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).
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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.
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2:19
Beth Rigby asks: ‘Is it time for you to level with people?’
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.
Image: Rachel Reeves. Pic: PA
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.
As riots broke out across the country last summer following the Southport attack, fear spread in a majority Muslim part of Birmingham that far-right protesters were on their way.
Locals came out on to the streets, and as I was reporting live on air, I was surrounded by a small group of masked men, swearing and gesturing to the camera.
Afterwards, as we were trying to drive away from the area, a man with a knife followed us and attempted to slash a tyre on our broadcast van.
Image: The moment Becky Johnson was confronted on camera last summer
A year on, I have returned to the area to discuss what happened with some of those who saw their city descend into chaos.
“The local community had lost faith in the local elected members as well as the local policing units,” says Naeem Yousef, 48, who lives nearby.
“They thought…the only way to protect themselves and the community was by coming out in force.”
‘You can’t control their behaviour’
Tanveer Choudhry, 56, agrees. “In every community we have our sort of, shall we call them… idiots, and you can’t control their behaviour,” he says.
“I think there was a concern that the far-right group that was coming may well be armed… so I think it was just trying to counteract what they thought was coming.”
We are sitting in a cafe, not far from where the unrest broke out last summer.
Image: Masked men surrounded the Sky team during the unrest
‘They were looking for who they thought were the enemy’
The group I’m with were invited by community activist Naveed Sadiq, who was there that day.
As well as Naveed, there are three other local Muslim men, and two white residents, including Gerry Moynihan.
He recalls deciding to stay at home that day.
“They were looking for what they thought were the enemy – white people – and trying to find white people,” he says.
“Which is why I stayed in my house, because the intelligence I had was, don’t get involved, don’t walk around, and you know, it will pass.”
I ask the group if my team and I were targeted because we were white.
Image: Gerry Moynihan says he decided not to leave his home
“It’s not because you’re white, it’s because they’re actually bored,” Naveed says. “They were wanting a bit of excitement.”
I ask if they think it would have happened if we were all British Asian.
“Of course,” Tanveer replies. “It wasn’t the fact that you were white… it was just the heat of the moment”.
Naeem believes it happened simply because the men involved “do not want anyone filming what they’re doing”.
“You could have been Asian… they would still try to get you out of the area,” he insists.
Image: Tanveer believes our team would still have been targeted if we were a different ethnicity
‘Are we going to be accepted?’
I’m keen to understand how these men feel now and whether the sentiment that brought people out on to the streets to “protect” them has been reignited by the recent protests outside hotels housing asylum seekers.
The answer, from Joe Khann, a local Muslim man, would surprise many.
“I would like to go and join them,” he says, referring to the anti-immigration protesters who have gathered several times in Epping.
“We have this problem within our own communities, and people don’t talk about it. We feel exactly the same and we understand how the English feel with the immigration,” he explains.
Image: ‘We feel exactly the same’ on immigration, says Joe Khann
“We’re having people who are getting married back home, they get married for six months, get divorced…and the government gives them all their help to get accommodation, their national insurance numbers and all that,” he says.
“We’re getting fed up within our own community because we hear this constantly.”
However, he thinks if he did try to join in protests, people would “think I’m an immigrant”.
He says he is “born here, 58, and they look at me as a foreigner or a migrant”.
Naeem agrees. “The question is for us now, as people who are born and bred in this country, what is our identity? Who are we?” he asks.
“As a white person born in this country, you are automatically accepted. Are we going to be accepted? How many generations will it take for us to be accepted?”
Image: Naeem (left) says even those born in the UK question their identity
‘You have to blame someone’
Naeem is also concerned about immigration.
“We have an influx of people that we do not know about, and they have no loyalty to the area,” he says.
“I believe that the average white guy… isn’t racist, they’re just fed up,” adds Naveed.
However, these men do have grievances, particularly with the media.
“We feel that we have a two-tier journalists system where when the colour is like mine we get different justice and when the colour is a bit paler it’s different,” Naveed says.
Image: ‘When the colour is like mine we get different justice,’ says Naveed (left)
‘We have become the bogeyman’
“When there’s criminality, and it’s on the news, a Muslim has to be identified by his religion,” Naeem says.
He believes Muslims have become the “bogeyman” in many people’s minds.
“Where you don’t have housing for example, where the crime has increased, you have to blame someone,” he says.
