the coming months.
But in fact most budgets, this one included, can really be boiled down to the difference between two big numbers.
Politics live blog: Budget 2024 latest developments
Total government spending and total government receipts.
Right now the UK government is spending just over £1.2trn a year and bringing in just over £1.1trn in taxes and receipts.
In other words, this country is spending more than it generates in tax receipts.
So it has to borrow the difference.
That borrowing, also known as the deficit, is (as you’ve already probably worked out from the above numbers) around £100bn a year.
And politicians, including the chancellor, spend rather a lot of time fretting about the deficit.
Indeed, the main objective of the various different fiscal rules they’ve imposed on themselves in recent decades has been to narrow the gap between those two big numbers.
Broadly speaking, the easiest way to do this is to cut something few people notice in the short run – government investment.
When he came into office in 2010, George Osborne cut a lot of parts of public spending, but he absolutely slashed the amount the public sector spent on buildings, infrastructure and machinery – capital spending.
Having lifted the total briefly after the pandemic, Jeremy Hunt was planning a similar fall in investment in the coming years.
Rachel Reeves has said repeatedly ahead of the budget that she plans to invest far more in the coming years.
This is a noble goal, given investment tends to benefit future generations, however, it will not be cheap in the short run.
Indeed, keeping investment spending at current levels will cost roughly £30bn a year by the end of this decade.
So how does the chancellor square that with her fiscal rules?
Well, one part of the answer is that she’s planning to increase the revenues coming into the Exchequer, reportedly via higher national insurance charges for insurers.
But the other part of the answer is that she’s changing her fiscal rules as well.
Budget 2024: Rachel Reeves vs the fiscal rules
The long and the short of it is that Ms Reeves looks likely to choose a set of fiscal rules that ignore investment spending.
Both her updated debt rule and her current budget rule essentially omit capital spending – although they include debt interest costs, so she can’t just borrow willy-nilly.
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That might sound like fiscal jiggery-pokery, and some in the market fret that investors will soon take fright as a result.
Indeed, some suggest they already are, and point to the fact the UK’s cost of government borrowing – as measured by the benchmark 10-year bond yield – has risen from under 4% to nearly 4.3% in the past month alone.
However, this is a slight misreading of this market, which is as affected by global economic factors and central bank action as much as by UK budgetary policy.
Indeed, compare the recent changes in the UK’s borrowing rates with those in Germany and the US and British government bond yields are close to where they usually trade in the run up to a budget.
And they are far, far below where they were in the run-up to Liz Truss’s mini-budget.
Even so, there are bound to be a few unexpected surprises and some relevant new data points in this fiscal event.
It is a budget after all.
Specialist search teams, police dogs and divers have been dispatched to find two sisters who vanished in Aberdeen three days ago.
Eliza and Henrietta Huszti, both 32, were last seen on CCTV in the city’s Market Street at Victoria Bridge at about 2.12am on Tuesday.
The siblings were captured crossing the bridge and turning right onto a footpath next to the River Dee in the direction of Aberdeen Boat Club.
Henrietta Huszti. Pic: Police Scotland
Eliza Huszti. Pic: Police Scotland
Police Scotland has launched a major search and said it is carrying out “extensive inquires” in an effort to find the women.
Chief Inspector Darren Bruce said: “Local officers, led by specialist search advisors, are being assisted by resources including police dogs and our marine unit.”
Aberdeenshire Drone Services told Sky News it has offered to help in the search and is waiting to hear back from Police Scotland.
CCTV of the sisters. Pic: Police Scotland
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The sisters, from Aberdeen city centre, are described as slim with long brown hair.
Police said the Torry side of Victoria Bridge where the sisters were last seen contains many commercial and industrial units, with searches taking place in the vicinity.
The force urged businesses in and around the South Esplanade and Menzies Road area to review CCTV footage recorded in the early hours of Tuesday in case it captured anything of significance.
Drivers with relevant dashcam footage are also urged to come forward.
CI Bruce added: “We are continuing to speak to people who know Eliza and Henrietta and we urge anyone who has seen them or who has any information regarding their whereabouts to please contact 101.”
Glasgow has been a city crying out for solutions to a devastating drugs epidemic that is ravaging people hooked on deadly narcotics.
We have spent time with vulnerable addicts in recent months and witnessed first-hand the dirty, dangerous street corners and back alleys where they would inject their £10 heroin hit, not knowing – or, in many cases, not caring – whether that would be the moment they die.
“Dying would be better than this life,” one man told me.
It was a grim insight into the daily reality of life in the capital of Europe’s drug death crisis.
Scotland has a stubborn addiction to substances spanning generations. Politicians of all persuasions have failed to properly get a grip of the emergency.
But there is a new concept in town.
From Monday, a taxpayer-funded unit is allowing addicts to bring their own heroin and cocaine and inject it while NHS medical teams supervise.
A dirty needle thrown less than 100 metres from the new injection centre
It may be a UK-first but it is a regular feature in some other major European cities that have claimed high success rates in saving lives.
Glasgow has looked on with envy at these other models.
One supermarket car park less than a hundred metres from this new facility is a perfect illustration of the problem. An area littered with dirty needles and paraphernalia. A minefield where one wrong step risks contracting a nasty disease.
Drugs paraphernalia in a supermarket car park in Glasgow, near the new facility
It is estimated hundreds of users inject heroin in public places in Glasgow every week. HIV has been rife.
The new building, which will be open from 9am until 9pm 365 days a year, includes bays where clean needles are provided as part of a persuasive tactic to lure addicts indoors in a controlled environment.
There is a welcome area where people will check in before being invited into one of eight bays. The room is clinical, covered in mirrors, with a row of small medical bins.
Clean needles are provided to lure addicts to inject in a controlled environment
There are eight bays users can inject in
We were shown the aftercare area where users will relax after their hit in the company of housing and social workers.
The idea is controversial and not cheap – £2.3m has been ring-fenced every year.
The aftercare area
Read more: ‘Dying would be better than my £1,000 a month heroin addiction’
Authorities in the city first floated a ‘safer drug consumption room’ in 2016. It failed to get off the ground as the UK Home Office under the Conservatives said they would not allow people to break the law to feed habits.
The usual wrangle between Edinburgh and London continued for years with Downing Street suggesting Scotland could, if it wanted, use its discretion to allow these injecting rooms to go ahead.
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The stalemate ended when Scotland’s most senior prosecutor issued a landmark decision that it would not be in the public interest to arrest those using such a facility.
One expert has told me this new concept is unlikely to lead to an overall reduction in deaths across Scotland. Another described it as an expensive vanity project. Supporters clearly disagree.
The question is what does success look like?
The big test will be if there is a spike in crime around the building and how it will work alongside law enforcement given drug dealers know exactly where to find their clients now.
It is not disputed this is a radical approach – and other cities across Britain will be watching closely.
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