Could Rachel Reeves’s budget ‘jiggery-pokery’ scare investors?

Published

8 months ago

October 30, 2024

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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.

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

‘Stability in Middle East is priority,’ says Starmer – as world reacts to strikes

Published

15 hours ago

June 22, 2025

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'Stability in Middle East is priority,' says Starmer - as world reacts to strikes

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”.

Follow latest: Iran considering ‘all options’ after US strikes

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.

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.

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.”

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.

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”.

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.

UK

Latest polling says if an election was held tomorrow Reform UK would win a majority

Published

16 hours ago

June 22, 2025

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Latest polling says if an election was held tomorrow Reform UK would win a majority

Since the local elections Reform UK has had no shortage of good polls.

But a new one suggests Nigel Farage‘s party has a chance not only of winning the next election, but of claiming a decent Commons majority, too.

In February, Reform topped a Sky News/YouGov poll for the first time, with Nigel Farage’s party edging in front on 25%, Labour pushed into second on 24%, with the Tories on 21%.

But a fresh one from Ipsos puts Reform on 34%, nine points ahead of Labour on 25%, with the Conservatives a distant third on 15%.

While the other parties are flatlining, Reform appears to be pushing boundaries.

Were these figures to be replicated across the country at a general election, with every constituency behaving the same way, then Reform could win as many as 340 seats, giving it a majority of 30, Sky News analysis suggests.

Labour could be reduced to 176 seats, down 236 on last year’s election, while the Tories would hit a record low of 12 seats.

But polling should always be taken with a pinch of salt and with the firm acknowledgement that there is not an election coming any time soon.

Conservative backbenchers might also tell you publicly that opinion polls are notoriously difficult to translate into seat numbers because voting percentages in individual constituencies can vary hugely from the overall average.

But the truth is that the symbolism of Reform UK topping another poll is likely to be noticed by MPs from all parties, especially backbench Conservatives who have actively been hoping their leader, Kemi Badenoch, can help them climb the polls and bring the party back into public favour.

Politics is a brutal game and when it comes to toppling underwhelming party leaders, the Tories are more ruthless than most. One wonders how many of these polls Mrs Badenoch’s party will allow her to endure.

This poll is also a warning to Labour.

As the party approaches a year since its major victory, it will not have much to celebrate if these numbers are anything to go by.

According to this survey, only 19% are satisfied with the job Sir Keir Starmer is doing as prime minister, with 73% dissatisfied.

And the figure of 25% of voters intending to vote Labour is a level not seen since October 2019.

While abstract to much of the public, polling can often shape not only the chatter inside Westminster but how and when plots by MPs begin.

For Reform UK, this is a much-needed morale boost after a surprise resignation by their former Chairman Zia Yusuf, and then an almost immediate U-turn back into the party.

And Kemi Badenoch – who said during her leadership campaign that the Conservatives needed to go back to first principles and that this would take time – will be wondering, seven-and-a-half months after winning the leadership, how much time she really has left.

Ipsos interviewed a representative probability sample of 1,180 British adults aged 18+, via the Ipsos UK KnowledgePanel. Data was collected between 30 May-4 June 2025.

UK

Palestine Action: The ‘enemy within’ or non-violent protesters?

Published

16 hours ago

June 22, 2025

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Palestine Action: The 'enemy within' or non-violent protesters?

The impending ban on protest group Palestine Action has divided opinion – described as both “outrageous” and “long overdue”.

Home Secretary Yvette Cooper is expected to take the step after the group broke into RAF Brize Norton in Oxfordshire on e-scooters and sprayed two Voyager planes with red paint.

The prime minister described the attack as “outrageous” and a rapid review of security at MoD bases is under way.

It was the latest protest in a five-year campaign from Palestine Action (PA) that has targeted arms manufacturers, financial institutions, political figures and government buildings.

Red spray paint has become its signature.

On its website, PA says it is a “direct action movement” committed to ending “global participation” in what it calls Israel’s “genocidal and apartheid regime”.

It adds that it uses “disruptive tactics” to target “corporate enablers of the Israeli military-industrial complex”.

Banning the group would make membership of it illegal. It would be treated as a terrorist organisation.

Saeed Taji Farouky, a spokesman for PA, told Sky News that potential proscription was “unfair”, adding that it was “ludicrous” that a “civil society direct action group” could end up on the same list as ISIS.

He added: “It’s not logical, it’s not even consistent with the British legal definition of terrorism, it’s a reaction that’s been taken overnight, with almost no discussion or debate.

“The whole thing is incredibly worrying, mostly for what it means about British law in general, about undermining the very basis of British democracy and the rule of law.”

There are “no circumstances” under which the two people who breached Brize Norton would be handed over to the police, he said.

Singer-songwriter Paloma Faith, who spoke at a pro-Palestine rally in Whitehall in central London on Saturday, told Sky News she was “devastated” by the move.

“I have met some of the people who have friends in that group. They are young students and they are basically trying to do something because they feel that our government is failing them.”

She added that “everyone” wants to end what she described as a “massacre” in Gaza.

Israel says its military campaign in Gaza is a way of defending itself against Hamas, which killed more than a thousand people in its 7 October attacks and took about 240 people hostage. Hamas-run health authorities claim Israeli attacks have since killed almost 56,000 people in Gaza.

Faith continued: “When you scribble on something, or paint on it, it’s a non-violent protest and it shouldn’t be made at the same level as a violent protest – it is unjust.”

Ben Jamal, director of the Palestine Solidarity Campaign, backed Palestine Action’s use of non-violent protest.

He told Sky News: “There has been a place for that in all political movements in history.

“In the struggle for the rights of black people in the US, in the struggle against apartheid in South Africa, in the struggle for women to have the vote, people took forms of non-violent direct action.

“Imagine if we had the current [situation] back in those days – we would have been proscribing the suffragettes, treating them as terrorists.”

Others have welcomed the move. Lord Walney, who served as the government’s independent adviser on political violence, told Sky News the decision was “long overdue”.

“Palestine Action have acted as the enemy within which is why it’s right, now, to crack down on them,” he said.

“They have terrorised working people for a number of years and there’s a number of serious violent charges that are going through the court system at the moment.”

The UK government is expected to announce its decision early next week.