What we got from Rachel Reeves today was, in economic terms, a major departure from economic policy as we’ve known it in this country for the past decade-and-a-half.
We got the single biggest increase in taxes in any fiscal event since 1993. The tax burden itself is now heading up to the highest level in history. We got a significant departure from the policies and promises laid out in the Labour manifesto.
Only a few months ago, Labour pledged not to make dramatic changes to Britain’s economic policy – no significant tax rises, no dramatic changes to public spending. But today the chancellor delivered significant changes.
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The old fiscal rules are out and now this government plans to borrow many billions of pounds more. It plans to increase investment considerably.
It plans to raise taxes on those with investments, on those with assets who could previously pass them on to their children (including business owners and farmers). In the meantime, it plans to spend considerably more on the health service and on public investment than previously slated.
It’s worth saying: while the government inherited the public finances in a worse condition than they looked before the election, even the Treasury’s “black hole” of £22bn cannot explain the dramatic change in economic policy here.
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0:23
Reeves refuses to rule out future tax hikes
It does not explain the dramatic increase in borrowing, spending and taxes – these are policy decisions by the current government. And, many would say, quite right too. Surveys suggest the British public support higher taxes, especially if they are used to improve the National Health Service.
Many think the UK should be spending more on its public services, even if that means we all have to contribute more (though they are generally less enthusiastic if asked whether they would be happy to pay higher taxes themselves). And there is little dispute that this country’s investment levels have been too low for too long and could afford to be higher.
However, that wasn’t the pitch Reeves and Keir Starmer made at the election. They promised, in their manifesto, only slight economic changes and only small increases in taxes. They promised to spend much of their time in office cleaning up the mess from the last government. Reeves promised to be the iron chancellor of fiscal discipline.
But this budget is considerably less disciplined with the public finances than expected. But what will worry the chancellor is that despite this extra largesse with both investment and current spending, the UK economy is not going gangbusters as a result.
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The Office for Budget Responsibility actually cut its forecasts for long term growth. That promise made by Starmer to achieve the highest economic growth in the G7 looks highly unlikely – even after the implementation of all these policies.
And in the hours after the speech, markets reacted in a way that will cause nerves in the Treasury. It’s nothing like the lurches in government debt yields we saw after Liz Truss’s mini budget in 2022. But the pound fell and the interest rates investors charge the UK government rose. That’s not something any chancellor would like to see after their first budget.
The next few days promise to be very interesting both in politics and in markets.
Bird flu has been detected in a sheep in England for the first time, the government has said.
The single case was identified in Yorkshire during a routine check of livestock on a farm where the H5N1 virus, also called avian influenza, had previously been confirmed in captive birds.
No further infection of the virus was detected in the remaining flock, the Department for Environment, Food and Rural Affairs (DEFRA) said.
“While this is the first time this virus has been reported in a sheep, it is not the first time influenza of avian origin has been detected in livestock in other countries,” it added.
“There is no evidence to suggest an increased risk to the nation’s livestock population.”
DEFRA said it has been introducing livestock surveillance on infected premises following the outbreak of avian influenza in dairy cows in the US.
The infected sheep has been humanely culled to enable extensive testing, it said.
Livestock farmers are being urged to remain vigilant to any signs of bird flu following recent outbreaks.
The UK’s chief veterinary officer, Christine Middlemiss, said: “We have confirmed the detection of influenza of avian origin in a single sheep on a farm in Yorkshire.
“Strict biosecurity measures have been implemented to prevent the further spread of disease.
“While the risk to livestock remains low, I urge all animal owners to ensure scrupulous cleanliness is in place and to report any signs of infection to the Animal Plant Health Agency immediately.”
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2:18
December 2024: ‘Bird flu could be spreading undetected’
Dr Meera Chand, of the UK Health Security Agency, said: “Globally, we continue to see that mammals can be infected with avian influenza.
“However, current evidence suggests that the avian influenza viruses we’re seeing circulating around the world do not spread easily to people – and the risk of avian flu to the general public remains very low.”
The Food Standards Agency has said properly cooked poultry and associated products, including eggs, remain safe to eat.
Bird flu poses a very low food safety risk to UK consumers since the virus is not normally transmitted through food, it added.
Chancellor Rachel Reeves is poised to deliver an update on the health of the British economy on Wednesday.
The spring statement is not a formal budget – as Labour pledged to only deliver one per year – but rather an update on the economy and any progress since her fiscal statement last October.
While it’s not billed as a major economic event, Rachel Reeves has a big gap to plug in the public finances and speculation has grown she may have to break her self-imposed borrowing rules.
Here, Sky News explains everything you need to know.
What is the spring statement?
The spring statement is an annual speech made by the chancellor in the House of Commons, in which they provide MPs with an update on the overall health of the economy and Office for Budget Responsibility (OBR) forecasts.
