Fiscal rules are silly but important as Reeves has banged on about them and markets care

Published

2 months ago

July 3, 2025

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You’re probably tired by now of hearing all about “black holes”.

It’s one of those phrases trotted out by journalists in an effort to make economic policy sound a little more interesting. And in some senses it’s a massively misleading image.

After all, when people talk about fiscal holes, what they’re really talking about is something rather prosaic: the amount of money it would take for the chancellor not to break her fiscal rules.

Those fiscal rules are not god-given, after all. They were confected by the chancellor herself. Missing them will not really result in Britain sliding into infinite nothingness. Even so, whatever you choose to call the dilemma she’s faced with right now, it’s certainly quite a big deal.

And understanding this helps provide a little context for the extraordinary events of the past few days, with markets sliding in the wake of Ms Reeves’ teary appearance at Prime Minister’s Questions.

Following that moment, the yield on UK government debt – the rate of interest we’re being charged by international investors – suddenly leapt higher. Granted, the jump was nothing like what we saw in the wake of Liz Truss’s mini-budget. And those yields dropped down after the prime minister backed the chancellor.

UK’s a global outlier

Even so, they underline one very important bit of context. The UK has become something of an outlier in global debt markets. For years, the yield on our benchmark government bonds was more or less middle of the industrialised-world pack. But since 2022’s drama, it has hovered unnervingly high, above every other G7 nation.

That speaks to a broader issue. Britain might not have the biggest deficit in the G7, or for that matter, the highest national debt. Others (most notably France, and to some extent, too, the US) face even more desperate fiscal dilemmas in the coming years. But markets do still seem nervous about Britain.

Perhaps that’s because of what they (and we) all endured in 2022 – when British gilt markets stepped briefly over the precipice, causing malfunctions all around the financial system (most notably in obscure parts of the pensions investment sector). But it also owes something to the fact that the chancellor’s own fiscal plans are sailing worryingly close to the wind.

Reeves made fiscal rules matter

The main piece of evidence here is the amount of leeway she has left herself against her fiscal rules. As I said at the start, there’s nothing gospel about these rules. But having created them and banged on about them for a long time, even those of us who are a little sceptical about fiscal rules would concede that breaking them is, as they say, not a good look.

Back in spring, the Office for Budget Responsibility thought the chancellor had about £9.9bn in leeway against these rules. But since then, she has u-turned on both the cuts in winter fuel payments and on personal independence payments. That reduces the £9.9bn down to barely more than £3bn.

But the real issue isn’t just these U-turns. It’s something else. The stronger the economy is, the more tax revenues come in and the more her potential headroom against the fiscal rules would be. By the same token, if the economy grows less rapidly than the OBR expected, that would mean less tax revenues and an even bigger deficit.

And if you compare the OBR’s latest forecasts with the current average of forecasts among independent forecasters, or for that matter, the Bank of England, they do look decidedly optimistic. If the OBR is right and everyone else is wrong, then the chancellor “only” has to fill in the hole left by those U-turns. But if the OBR is wrong and everyone else is right, things get considerably more grisly.

Even a small downgrade in the OBR’s expectations for productivity growth – say a 0.1 percentage point drop – would obliterate the remaining headroom and leave the chancellor with a £6bn shortfall against her rule. Anything more than that (and bear in mind, most economists think the OBR is out by more than that) and she could be £10bn or more underwater.

Now, there are plenty of very reasonable points one could make about how silly this all is. It’s silly that so many people treat fiscal rules as tablets of stone. It’s silly that government tax policy from one year to the next seems to hinge on how right or wrong the OBR’s economic forecasts are.

Yet all this stuff, silly as it might all seem, is taken quite seriously by markets right now. They look at the UK, see an outlier, and tend to focus more than usual on black holes. So I’m afraid we’re going to be talking about “black holes” for quite some time to come.

UK

‘I’m deprived of my UK citizenship but I’m not a convicted terrorist’

Published

10 hours ago

August 24, 2025

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'I'm deprived of my UK citizenship but I'm not a convicted terrorist'

Hayat Tahrir al Sham (HTS) went from a jihadist movement once aligned to al Qaeda to forming the official government of Syria.

It was a monumental transformation for them, their country and the wider Middle East.

But potentially too for British people who went to Syria – and who were stripped of their citizenship as a result, on the grounds of national security.

Tauqir Sharif, better known as Tox, went to Syria in 2012 as an aid worker. He was accused of being part of a group affiliated with al Qaeda, which he denies, and the then-home secretary Amber Rudd deprived him of his British citizenship in 2017.

“As of now, I am deprived of my UK citizenship but I’m not a convicted terrorist – and the reason for that is because we refused, we boycotted, the SIAC [Special Immigration Appeals Commission] secret courts, which don’t allow you to see any of the evidence presented against you,” he said.

“And one of the things that I always called for was, look, put me in front of a jury, let’s have an open hearing.”

HTS is still a proscribed terrorist organisation but the British government has now established relations with it.

Foreign Secretary David Lammy travelled to Damascus to meet the jihadist-turned-Syrian interim president – the man who swapped his nom de guerre of al Jolani for Ahmed al Sharaa.

If the UK government takes HTS off the terror list, what does that mean for those who lost their citizenship after being accused of being part of it?

People who joined HTS are only a subset among the scores of people who have had their citizenship revoked – a tool the UK government has been quick to use.

According to a report by the Parliamentary Joint Human Rights Committee, the UK “uses deprivation of citizenship orders more than almost any country in the world”.

The peak of that was in 2017, and mainly in relation to Syria – especially in the case of people joining Islamic State, perhaps most famously Shamima Begum.

And because people cannot be made entirely stateless, and need to have a second nationality, or be potentially eligible for one, there are worries of racism in who the orders apply to.

