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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.

Graph graph

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.

pic pic graph

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.

graph

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.

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P&O spent £47m sacking and replacing 786 mainly British seafarers in 2022

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P&O spent £47m sacking and replacing 786 mainly British seafarers in 2022

P&O Ferries spent more than £47m summarily sacking hundreds of seafarers in 2022, helping it cut losses by more than £125m and putting it on a path to profitability, according to accounts due to be published in the coming days.

The dismissal of 786 mainly British seafarers, and their replacement with largely non-European agency staff earning as little as £4.87 an hour, was hugely controversial, drawing criticism from across the political spectrum and threats of a consumer boycott.

The controversy was rekindled last month when Sky News revealed that DP World, P&O‘s Dubai-based parent, considered withdrawing a £1bn investment at its London Gateway port following criticism of P&O by the Transport Secretary Louise Haigh.

Read more: Why P&O Ferries’ pariah status may never change

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Chancellor quizzed over P&O ferries

P&O has always maintained the restructuring was necessary to allow it to compete with its rivals on cross-Channel routes, and prevent a total collapse of the company with the loss of more than 2,000 jobs.

In financial statements for P&O Holdings, filed 11 months late and seen by Sky News, the company says the restructuring cost £47.4m including legal fees and consultants, allowing it to cut the overall wage and salary bill by £21.3m.

In a note accompanying the accounts submitted to Companies House, P&O’s directors describe the restructuring as part of a “transformational journey” that will help it return to recording a profit before tax this year.

“The business has been on a transformational journey as it has recovered from the challenges of the global pandemic, Brexit and the impact of disruption caused by the change in the crewing model,” the directors say.

“The group believes that the transformational actions that commenced in 2022 and continue through into 2024 will equip the business to grow profitably when demand rises in the coming years.”

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Brexit and COVID financial distress

The accounts reveal the financial distress in which P&O found itself in 2022.

Having recorded losses of £375m the previous year as it struggled to recover from the pandemic-era decline in passenger numbers and post-Brexit complications, it was in breach of its covenants to external lenders underwriting the construction of new hybrid cross-Channel ferries.

Despite the restructuring costs, revenue increased by £83.3m to £918m in the financial year, but the company still recorded a loss of £249m and was reliant on loans totalling £365m from parent company DP World to remain a going concern.

An additional £70m was made available this year, with 4.5% interest rolled up and not requiring any repayment until 2028 at the earliest.

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The financial statements also reveal that P&O was forced to sell one of the new cross-Channel ferries to a French subsidiary to pay off an external financing loan of £76.9m, and then lease the vessel back from its ultimate owner.

In a statement, P&O Ferries said: “Our 2022 financial accounts show the challenges faced by the business at that time, and why the business needed to transform into a competitive operator with a sustainable long-term future.

“P&O Ferries has taken steps to adjust to new market conditions, matching our capacity to demand, and adopting a more flexible operating model that enables us to better serve our customers.”

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Why P&O Ferries’ pariah status may never change

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Why P&O Ferries' pariah status may never change

P&O Ferries’ summary sacking of hundreds of seafarers in March 2022 was and remains perhaps the most ruthless act of “restructuring” in British corporate history. 

From the furthest left of the trades union movement to the right of the Conservative government, P&O and its lightning-rod chief executive Peter Hebblethwaite were condemned for shamelessly putting profit before people, without the courtesy of notice and due consultation.

Two years on, the company remains unapologetic and a pariah to some, including the transport secretary. That may never change. But long-overdue accounts for 2022 do illuminate why the company acted as it did.

In 2022, buffeted by Brexit and with passenger numbers devastated by COVID, P&O was holed below the water line, leaking cash and sinking fast.

Losses in 2021 had swelled to £375m, with payroll costs for 3,018 employees – 859 of them seafarers – of more than £132m.

It was also in breach of its covenants on more than £70m of loans from an external lender underwriting the cost of new hybrid cross-Channel ferries.

Read more: P&O spent £47m sacking and replacing 800 British workers

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Chancellor quizzed over P&O ferries

Only rolling and increasing loans from parent company DP World were preventing P&O from going under.

As well as earning at least the UK minimum wage, those seafarers were bound by work patterns negotiated with unions, including the RMT, that P&O says lacked flexibility and left some crossings unprofitable.

By contrast one of their competitors on the Dover-Calais route, Irish Ferries, was exploiting international maritime law to pay agency seafarers far less.