“Prior it was the Irish community, now it’s the Muslim community.
“It’s a distraction from the actual real issues and how you can resolve them but let’s just put it on to the Muslim community for now, let’s just distract the whole nation and say look it’s the problem with asylum, it’s a problem with Muslims,” he says.
After leaving, I head over to the spot on the roundabout where my team were targeted last year.
As I stand there, my colleague sees a man imitating pulling the trigger of a gun at me from his car.
Sir Keir Starmer and Emmanuel Macron’s migrant deal comes into force today, with detentions set to begin by the end of the week.
The “one in, one out” pilot scheme – which allows the UK to send some people who have crossed the Channel back to France in exchange for asylum seekers with ties to Britain – was signed last week, and has now been approved by the European Commission.
It comes as 2025 is on course to be a record year for crossings.
Approximately 25,436 people have already made the journey this year, according to PA news agency analysis of Home Office figures – 49% higher than at the same point in 2024.
The scheme also means that anyone arriving in a small boat can be detained immediately, with space set aside at immigration removal centres in anticipation of their arrival.
Sir Keir said the ratification of the treaty will “send a clear message – if you come here illegally on a small boat you will face being sent back to France”.
Ministers have so far declined to say how many people could be returned under the deal, however, there have been reports that under the scheme only 50 people a week will be returned to France.
Analysis: Deal will need to go much further to work
Sky News political correspondent Rob Powellsaid while it was a “policy win” for the government, the numbers must eventually “go a lot higher” than 50 per week if it is to work as a deterrent.
“The average crossing rate is about 800 a week, so this will need to go up by a sizeable factor for that message to start seeping through to people trying to make that crossing,” Powell added.
The aim will be to make asylum seekers believe the “risk of going back to France is so big that they shouldn’t bother parting with their cash and paying smugglers” to make the crossing.
Image: Migrants in Dunkirk, France, preparing to cross the English Channel.
The Conservatives have branded the agreement a “surrender deal” and said it will make “no difference whatsoever”.
Under the terms of the agreement, adults arriving on small boats will face being returned to France if their asylum claim is inadmissible.
In exchange, the same number of people will be able to come to the UK on a new legal route, provided they have not attempted a crossing before and subject to stringent documentation and security checks.
The pilot scheme is set to run until June 2026, pending a longer-term agreement.
Home Secretary Yvette Cooper will face questions on the agreement on Sky News Breakfast this morning.
Police are warning of mass arrests if a protest in support of the banned group Palestine Action goes ahead on Saturday.
Hundreds of people are expected to turn out for the demonstration, which is understood to be planned for London.
However, the Metropolitan Police said “anyone showing support for the group can expect to be arrested.”
“We are aware that the organisers of Saturday’s planned protest are encouraging hundreds of people to turn out with the intention of placing a strain on the police and the wider criminal justice system,” said a spokesperson.
The organisers, a pressure group called Defend Our Juries, denied their protest will try to overwhelm the police and justice system.
“If we are allowed to protest peacefully and freely, then that is no bother to anyone,” said the group in a statement.
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1:29
What’s happening to Palestine Action?
Palestine Action was banned under terrorism laws after two aircraft were damaged at RAF Brize Norton on 20 June.
Home Secretary Yvette Cooper said the vandalism of the planes was “disgraceful” and accused the group of a “long history of unacceptable criminal damage”.
The ban means membership of, or support for, Palestine Action is a criminal offence punishable by up to 14 years in prison.
More than 200 people supporting the group were arrested at Defend Our Juries protests across the UK last month, many of whom held placards with the message: “I oppose genocide, I support Palestine Action.”
Downing Street has urged people not to attend this weekend’s protest.
Image: Monday’s protesters waved flags and banged pan lids
It comes after around 40 people gathered outside Labour HQ on Monday to protest the party’s stance on Gaza.
They were watched by a small group of police officers as they chanted phrases including: “Shame on Keir Starmer, shame on the Labour Party, shame on David Lammy.”
Separately, the Board of Deputies of British Jews has also confirmed it will protest this weekend, with community organisations marching through central London to Downing Street on Sunday.
They are calling for the government not to recognise the state of Palestine without all hostages taken by Hamas being released.
Last week, Sir Keir Starmer said he planned to recognise Palestine by the UN General Assembly meeting in September, unless Israel met certain conditions including agreeing a ceasefire and improving the humanitarian situation in Gaza.