Chancellor’s difficult decisions in spring statement could just be the start

Published

6 months ago

March 26, 2025

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It might not have been a budget, but the spring statement felt like one.

There was red pen all over the chancellor’s economic plans as Rachel Reeves sought to repair deteriorating public finances by cuts that will hit the poorest in society.

Faced with a deteriorating economic outlook and rising debt repayment costs, the chancellor was in a tight spot having made her big call back in October when she executed a – her words – “once in a generation” £70bn tax and spend budget to improve public services and drive economic growth.

Five months in, the budget is not living up to what was billed.

She confirmed on Wednesday that the £9.9bn surplus forecast in 2029/30 had been wiped out, leaving the public finances in the red.

Cue a £14bn repair job to restore her fiscal cushion as Reeves told the House of Commons her fiscal rule to fund day-to-day government spending from tax receipts not borrowing by the end of the decade was “non-negotiable”.

No more borrowing and no more tax hikes (for now).

The chancellor instead announced billions of spending cuts to make her sums add up and the cuts were hard to stomach for the Labour movement as they watched a Labour chancellor cut the welfare bill by £4.8bn.

The government’s own assessments estimate that 3.2m families on universal credit will be on average £1,720 worse off a year by 2029/30 while 250,000 adults and 50,000 more children are set to be pushed into relative poverty, according to the government’s own impact assessment.

I don’t need to tell you how uncomfortable this is for many Labour MPs and the clamour against cuts was plain to see, not only in the Commons as MPs stood up to rail against “cruel cuts” and urge the chancellor to think again, but outside Downing Street too as protesters gathered.

For now, MPs, and government insiders, tell me they don’t scent a full-blown rebellion. One seasoned MP told me that while MPs are very concerned about how these cuts will be implemented and reaction from constituents, they also “generally still recognise the tough circumstances” with “no one in doubt Rachel Reeves is serious about turning around public finances”.

Government figures argue they do not think the fall-out from the cuts will be as bad as their own assessment, pointing out that the calculations don’t take into account the rise in national living wage, the government’s poverty plan for around 700,000 vulnerable families and changes to employment support as part of the welfare reform that should help people back into work.

But that does not mean the difficulties are not piling up for this chancellor even if on Wednesday she managed to buy a bit of political space as she repaired her black hole, avoided an emergency budget and could at least point to upgrades to the growth forecasts after 2026.

There was also a rabbit of sorts – the chancellor looks very happy about this – as she announced that the government’s planning reforms would add nearly £7bn to the economy over the next five years.

This is something to grasp on to for a politician groping around for a bit of good news and something to sell to her MPs: Stick with me the growth plan is going to work.

But what is plain to see is that this is a repair job rather than a fix.

As the Office of Budget Responsibility itself noted, the £9.9bn headroom Reeves has re-built to stick to her fiscal rules is flimsy and fragile and could easily be wiped out by trade wars, an interest rate shock or market volatility in these deeply uncertain times.

So, the question on everyone’s lips is will she have to come back for more in a few months? When I asked her at this afternoon’s press conference, she said only that the government was, as demonstrated on Wednesday, “determined to live within its means”.

But it’s obvious that further tax rises or spending cuts could soon be on the cards if she remains determined to stick to her fiscal rules and not borrow more.

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What is clear too is that the appetite for further spending cuts from her own party is pretty much exhausted.

Labour MPs were vocal about that in the chamber, demanding taxes on the rich rather than benefits cuts on the poor, while those who are sticking with the chancellor now also know all too well that pressure will build to raise revenue elsewhere.

The chancellor may have managed to navigate a difficult day, but the months ahead look set to become harder still. The difficult decisions now could be just the start.

UK

Google makes £5bn pledge to Britain – but concerns raised over mooted UK-US tech deal

Published

55 mins ago

September 16, 2025

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Google makes £5bn pledge to Britain - but concerns raised over mooted UK-US tech deal

Google is set to invest £5bn in the UK in the next two years, to support growing demands for AI services.

The announcement, which comes as Google opens a new data centre in Waltham Cross in Hertfordshire, is expected to contribute to the creation of thousands of jobs, the US tech giant said.

Chancellor Rachel Reeves described it as a “vote of confidence” in the UK economy.

The news comes hours before Donald Trump lands in the UK for a state visit at which he and Sir Keir Starmer are widely expected to sign a new UK-US tech deal.

It also follows reports that ChatGPT parent firm OpenAI, and Nvidia, will also unveil billions of dollars’ worth of investment into UK data centres this week.

The chancellor said the investment would boost research and development, capital expenditure and engineering.

However, Liberal Democrat leader Sir Ed Davey has criticised the proposed deal as a “Silicon Valley stitch-up”, and has demanded that the government put it to a vote in parliament.

He said: “I am really concerned the government is going to agree to a Silicon Valley stitch-up that hands tax cuts to tech billionaires while undermining protections for our children online.”

Sir Ed added: “Parents want protections for children online to be kept in place, not traded away in a backroom deal with tech barons.

“We can’t let the government sign up to a deal that benefits Elon Musk at the expense of the British people.”

Google has confirmed it will invest £5bn into capital expenditure, research and development, and related engineering over the next two years, which will include “pioneering” AI research in science and healthcare through its DeepMind operation.

The Silicon Valley firm said the investment will help the UK grow its AI economy and contribute to technological breakthroughs, improvements in cybersecurity and job creation.

Google predicted the investment will help to create 8,250 jobs annually at UK businesses.

DeepMind co-founder and chief executive Demis Hassabis said: “We founded DeepMind in London because we knew the UK had the potential and talent to be a global hub for pioneering AI.