Countries like Pakistan and Bangladesh offer dual nationality, whereas other nations do not. In 2022, the Institute of Race Relations said “the vast majority of those deprived are Muslim men with South Asian or Middle Eastern/North African heritage”.

Legal grey areas

Sky News submitted Freedom of Information requests to the Home Office asking for a breakdown of second nationalities of those deprived of citizenship, but was refused twice on national security grounds.

The independent reviewer of terrorism legislation, Jonathan Hall KC, told Sky News there are issues around transparency.

“I do think there is a problem when you have people whose relationship with the country that they’re left with is really technical and they may never have realised that they had that citizenship before and may never gone to that country,” he said.

“Me and my predecessors have all said, owing to how frequently this power is used, it should be something that the independent reviewer should have the power to review. I asked, my predecessor asked, we’ve both been told no, so I agree there’s a lack of transparency.”

No automatic reversal

Even if the government does remove HTS from the terror list, it would not automatically invalidate decisions to deprive people of their citizenship.

Macer Gifford gave up a career as a banker in London to join the Kurdish People’s Protection Units (YPG) as a foreign volunteer between 2015 and 2017.

He told Sky News that decisions “made years ago in the interest of the British public have to remain”.

“We can’t sort of go through previous cases nitpicking through it, wasting time and money to bring it up to date,” he added.

“We can’t be naive because the intent to go out, the decision to go in itself is a huge decision for them. So it shows commitment when they’re there, they then, if they take an active participation in the organisations that they’ve been accused of joining, again, that involves training and perseverance and dedication to the cause.”

But those born and raised in Britain, who joined the same cause, and lost their citizenship as a result, might reasonably ask why that should remain the case.

UK

Criminals could be banned from pubs and sports grounds under new plans

Published

10 hours ago

August 24, 2025

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Criminals could be banned from pubs and sports grounds under new plans

Criminals face being banned from pubs, sports grounds and concerts under new government plans to give judges powers to pass tougher community sentences.

The new measures, which would apply to people in England and Wales, “should remind all offenders that, under this government, crime does not pay”, Justice Secretary Shabana Mahmood said.

Offenders’ freedom could also be curtailed with limits on driving, travel bans and restriction zones confining them to specific areas, the government said.

Similar measures could also apply to prisoners let out on licence, while drug testing would be expanded to include all those released, rather than just those with a history of substance misuse.

While judges are currently able to impose limited bans for specific crimes, such as football bans for crimes committed inside a stadium on match day, the new measures would allow for such bans to be handed down for any offence.

The justice secretary said: “When criminals break society’s rules, they must be punished.

“Those serving their sentences in the community must have their freedom restricted there too.

“These new punishments should remind all offenders that, under this government, crime does not pay.

“Rightly, the public expect the government to do everything in its power to keep Britain safe, and that’s what we’re doing.”

The proposals are part of the Labour government’s efforts to tackle overcrowding in prisons.

Back in June, it emerged that prisoners were to be transferred to lower security jails in an effort to ease overcrowding, as part of a new measure quietly unveiled by the government.

Sky News reported earlier this month how the prison system was close to collapse on a number of occasions between autumn 2023 and summer 2024, according to an independent review by former chief inspector of prisons, Dame Anne Owers.

The report said there was a systemic problem which has led to recurring prison capacity crises over the last 18 years.

UK

Police separate anti-immigration and anti-racism protesters across the country

Published

23 hours ago

August 23, 2025

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Police separate anti-immigration and anti-racism protesters across the country

Protesters have gathered across the country as groups demonstrated against asylum seeker housing and were met by anti-racism campaigners.

Demonstrations under the Abolish Asylum System slogan were held in England, Scotland and Wales, including in Bristol, Exeter, Tamworth, Cannock, Aberdeen, Mold, Perth, Nuneaton, Liverpool, Wakefield, Newcastle, Horley and Canary Wharf.

Counter-protests were also organised by campaign group Stand Up to Racism.

In Bristol, mounted police separated the two groups in the Castle Park, with officers scuffling with protesters.

Police kept around 200 anti-immigration protesters draped in English flags away from roughly 50 Stand Up to Racism protesters in Horley, Surrey.

One man, wearing a West Ham United football shirt, was held by police as he yelled: “You’re not welcome here, you’re not welcome here, you’re not welcome here” at anti-racism protesters.

Anti-immigration protesters also chanted: “Tommy, Tommy, Tommy, Tommy Robinson” in support of the far-right activist, whose real name is Stephen Yaxley-Lennon.

The anti-racism protesters chanted “say it loud, say it clear, refugees are welcome here” and held signs calling for solidarity and to “stop deportations”.

The Stand Up to Racism protesters were shepherded into a smaller area as they continued to chant: “No hate, no fear, refugees are welcome here”, which was met with “No they’re f****** not” from the other side of the street.

In Perth, protesters gathered outside the Radisson Hotel.

The anti-migration protesters held up signs with slogans such as “Perth is full – empty the hotels” and “get them out”.

Stand Up to Racism Scotland said it had achieved “victory” in Perth, with more than 200 gathering to oppose the Abolish Asylum System demonstration.

In Liverpool, a dispersal order was issued to try and contain the protests.

Saturday’s events come amid continued tension around the use of the hotels for asylum seekers.

Regular protests had been held outside the Bell Hotel in Epping, Essex, which started after an asylum seeker housed there was charged with sexually assaulting a 14-year-old girl on 10 July.

Hadush Gerberslasie Kebatu, 38, was charged with trying to kiss a teenage girl and denies the allegations. He is due to stand trial later this month.

In the wake of those protests, Epping Forest District Council sought and won an interim High Court injunction to stop migrants from being accommodated there – a decision which the government is seeking permission to appeal.