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.
UK
Pictured: Boy killed in Gateshead industrial estate fire – 14 children arrested on suspicion of manslaughter
Tributes have been paid to 14-year-old Layton Carr who died in a fire at an industrial estate.
Eleven boys and three girls, aged between 11 and 14 years, have been arrested on suspicion of manslaughter after the incident in Gateshead on Friday. They remain in police custody.
Police were alerted to a fire at Fairfield industrial park in the Bill Quay area
Firefighters raced to Fairfield industrial park in the Bill Quay area shortly after 8pm, putting out the blaze a short time later.
Police then issued an appeal for a missing boy, Layton Carr, who was believed to be in the area at the time.
In a statement, the force said that “sadly, following searches, a body believed to be that of 14-year-old Layton Carr was located deceased inside the building”.
Layton’s next of kin have been informed and are being supported by specialist officers, police added.
Layton has been described as a ‘beautiful soul’
A fundraising page on GoFundMe has been set up to help Layton’s mother pay for funeral costs.
Organiser Stephanie Simpson said: “The last thing Georgia needs to stress trying to pay for a funeral for her Boy Any donations will help thank you.”
One tribute in a Facebook post read: “Can’t believe I’m writing this my nephew RIP Layton 💔 forever 14 you’ll be a massive miss, thinking of my sister and 2 beautiful nieces right now.”
Another added: “My boy ❤️ my baby cousin, my Layton. Nothing will ever come close to the pain I feel right now. Forever 14. I’ll miss you sausage.”
A third said: “Rest in peace big lad such a beautiful soul taken far to soon my thoughts are with you Gee stay strong girl hear for u always.”
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Detective Chief Inspector Louise Jenkins, of Northumbria Police, also said: “This is an extremely tragic incident where a boy has sadly lost his life.”
She added that the force’s “thoughts are with Layton’s family as they begin to attempt to process the loss of their loved one”.
They are working to establish “the full circumstances surrounding the incident” and officers will be in the area to “offer reassurance to the public”, she added.
A cordon remains in place at the site while police carry out enquiries.
Sky News can reveal that the government has rowed back on a national compensation scheme for victims of child sexual abuse, despite it being promised under the previous Conservative administration.
Warning – this story contains references to sexual and physical abuse
A National Redress Scheme was one of 20 key recommendations made by the Independent Inquiry into Child Sexual Abuse (IICSA), but a Home Office report reveals the government has scrapped it because of the cost.
Marie, who is 71, suffered alleged sexual, physical, and emotional abuse at Greenfield House Convent in St Helens, Merseyside, between 1959 and 1962, and is still fighting for compensation.
Greenfield House Convent, where Marie says she was abused
As soon as she arrived as a six-year-old, Marie says her hair was cut off, her name changed, and she experienced regular beatings from the nuns and students.
She claims a nun instigated the violence, including when Marie was held down so that her legs were “spread-eagled” as she was sexually abused with a coat hanger.
Merseyside Police investigated claims of abuse at the convent, but in 2016, a suspect died before charges could be brought.
Marie has received an apology from the Catholic body that ran the home; she tried to sue them, but her claim was rejected because it was filed too long after the alleged abuse.
Marie, 71, is still fighting for compensation for the abuse she says she suffered as a child
In February, ministers said the law would change for victims of sexual abuse trying to sue institutions for damages, which was a recommendation from the IICSA.
Previously, people had to make a civil claim before they were 21, unless the victim could prove a fair trial could proceed despite the time lapse.
Campaigners argued for the time limit to be removed as, on average, victims wait 26 years to come forward. Changes to the 1980 Limitation Act could lead to more people making claims.
Peter Garsden, President of The Association of Child Abuse Lawyers
Civil cases ‘can take three to five years’
But Peter Garsden, president of the Association of Child Abuse Lawyers, worries that when it comes to historical abuse where the defendant is dead, institutions will still argue that it is impossible to have a fair trial and will fight to have the case thrown out of court.
Mr Garsden said it takes “between three and five years” for a civil case to get to trial.
He warned that claimants “can end up losing if you go through that process. Whereas the Redress Scheme would be quicker, much more straightforward, and much more likely to give justice to the victims”.
Victim awarded £10 compensation
Jimbo, who was a victim of abuse at St Aidan’s children’s home in Cheshire, took his case to the High Court twice and the Court of Appeal three times, but, after 13 years, all he ended up with was £10 for his bus fare to court.
Despite the Lord Justice of Appeal saying he believed that the abuse had occurred, Jimbo lost his claim because of the time limit for child sexual abuse claims to be made.
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Neither Marie nor Jimbo is likely to benefit from the removal of the time limit for personal injury claims, which is why Mr Garsden is calling on the government to implement a National Redress Scheme for victims of sexual abuse, as recommended by the IICSA.
Hundreds of millions paid to victims
The governments in Scotland and Northern Ireland have set up compensation schemes and paid hundreds of millions of pounds to victims.
In 2023, the then Conservative government said a similar scheme would be organised for England and Wales.
But the Home Office admitted in its Tackling Child Sexual Abuse: Progress Update that it “is not currently taking forward any further steps on the IICSA proposal for a separate, national financial redress scheme for all survivors of child sexual abuse”.
“In the current fiscal environment, this recommendation is very difficult to take forward,” it added.
For victims, the scheme was the last chance of compensation for a lifetime blighted by abuse.
“The money is about justice and about all the other people who have had to suffer this abuse,” Marie said.
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