On the one hand, Keir Starmervowed there would be “no return to austerity” under his government, while also insisting he had “no plans” to raise taxes beyond an £8bn raid on private equity, oil and gas companies, private school fees and non-doms to pay for more teachers and NHS appointments.
In reality, whoever won the election faced tens of billions of pounds in tough choices over tax and spending. But instead of levelling with us, the two main parties embarked in a “conspiracy of silence” in order to win votes.
Today, the truth will out, in a budget which will define Sir Keir Starmer’s first term in a way his manifesto did not.
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2:49
What to expect from the budget
There will be huge tax rises and there will be changes in the fiscal rules to allow the chancellor to borrow more to invest in Britain’s crumbling infrastructure.
And we will finally find out which “working people” are the ones Sir Keir Starmer wants to protect as small and big businesses, property owners, shareholders – and perhaps “Middle England” too – braces itself for tax rises, and the government braces itself for the fall-out.
The prime minister set the hare running on who’s in the firing line for tax rises last week at the Commonwealth Heads of Government summit in Samoa when he told me “working people” were those who “go out and earn their living, usually paid in a sort of monthly cheque” but they did not have the ability to “write a cheque to get out of difficulties”.
He told me explicitly that “working people” who also owned assets, such as property or shares, did not fit his definition.
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10:04
Sky News questions Starmer on tax rises
So business owners, property owners and Middle England do have some cause for alarm.
The pledge to “not increase national insurance, the basic, higher, or additional rates of income tax, or VAT” has been tweaked in recent weeks to a promise to “protect the payslips of working people”.
In another blow to employers, but a win for those struggling on low wages, Labour have also announced a 6.7% increase in the National Living Wage for over three million workers next year, amounting to a pay boost worth £1,400-a-year for an eligible full-time worker.
Is this the moment the manifesto is revealed as a sham? Labour insiders insist not and point, again, to the “£22bn black hole” in the current financial year they discovered when their took office – and which ratchets up to a £40bn gap in the public finances over the course of the parliament – that they now have to plug.
Politically, they hope to blame the big tax rises and borrowing on the economic inheritance left to them by the Tories and buy some space with voters.
As one senior government figure put it to me: “The scale of the economic inheritance is bigger than thought and it has blown a political and economic hole in our first few months.”
This will be a message Rachel Reeves will want to land at the despatch box on Wednesday.
But a public disillusioned with politicians might not see it like that as they watch a Labour chancellor, flanked by a prime minister who promised the opposite in the election, embark on a massive round of tax rises that but months ago they were told were not coming down the tracks.
Image: Ms Reeves is set to deliver the budget from 12.30pm. Pic: Treasury
Insiders acknowledge this is going to be a tax and spend budget that goes far beyond what we were told to expect when Labour were asking for votes.
But they hope what they can do with this big moment is to take it beyond the winners and losers and frame this first Labour budget in over 14 years as “forging a new settlement” for the people and the country.
To that end, this will be the “fixing the foundations and change” budget: “This is a new economic settlement from a government willing to investment and, in particular, borrow to invest, and that is a change and it will show a path towards long term growth.”
Because, as we drill into who is a working person, and who is going to be hit with tax raises in this budget, there will also be a big story about billions of investment in our country’s energy and transport infrastructure, into housing and hospitals and schools.
“If we get it right, on the evening of the budget, we want to be able to show that we protected your pay slip, are fixing the NHS and investing to rebuild Britain,” one senior figure explains. “What’s the alternative? Choice is going to feature very heavily in the chancellor’s speech. We have made our choices and we are asking business and the wealthiest to pay a bit more to grow our economy and protecting working people.”
And this new settlement, when it lands, will be massive. Rachel Reeves intends to change her borrowing rules to allow up to £53bn more in borrowing to be spent on public services and infrastructure.
Trailing the decision at the International Monetary Fund summit in Washington last week, the chancellor said she was making the change in order to take opportunities for the economy “in industries from life sciences to carbon capture, storage and clean energy to AI and technology”, as well as using borrowing to “repair our crumbling schools and hospitals”.
The danger for the chancellor is that what actually comes out the other side is anger over tax rises not flagged in the manifesto, or accusations that the government is being Janus-faced if it claims it’s protecting working people should it also, as speculated, extend the freeze on income tax thresholds beyond the 2028 deadline set by the last government, which would drag millions of workers into higher tax bands (and raise as much as £7bn a year for the government).
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How might the middle classes and wealthier voters respond to their incomes being squeezed? And how might businesses respond to being asked to pay billions more in taxes from a government that has been banging on about being pro-business for months?
It is going to be a difficult sell, no doubt. But this government is calculating that short-term pain now will translate into gains in the medium to long term if Reeves can pull it off and kick-start economic growth.
The hope is that come the next Labour manifesto, the pledges on the NHS, economy, better housing and jobs have been met and the public can forgive the tax rises foisted on them to get there.