Peter Hebblethwaite, Chief Executive, P&O Ferries, answering questions in front of the Transport Committee and Business, Energy and Industrial Strategy Select Committee in the House of Commmons on the subject of P&O Ferries after the ferry giant handed 800 seafarers immediate severance notices last week. Picture date: Thursday March 24, 2022.
Image:
Peter Hebblethwaite, chief executive of P&O Ferries. Pic: PA

Mr Hebblethwaite’s response – and DP World insists it was his call – was breathtaking. The unionised workforce was fired by video call, escorted from vessels and, after a four-week shutdown, replaced by workers largely flown in from beyond Europe for rosters involving months at sea.

That move saved more than £21m from the payroll and helped a turnaround the company says will see a return to pre-tax profit this year.

Ask P&O executives in Dover or those from its parent company in Dubai, and they will tell you the ends justified the means, and point out that passenger numbers are increasing.

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New laws that came too late for sacked workers

And these accounts have been filed just as legislation takes effect that would have removed any advantage from the sackings.

Since May, French law has required the minimum wage to be paid in French waters, and from December, UK law will require the same, making the Channel a haven of relatively high pay in a maritime industry overwhelmingly fuelled by cheap labour sourced from Asia.

It is an irony unlikely to be lost on seafarers who paid with their jobs.

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Full list of Post Office crown branches that could close under transformation plan

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Full list of Post Office crown branches that could close under transformation plan

The Post Office has announced that more than a hundred larger crown branches – those owned by the company directly – could close with the possible loss of hundreds of jobs.

The Communication Workers Union has signalled a fight ahead as the Post Office confirmed details of its transformation plan.

The affected branches collectively employ close to 1,000 people and are said to be significantly loss-making.

The full list of at-threat branches is as follows:

Bangor – 143 Main Street, BT20 4AQ
Belfast City – 12-16 Bridge Street, BT1 1LT
Edinburgh City – Waverley Mall, Waverley Bridge, EH1 1BQ
Glasgow – 136 West Nile Street, G1 2RD
Haddington – 50 Court Street, EH41 3UU
Inverness – 14-16 Queensgate, IV1 1AX
Kirkwall – 15 Junction Road, KW15 1DD
Londonderry – 3 Custom House Street, BT48 6AA
Newtownards – 8 Frances Street, BT23 4FA
Saltcoats – Chapelwell Street, KA21 5EX
Springburn Way – 230 Springburn Way, Glasgow, G21 1BU
Stornoway – 16 Francis Street, HS1 2AD
Wester Hailes – 14A Westside Plaza, EH14 2SW
Barnes Green – Lee Road, Manchester, M9 4DL
Bransholme – 51A Goodhart Road, Bransholme, Hull, HU7 4JF
Bridlington – 15-17 Quay Road, YO15 2AA
Chester Le Street – 137 Front Street, Chester-le-Street, DH3 3AA
Crossgates – 9 Austhorpe Road, Crossgates, Leeds, LS15 8QS
Eccles – 63 Church Street, Manchester, M30 0NS
Furness House – 5-7 Dalton Road, LA14 1LE
Grimsby – 67-71 Victoria Street, DN31 1AA
Hyde – 30-32 Market Place, SK14 2QU
Kendal – 75 Stricklandgate, LA9 4AA
Manchester – 26 Spring Gardens, M2 1BB
Morecambe – 2-6 Victoria Street, LA4 4AA
Morley – 129A Queens Street, Leeds, LS27 8TB
Poulton Le Fylde – Teanlowe Centre, FY6 7BB
Prestwich – 2 Kingswood Road, Manchester, M25 3NS
Rotherham – 3-5 Bridgegate, S60 1PJ
Salford City – 112 Rossall Way, M6 5DS
Sheffield City – (unclear which branch)
South Shields – 8 King Street, NE33 1HT
St Johns – (unclear)
Sunderland City – 45-47 Fawcett Street, SR1 1RR
The Markets – 6-16 New York Street, Leeds, LS2 7DZ
Birmingham – 1 Pinfold Street, B2 4AA
Breck Road – 11 The Mall, Liverpool, L5 6SW
Caernarfon – Castle Square, LL55 2ND
Didsbury Village – Albert Hill Street, Manchester, M20 6RJ
Harlesden – 2 Wendover Road, London, NW10 4RU
Kettering – 17 Lower Street, NN16 8AA
Kingsbury – 439-441 Kingsbury Road, London, NW9 9DU
Leigh – 17 Silk Street, WN7 1AA
Leighton Buzzard – 7-9 Church Square, LU7 1AA
Matlock – 14 Bank Road, DE4 3AA
Milton Keynes – Unit N1 802 Midsummer Boulevard, MK9 3QA
Northolt – 46 Mandeville Road, UB5 5AA
Old Swan – 489 Prescot Road, Liverpool, L13 3BU
Oswestry – 17 Willow Street, SY11 1AG
Oxford – 102-104 St Aldates, OX1 1ZZ
Redditch – Threadneedle House, Alcester Street, B98 8AB
Southall – 38 The Broadway, UB1 1PY
St Peters Street – 14 St Peters Street, St Albans, AL1 3AA
Stamford – All Saints Place, Stamford, PE9 2EY
Stockport – 36-40 Great Underbank, SK1 1QF
Wealdstone – 4-12 Headstone Drive, Harrow, HA3 5QL
Barnet – 63-65 High Street, EN5 5UU
Cambridge City – 57-58 St Andrew Street, CB2 3BZ
Canning Town – 22 Barking Road, London, E16 1HF
Cricklewood – 193 Cricklewood Broadway, London, NW2 3HR
Dereham – Quebec Street, Dereham, NR19 2AA
Golders Green – 879 Finchley Road, London, NW11 8RT
Hampstead – 79-81A Hampstead High Street, London, NW3 1QL
Harold Hill – 17 Farnham Road, Romford, RM3 8EJ
Kilburn – 79A Kilburn High Road, London, NW6 6JG
Kingsland – 118-120 Kingsland High Street, London, E8 2NX
Lower Edmonton – 1-7 South Mall, Edmonton Green, London, N9 0TX
Roman Road – 138 Roman Road, Bethnal Green, London, E2 0RX
South Ockendon – 8 Derwent Parade, RM15 5EB
Stamford Hill – (unclear, two possible locations)
Bideford – The Quay, EX39 2EX
Dunraven Place – 4-5 Wyndham Street, Bridgend, CF31 1AB
Gloucester – Kings Square, GL1 1AD
Liskeard – The Parade, PL14 6AA
Merthyr Tydfil – 3 John Street, CF47 0AB
Mutley – 38 Mutley Plain, Plymouth, PL4 6LL
Nailsea – Crown Glass Place, Bristol, BS48 1RA
Newquay – 31-33 East Street, TR7 1BU
Paignton – 34 Torquay Road, TQ3 3EX
Port Talbot – 139 Station Road, SA13 1NG
Stroud – 16-17 Russell Street, GL5 3AA
Teignmouth – Den Road, TQ14 8AA
Yate Sodbury – 1 South Parade, Bristol, BS37 4BB
Baker Street – 111 Baker Street, London, W1U 6SG
Bexhill On Sea – Devonshire Square, TN40 1AA
Cosham – 13 High Street, Portsmouth, PO6 3EH
Great Portland Street – 173 Great Portland Street, London, W1W 5PH
High Street (10) – (unclear, multiple locations)
Kensington – 208-212 Kensington High Street, London, W8 7RG
Knightsbridge – 6 Raphael Street, London, SW7 1DL
Melville Road – 20 Melville Road, Hove, BN3 1UB
Paddington Quay – 4 Praed Street, London, W2 1JX
Portsmouth – Slindon Street, PO1 1AB
Raynes Park – 1a Amity Grove, London, SW20 0LL
Romsey – 15-25 Church Street, SO51 8WA
Westbourne – 10-12 Seamoor Road, Bournemouth, BH4 9AW
Windsor – 38-39 Peascod Street, SL4 1AA
Worlds End – 351-353 Kings Road, London, SW3 5EX
Aldwych – 95 Aldwych, London, WC2B 4JN
Brixton – 242 Ferndale Road, London, SW9 8FR
Broadway – 1 Broadway, London, SW1H 0AX
City of London – 12 Eastcheap, London, EC3M 1AJ
East Dulwich – 74-76 Lordship Lane, London, SE22 8HH
Eccleston Street – 6 Eccleston St, London SW1W 9LS
High Holborn – 181 High Holborn, London, WC1V 7RL
Houndsditch – 11 White Kennet Street, London, E1 7BS
Islington – 160-161 Upper Street, London, N1 1US
Kennington Park – 410 Kennington Road, London, SE11 4QA
London Bridge – 19A Borough High Street, London, SE1 9SF
Lupus Street – 121-125 Lupus Street, London, SW1V 3EW
Mount Pleasant – Rosebery Avenue, London, EC1R 4SQ
Vauxhall Bridge Road – 167 Vauxhall Bridge Road, London, SW1V 2ST

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