It is one of two major financial statements in the financial year – which runs from 1 April to 31 March.
The other is the autumn budget, a more substantial financial event in which the chancellor sets out a raft of economic policy for the year ahead.
Typically, the spring statement – which was first delivered by ex-chancellor Phillip Hammond in 2018 – gives an update on the state of the economy, and details any progress that has been made since the autumn budget.
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2:55
Sam Coates previews the chancellor’s announcements
When will Rachel Reeves deliver it?
The OBR, which monitors the government’s spending plans, will publish its forecast on the UK economy on 26 March.
It is required to produce two economic forecasts a year, but the chancellor said she would only give one budget a year to provide stability and certainty on upcoming tax changes.
The OBR will also provide an estimate on the cost of living for British households, and detail whether it believes the Labour government will adhere to its own rules on borrowing and spending.
The chancellor will then present the OBR’s findings to the House of Commons, and make her first spring statement.
This will be responded to by either Conservative leader Kemi Badenoch or shadow chancellor Mel Stride.
Image: Rachel Reeves is looking to plug gaps in the UK’s finances. Pic: PA
Why does it matter?
The UK economy is thought to be underperforming – potentially due to global factors, like Donald Trump’s trade tariffs – and there are rumours that the chancellor could consider breaking her own rules on borrowing in response.
The economy contracted slightly in January, while inflation has climbed to a 10-month high of 3%. Meanwhile, the government has committed to boosting defence spending to 2.5% of GDP by 2027 – an expensive task.
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Ms Reeves’s fiscal rules mean she cannot borrow for day-to-day spending – leaving cuts as one of her only options. Her other “non-negotiable” is to get debt falling as a share of national income by the end of this parliament.
It is expected that welfare cuts will be part of the spring statement package to help the chancellor come within her borrowing limit.
In short, the Treasury believes Ms Reeves must maintain £10bn in headroom after months of economic downturn and geopolitical events since last October’s budget.
It is widely expected the OBR will confirm that this financial buffer has been wiped clean.
Where can I watch the spring statement?
The spring statement will be delivered in the House of Commons on Wednesday 26 March, directly after Prime Minister’s Questions, which is usually finished by around 12.30pm.
You’ll be able to keep up to date on Sky News – and follow live updates in the Politics Hub.
The chief executive of National Grid has claimed that Heathrow Airport had enough power from other substations despite Friday’s shutdown.
Around 1,300 flights were affected after a fire knocked out an electricity substation in Hayes on Thursday evening. Operations were not able to resume until Friday evening.
John Pettigrew from National Grid said there were two other substations “always available for the distribution network companies and Heathrow to take power”.
Image: The aftermath of the substation fire. Pic: Reuters
Image: The substation fire
In his first comments since the disruption, Mr Pettigrew told the Financial Times: “There was no lack of capacity from the substations.
“Each substation individually can provide enough power to Heathrow.”
He added: “Losing a substation is a unique event – but there were two others available.
“So that is a level of resilience.”
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In response to the comments, a Heathrow Airport spokesperson said: “As the National Grid’s chief executive, John Pettigrew, noted, he has never seen a transformer failure like this in his 30 years in the industry.
“His view confirms that this was an unprecedented incident and that it would not have been possible for Heathrow to operate uninterrupted.
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2:56
Heathrow reopens: Govt orders probe
Image: Flight cancellations at Heathrow left hundreds of thousands of passengers stranded around the globe
“Hundreds of critical systems across the airport were required to be safely powered down and then safely and systematically rebooted. Given Heathrow’s size and operational complexity, safely restarting operations after a disruption of this magnitude was a significant challenge.”
Heathrow chief executive Thomas Woldbye previously said a back-up transformer failed during the power outage, meaning systems had to be closed in accordance with safety procedures so power supplies could be restructured from two remaining substations.
But it has emerged that a report by consultancy firm Jacobs more than 10 years ago found a “key weakness” of Heathrow’s electricity supply was “main transmission line connections to the airport”.
The document, published in 2014, stated “outages could cause disruption to passenger, baggage and aircraft handling functions”, and “could require closure of areas of affected terminals or potentially the entire airport”.
In its appraisal of operational risk at the airport, Jacobs said provision of on-site generation and other measures to ensure resilient supply appeared “to be adequate” to enable Heathrow “to withstand and recover from interruptions to supply”.
The report added that the airport operated “within risk parameters that are not excessive or unusual for an airport of its type”.
Metropolitan Police counter-terrorism officers initially led the investigation but the force said the fire is not believed to be suspicious so the London Fire Brigade is now leading the probe which will focus on the electrical distribution equipment.
Heathrow is Europe’s largest airport, with more than 83.9 million passengers travelling through its terminals in 2024. Around 200,000 passengers were affected by Friday’s closure.