Starmer talked endlessly about it being a change election and it will be this budget, not his manifesto, that proves the point.
Naguib Kheraj, the City veteran, has been shortlisted to become the next chairman of HSBC Holdings, Europe’s biggest bank.
Sky News can reveal that Mr Kheraj, a former Barclays finance chief, is among a small number of contenders currently being considered to replace Sir Mark Tucker.
HSBC, which has a market capitalisation of £165.4bn, has been conducting a search for Sir Mark’s successor since the start of the year.
In June, Sky News revealed that the former McKinsey boss Kevin Sneader was among the candidates being considered to lead the bank, although it was unclear this weekend whether he remained in the process.
Mr Kheraj would, in many respects, be seen as a solid choice for the job.
He is familiar with HSBC’s core markets in Asia, having spent several years on the board of Standard Chartered, the FTSE-100 bank, latterly as deputy chairman.
He also possesses extensive experience as a chairman, having led the privately held pensions insurer Rothesay Life, while he now chairs Petershill Partners, the London-listed private equity investment group backed by Goldman Sachs.
Mr Kheraj’s other interests have included acting as an adviser to the Aga Khan Development Board and The Wellcome Trust, as well as the Financial Services Authority.
He spent 12 years at Barclays, holding board roles for much of that time, before he went on to become chief executive of JP Morgan Cazenove, the London-based investment bank.
HSBC’s shares have soared over the last year, rising by close to 50%, despite the headwinds posed by President Donald Trump’s sweeping global tariffs regime.
In June, the bank said that Sir Mark would be replaced on an interim basis by Brendan Nelson, one of its existing board members, while it continued the search for a permanent successor.
Ann Godbehere, HSBC’s senior independent director, said at the time: “The nomination and corporate governance committee continues to make progress on the succession process for the next HSBC group chair.
“Our focus is on securing the best candidate to lead the board and wider group over the next phase of our growth and development.”
Sky News revealed late last year that MWM, the headhunter founded by Anna Mann, a prominent figure in the executive search sector, was advising HSBC on the process.
Since then, at least one other firm has been drafted in to work on the mandate.
Sir Mark, who has chaired HSBC since 2017, steps down at the end of next month to become non-executive chair of AIA, the Asian insurer he used to run.
He will continue to advise HSBC’s board during the hunt for his long-term successor.
As a financial behemoth with deep ties to both China and the US, HSBC is deeply exposed to escalating trade and diplomatic tensions between the two countries.
When he was appointed, Mr Tucker became the first outsider to take the post in the bank’s 152-year history – which has a big presence on the high street thanks to its acquisition of the Midland Bank in 1992.
He oversaw a rapid change of leadership, appointing bank veteran John Flint to replace Stuart Gulliver as chief executive.
The transition did not work out, however, with Mr Tucker deciding to sack Mr Flint after just 18 months.
He was replaced on an interim basis by Noel Quinn in the summer of 2018, with that change becoming permanent in April 2020.
Mr Quinn spent a further four years in the post before deciding to step down, and in July 2024 he was succeeded by Georges Elhedery, a long-serving executive in HSBC’s markets unit, and more recently the bank’s chief financial officer.
The new chief’s first big move in the top job was to unveil a sweeping reorganisation of HSBC that sees it reshaped into eastern markets and western markets businesses.
He also decided to merge its commercial and investment banking operations into a single division.
The restructuring, which Mr Elhedery said would “result in a simpler, more dynamic, and agile organisation” has drawn a mixed reaction from analysts, although it has not interrupted a strong run for the stock.
During Sir Mark’s tenure, HSBC has also continued to exit non-core markets, selling operations in countries such as Canada and France as it has sharpened its focus on its Asian businesses.
On Friday, HSBC’s London-listed shares closed at 946.7p.
Shares in UK banks have fallen sharply on the back of a report which urges the chancellor to place their profits in her sights at the coming budget.
As Rachel Reeves stares down a growing deficit – estimated at between £20bn-£40bn heading into the autumn – the Institute for Public Policy Research (IPPR) said there was an opportunity for a windfall by closing a loophole.
It recommended a new levy on the interest UK lenders receive from the Bank of England, amounting to £22bn a year, on reserves held as a result of the Bank’s historic quantitative easing, or bond-buying, programme.
It was first introduced at the height of the financial crisis, in 2009.
The left-leaning think-tank said the money received by banks amounted to a subsidy and suggested £8bn could be taken from them annually to pay for public services.
It argued that the loss-making scheme – a consequence of rising interest rates since 2021 – had left taxpayers footing the bill unfairly as the Treasury has to cover any loss.
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1:28
Why taxes might go up
The Bank recently estimated the total hit would amount to £115bn over the course of its lifetime.
The publication of the report coincided with a story in the Financial Times which spoke of growing fears within the banking sector that it was firmly in the chancellor’s sights.
Her first budget, in late October last year, put businesses on the hook for the bulk of its tax-raising measures.