“The UK has a rich history of being at the forefront of technology – from Lovelace to Babbage to Turing – so it’s fitting that we’re continuing that legacy by investing in the next wave of innovation and scientific discovery in the UK.”

UK

Heavy security at Windsor for Trump’s state visit feels ‘American’

Published

55 mins ago

September 16, 2025

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Heavy security at Windsor for Trump's state visit feels 'American'

There has been no expense spared for the UK’s biggest security operation since the King’s coronation.

This time the occasion is both royal and presidential. It is vast and honestly feels, well, American.

The operation has been led by Thames Valley Police, but officers from across the UK will also play a part in the visit.

Windsor is a sea of fluorescent yellow jackets and black and white flat caps. Officers are swarming the town and over the next couple of days will be sending drones into crowds, conducting boat patrols and deploying mounted units in and around the wider area.

Authorities have planned for every eventuality but would not expand on whether the fatal shooting of Charlie Kirk had led them to heighten security measures.

The assassination of the US activist may have intensified consideration about potential threats, but authorities have had extensive security plans in the works for months.

Operational firearms commander Sergeant Dan Hatfield explained that the police presence will be heightened – and every plan has been worked on in conjunction with the Secret Service.

“The residents of Windsor and visitors to Windsor are used to seeing a fairly high police presence, including armed police,” Sgt Hatfield said.

“However, for this state visit, they will see an increase in those numbers. Fortunately, I’ve had experience working with the Americans with all the Secret Service. We have a really good working relationship and work fairly harmoniously together to ensure the safety of everyone involved.”

Whether in the air, on the ground or on the water, safety is paramount.

On a visit with the Thames Valley marine unit, Sky News witnessed what their 24-hour patrol of the waterways would look like.

A section of the River Thames that borders the Castle will be closed off during the visit.

Sergeant Lyn Smith, head of the joint operations marine unit between the Thames Valley and Hampshire forces, said this is the biggest event she has worked on.

“The team is highly trained, we are ready for anything that will happen on or around the water,” she said.

“The marine support unit are going to be doing high visibility patrols, some searching, some specialist searching in and around the area, and working with our partners in the Environment Agency to deliver a safe event.

“Similar to President Macron’s state visit, we are still providing capability on the water, it’s just on a larger scale for us.”

Notably, for the first time in any state visit or royal occasion, the section of the Long Walk leading up to the castle has been cordoned off with large white barricades erected to shield the residence from view.

Airspace over the town is also restricted for the duration of the visit, enforced using police drones and helicopters.

Vehicles will be standing by close to patrol officers on the ground, holding their ballistic helmets, ballistic vests and shields if an incident occurs.

Thousands of protesters plan to descend on Windsor and central London during the visit to demonstrate against the president’s trip.

A rally in central London on Wednesday is expected to draw the largest crowd, but protesters from the Stop Trump Coalition have now confirmed plans for a Tuesday event too.

A royal welcome may not be extended by all – but many will be hoping they won’t drown out the pomp for the president.

UK

PM ‘angry’ over Mandelson scandal – as emergency debate set to ramp up pressure

Published

10 hours ago

September 16, 2025

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PM 'angry' over Mandelson scandal - as emergency debate set to ramp up pressure

An emergency debate will take place in parliament today over Sir Keir Starmer’s controversial appointment of Peter Mandelson as his ambassador to the US.

Speaker Lindsay Hoyle has agreed to allot three hours for questions about what the government, and particular the prime minister, knew and didn’t know about the depth of Lord Mandelson’s relationship with billionaire paedophile Jeffrey Epstein.

Lord Mandelson was appointed in January 2025 to the UK’s most senior overseas diplomatic position – the ambassador to the US.

He had always admitted to having known Epstein, but last week the US Congress unveiled the contents of a 50th “birthday book” which revealed a much closer relationship.

Among the tributes to Epstein in it, Lord Mandelson had described him as “my best pal”.

Then, emails published by The Sun and Bloomberg were even more damning, showing the former Labour minister sympathising with the convicted sex trafficker, saying: “I think the world of you and I feel hopeless and furious about what has happened.”

Lord Mandelson was removed from his ambassadorial post on Thursday, but not before Sir Keir had defended him at PMQs the day before. He has come under fire over his handling of the issue.

I’m ‘angry’, says PM

On Monday, in his first remarks about the sacking, the embattled prime minister – who earlier this month lost his deputy Angela Rayner to a tax affairs scandal – insisted he would have “never appointed” Lord Mandelson if he’d known then what he knows now.

He told Channel 4 News he was “angry” to have ended up in a situation where he pivoted from defending him to sacking him within 24 hours, suggesting he was unaware of the “detailed allegations” before PMQs.

But questions remain about what exactly the PM – or the vetting team – knew, and the government has declined to release the details of the procedure Lord Mandelson underwent before he was appointed.

The Conservatives hope to use today’s emergency debate to increase pressure on the government to publish all the information – just hours before Donald Trump lands in the UK for a state visit.

The US president is himself embroiled in questions about his own relationship with the disgraced billionaire.

Analysis: No state visit has had a backdrop quite like this

Sir Keir was also hit by the resignation of Number 10’s director of strategy, Paul Ovenden, on Monday. He quit after it emerged he’d sent sexually explicit messages about independent MP Diane Abbott.

It’s all added up to a rotten start to the new parliamentary term for the prime minister, who just two weeks ago confidently declared “phase two” of his government was now under way.

He’s ruled out resigning, despite discontent on his backbenches and Reform UK’s sustained lead in the polls.