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.
The mistaken release of an asylum seeker who was jailed for sexual offences has prompted widespread condemnation – and an extensive police operation.
Hadush Gerberslasie Kebatu, 38, had assaulted a 14-year-old girl and a woman in Epping, about a week after he had crossed the Channel and arrived in the UK by boat.
Last night, the teenager’s father was visibly upset as he turned up at HMP Chelmsford – asking for answers on how Kebatu was freed just one month into a 12-month sentence.
He did not want to speak on camera – but told Sky correspondent Mollie Malone that he was “frustrated” at the thought of the Ethiopian national being back on the streets.
“The justice system has let us down,” he said.
Footage has emerged that appears to show Kebatu in Chelmsford town centre following his release – dressed in prison clothes and clutching his belongings in a see-through bag.
He then headed to the railway station and boarded a train bound for London’s Liverpool Street, which departed at 12.41pm yesterday.
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Accidental release ‘damaging’ for government
‘You couldn’t make it up’
Kebatu’s case had a high profile and led to weeks of protests outside the Bell Hotel in Epping, where he was staying alongside other asylum seekers.
When he was sentenced last month, Judge Christopher Williams warned he posed a “significant risk of reoffending”.
The Liberal Democrat MP for Chelmsford, Marie Goldman, told Sky presenter Barbara Serra she was “appalled, frustrated and angry about how this could possibly happen in the first place”.
She said it is clear something went “fundamentally wrong” at HMP Chelmsford – and her constituents are “fed up” with systems not working and underinvestment.
“It just destroys trust at a time when emotions are riding high. We’ve seen protests over the past few weeks and months, and there’s a lot of fear out there,” Ms Goldman added.
“It is so easy to lose trust and really hard to gain it – we need the government to get a grip on this.”
Protests were held at The Bell Hotel for several weeks
Shadow home secretary Chris Philp described Kebatu as a “dangerous illegal immigrant” – and said his premature release shows “staggering incompetence”.
He told Sky News: “We also need an urgent apology from Home Secretary Shabana Mahmood and Justice Secretary David Lammy who have presided over this fiasco.”
Mr Lammy, who also serves as deputy prime minister, has said he is “appalled” and “livid on behalf of the public that Kebatu is at large”.
He confirmed a full investigation is being launched, adding: “He should be deported back to Ethiopia after the sexual assaults that he’s committed.”
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Manhunt continues for Kebatu
Extensive policing operation under way
Multiple forces are now involved in the manhunt for Kebatu – including Essex Police, the British Transport Police and the Metropolitan Police in London.
Policing commentator Graham Wettone told Sky presenter Gillian Joseph that detectives will be carefully piecing together his movements after walking free from HMP Chelmsford.
“All these forces will now be looking at the CCTV from the train itself – trying to locate him on the train and trying to identify at which stop he went off at, and where he went from that station,” he explained.
Mr Wettone said information from Essex Police’s initial investigation – including the contacts, friends and associates he had at the Bell Hotel – will also be a factor.
Questions will also be asked of the prison authorities: “Has he had any visits or phone calls? Has he got any friends or family in the country?”
He added that additional officers will have been allocated to the manhunt: “The Met will have some significant resources looking for him – maybe the Territorial Support Group or additional borough-based officers in and around Liverpool Street first of all.”
The British Transport Police could also be involved in further inquiries if Kebatu ended up travelling on the Underground.
“It really depends on where that thread goes – if they can locate where he got off, and then where he went to,” Mr Wettone said.
“This work is very, very fast-paced – there are detectives and intelligence officers working in the background, chasing up on leads and updating the teams on the ground.”
Experts are warning that without “fast changes” the UK could run out of drinking water in the future.
The first seven months of 2025 were the driest since 1976, with reservoirs across England only 56.1% full on average, according to the Environment Agency.
“I think that we do need to worry about the fact that there is this possibility we could run out,” Hannah Cloke, professor of hydrology from Reading University, told Sky News.
“It’s only if we start thinking like that, that we’re going to start conserving our water, otherwise we just take it completely for granted.
“It is all of our fault, we have not been paying attention to what’s going on… we need some very fast changes to the way that we are using water and the way that we’re storing water in order to stop this being a problem in the future, because our summers are only going to get hotter.”
By 2050, the government says that England could face a shortfall of five billion litres of water every day.
‘Growing pressure’ on water system
A Department for Environment, Food and Rural Affairs spokesperson said: “This government recognises the growing pressure on our water system and is taking decisive action.
“We’re delivering over £104bn of private investment to fix leaking pipes, build nine new reservoirs and secure our water supply for the future.”
Latest figures suggest that around 2,690 megalitres of water is lost every day in England through leaks – the equivalent of 1,076 Olympic-sized swimming pools.
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‘We have invested an extra £10m’
“Leaks are a really important issue for us. We have invested an extra £10m just to deal with the weather that we’ve seen this summer,” said Dr Geoff Darch, head of strategic asset planning for Anglian Water.
Anglian Water is also hoping to build two new reservoirs in the East of England.
“We don’t want to stop people using water, it is absolutely essential for everything that we need it to do,” Dr Darch said.
“But I think we’ve got to a point now where we have to realise that water is a precious resource, it’s something that we all have to look after so that we have it for future generations and for the environment and with climate change and drought, we will need more reservoirs.”
The government claims it is fast-tracking new reservoirs to address the problem
Concerns about ‘whole system starting to collapse’
In August, the UK received just 62% of its average rainfall, according to the Met Office, which is leading a group of residents to monitor their water stocks closely.
“We collect all our own water from the rain, and so if we don’t have the rain that’s a significant issue,” explained Simon Tilly, director of the Hockerton eco housing project in Nottinghamshire.
He told Sky News they were working together to use less water.
“I suppose I’m most concerned about the whole system starting to collapse. There’s potential for longer droughts and us having a lot of water stress, there’s potential for a lot of floods when the drought finishes… and just generally that system going into random patterns where we’re getting more droughts and more floods,” he added.
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