Ms Reeves is under pressure to find more money from somewhere as she has ruled out breaking her own fiscal rules to help secure the cash she needs through heightened borrowing.
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1:17
Is Labour plotting a ‘wealth tax’?
Other measures understood to be under consideration include a wealth tax, new property tax and a shake-up that could lead to a replacement for council tax.
Analysts at Exane told clients in a note: “In the last couple of years, the chancellor has been protective of the banks and has avoided raising taxes.
“However, public finances may require additional cash and pressures for a bank tax from within the Labour party seem to be rising,” it concluded.
The investor flight saw shares in Lloyds and NatWest plunge by more than 5%. Those for Barclays were more than 4% lower at one stage.
A spokesperson for the Treasury said the best way to strengthen public finances was to speed up economic growth.
“Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms,” they added.
The man dubbed “Britain’s most hated boss” for his controversial policy of sacking hundreds of seafarers and replacing them with cheaper agency staff is to quit.
Sky News can exclusively reveal that Peter Hebblethwaite, the chief executive of P&O Ferries, is leaving the company.
Sources said he had decided to resign for personal reasons.
Mr Hebblethwaite joined the ranks of Britain’s most notorious corporate figures in 2022 when P&O Ferries – a subsidiary of the giant Dubai-based ports operator DP World – said it was sacking 800 staff with immediate effect – some of whom learned their fate via a video message.
The policy, which Mr Hebblethwaite defended to MPs during subsequent select committee hearings, erupted into a national scandal, prompting changes in the law to give workers greater protection.
Under the new legislation, the government plans to tighten collective redundancy requirements for operators of foreign vessels.
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In a statement issued in response to a request from Sky News, a P&O Ferries spokesperson said: “Peter Hebblethwaite has communicated his intention to resign from his position as chief executive officer to dedicate more time to family matters.
Image: Peter Hebblethwaite gives evidence to a committee of MPs in 2022. Pic: PA
“P&O Ferries extends its gratitude to Peter Hebblethwaite for his contributions as CEO over the past four years.
“During his tenure the company navigated the challenges of the COVID-19 pandemic, initiated a path towards financial stability, and introduced the world’s first large double-ended hybrid ferries on the Dover-Calais route, thereby enhancing sustainability.
“We extend our best wishes to him for his future endeavours.”
A source close to the company said it anticipated making an announcement on Mr Hebblethwaite’s successor in the near term.
A former executive at J Sainsbury, Greene King and Alliance Unichem, Mr Hebblethwaite joined P&O Ferries in 2019, before taking over as chief executive in November 2021.
Insiders claimed on Friday that he had “transformed” the business following the bitter blows dealt to its finances by the COVID-19 pandemic and – to some degree – by the impact of Britain’s exit from the European Union.
Image: A union protest is shown at the height of the mass sackings row in 2022
P&O Ferries carries 4.5 million passengers annually on routes between the UK and continental European ports including Calais and Rotterdam.
It also operates a route between Northern Ireland and Scotland, and is a major freight carrier.
The company’s losses soared during the pandemic, with DP World – its sole shareholder – supporting it through hundreds of millions of pounds in loans.
Its most recent accounts, which were significantly delayed, showed a significant reduction in losses in 2023 to just over £90m.
The reduction from the previous year’s figure of almost £250m was partly attributed to cost reduction exercises.
The accounts also showed that Mr Hebblethwaite received a pay package of £683,000, including a bonus of £183,000.
“I reflected on accepting that payment, but ultimately I did decide to accept it,” he told MPs.
“I do recognise it is not a decision that everybody would have made.”
The row over his pay was especially acute because of his admission that P&O Ferries’ lowest-paid seafarers received hourly pay of just £4.87.
Mr Hebblethwaite had argued since the mass sackings of 2022 that the company would have gone bust without the drastic cost-cutting that it entailed.
The company insisted at the time that those affected by the redundancies had been offered “enhanced” packages to leave.
Last October, the then transport secretary, Louise Haigh, said: “The mass sacking by P&O Ferries was a national scandal which can never be allowed to happen again,” adding that measures to protect seafarers from “rogue employers” would prevent a repetition.
“This issue has been ignored for over 2 years, but this new government is moving fast and bringing forward measures within 100 days,” Ms Haigh added.
“We are closing the legal loophole that P&O Ferries exploited when they sacked almost 800 dedicated seafarers and replaced them with low-paid agency workers and we are requiring operators to pay the equivalent of National Minimum Wage in UK waters.
“Make no mistake – this is good for workers and good for business.”
The minister’s description of P&O Ferries as “rogue”, and suggestion that consumers should boycott the company, sparked a row which threatened to overshadow the government’s International Investment Summit last October.
Sky News’s business and economics correspondent, Paul Kelso, revealed that DP World had withdrawn from participating in the event, and paused a £1bn investment announcement.
The company relented after Sir Keir Starmer publicly distanced the government from Ms Haigh’s characterisation of DP World.