Be bold with tax hikes or risk ‘groundhog day’, chancellor told as limited growth recorded
Rachel Reeves faces the prospect of another “groundhog day” unless next month’s budget goes further than plugging an estimated £22bn black hole in the public finances, according to a respected thinktank.
It comes as latest official figures showed the UK economy grew 0.3% in the three months to August, limited growth, despite the Treasury saying it is the fastest growth in the G7.
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The Institute for Fiscal Studies (IFS) said there was a “strong case” for the chancellor to substantially increase the £10bn headroom she has previously given herself against her own debt rules, or risk further repeats of needing to restore the buffer in the years ahead.
It said Ms Reeves could bring the cost of servicing government debt down through ending constant chatter over the limited breathing space she has previously given herself, in uncertain times for the global economy.
The chancellor herself used an interview with Sky News this week to admit tax rises were being considered, and appeared to concede she was trapped in a “doom loom” of annual increases.
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Tax hikes possible, Reeves tells Sky News
What is the chancellor facing?
Speculation over the likely contents of the budget has been rife for months and intensified after U-turns by the government on planned welfare reforms and on winter fuel payments.
The Office for Budget Responsibility’s determination on the size of the black hole facing Ms Reeves could come in well above or below the IFS estimate of £22bn, which includes the restoration of the £10bn headroom but not the cost of any possible policy announcements such as the scrapping of the two-child benefit cap.
Economists broadly agree tax rises are inevitable, as borrowing more would be prohibitive given the bond market’s concerns about the UK’s fiscal position.
Long-term borrowing costs have recently stood at levels not seen since the last century.
What are her tax options?
While there has been talk of new levies on bank profits and the wealthy, to name but a few rumours, the IFS analysis suggests the best way to raise the bulk of sufficient funds is by hiking income tax, rather than making the tax system even more complicated.
Earlier this week, it suggested reforms, such as to property taxes, could raise tens of billions of pounds.
But any move on income tax would mean breaking Labour’s manifesto pledge not to target the three main sources of revenue from income, employee national insurance contributions and VAT.
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Is Labour plotting a ‘wealth tax’?
She is particularly unlikely to raise VAT, as it would risk fanning the flames of inflation, already expected by the International Monetary Fund to run at the highest rate across the G7 this year and next.
Business argues it should be spared.
The chancellor’s first budget, which raised taxes by £40bn, has been blamed by the sector for raising costs in the economy since April via higher minimum pay and employer national insurance contributions.
They say the measures have dragged on employment, investment, and growth.
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The big issues facing the UK economy
‘A situation of her own making’
Analysis by Barclays, revealed within the IFS’s Green Budget, suggested inflation was on course to return to target by the middle of next year but that the UK’s jobless rate could top 5% from its current 4.8% level.
Ms Reeves, who has blamed the challenges she faces on past austerity, Brexit and a continuing drag from the mini-budget of the Liz Truss government in 2022, was urged by the IFS to not harm growth through budget measures.
IFS director Helen Miller said: “Last autumn, the chancellor confidently pronounced she wouldn’t be coming back with more tax rises; she almost certainly will.
“For Rachel Reeves, the budget will feel like groundhog day. This is, to a large extent, a situation of her own making.
“When choosing to operate her fiscal rules with such teeny tiny headroom, Ms Reeves would have known that run-of-the-mill forecast changes could easily blow her off course.”
Ms Miller said there was a “strong case for the chancellor to build more headroom against her fiscal rules”, adding: “Persistent uncertainty is damaging to the economic outlook.”
‘No return to austerity’
A Treasury spokesperson responded: “We won’t comment on speculation. The chancellor’s non-negotiable fiscal rules provide the stability needed to help to keep interest rates low while also prioritising investment to support long-term growth.
“We were the fastest-growing economy in the G7 in the first half of the year, but for too many people our economy feels stuck. They are working day in, day out without getting ahead.
“That needs to change, and that is why the chancellor will continue to relentlessly cut red tape, reform outdated planning rules, and invest in public infrastructure to boost growth – not return to austerity or decline.”
The budget is scheduled for 26 November.
Victims of grooming gangs and modern slavery are being denied compensation by a government scheme because of their criminal records, Sky News has learned.
Analysis of official figures by Sky News’ Data & Forensics team shows more than 11,000 victims of crime over the last decade have been denied payouts because of their unspent convictions, including children.
The Criminal Injuries Compensation Authority can award money to victims of violent crime, including sexual abuse.
It is the only government compensation scheme for victims – for those unable to work due to injuries, the money can be vital.
But, if an applicant has a criminal record, they are automatically refused compensation with limited exceptions.
Those with unspent convictions sometimes receive reduced sums.
Sky News has found that at least 130 children with criminal records have received reduced awards over the last 10 years, including 50 victims of sex abuse, four victims of brain damage, and one child who lost sight in an eye.
This rule on unspent convictions is based on the idea that public funds should only compensate blameless victims of crime and not, for example, a gang member who was injured in a fight.
But many argue the policy punishes those who have been forced to offend by exploiters, as well as victims of child sexual abuse.
‘I was frustrated that I wasn’t being believed’
Arthur Sherry, 43, from Perranporth in Cornwall was regularly abused by his babysitter from the age of five, including suffering rape.
In 2008, he reported it to Devon and Cornwall Police, alongside two other victims. He alleges the police did not believe him, and charges were not brought against his abuser.
Arthur Sherry, who was abused as a child, says he was denied compensation because of his criminal record
Arthur became angry and descended into addiction as a “coping mechanism”, becoming suicidal, and was repeatedly arrested for minor offences, such as making false calls to the emergency services.
“I wasn’t getting support from any agencies, and no one asked me, ‘Why is this man ringing the emergency services all the time?'”
“It was a cry for help. I was frustrated that I wasn’t being believed.”
Eventually, Arthur’s abuser, Shaun Burton, was convicted of multiple offences against children, including 11 counts of indecency with a child in relation to Mr Sherry.
But when Arthur, who suffers from complex PTSD, subsequently tried to make a claim through the Criminal Injuries Compensation Authority in 2013, it was rejected because of his criminal record and because he submitted his application beyond CICA’s time limit.
He was not allowed to appeal the decision.
Arthur, aged 12 in the picture, was regularly abused by his babysitter, Shaun Burton, from the age of five
Many survivors of grooming gangs have criminal records due to being exploited and coerced.
While the government recently announced plans to disregard child prostitution convictions for these victims, many are urging authorities to go further and pardon all related offences.
Former victims’ commissioner Dame Vera Baird said: “They were not exercising their own free will and voluntarily committing crime, so there should be a discretion to look at that and say, ‘No, that wasn’t their fault’.
“They should get compensation for all the evil that was done to them by that gang.”
In 2022, the Independent Inquiry into Child Sexual Abuse recommended that the government amend the Criminal Injuries Compensation Scheme so that “applicants with unspent convictions are not automatically excluded where offences are likely to be linked to the circumstances of their sexual abuse as a child”.
The government has refused to act on this recommendation.
However, Labour MP Sarah Champion has tabled an amendment to the upcoming Victims and Courts Bill, hoping to implement it, as well as widen eligibility to the scheme.
“Victims are seen as running a cannabis farm and get a conviction, before it actually turns out that they were a victim of modern slavery.
“These people, who are very clearly recognised as victims and survivors, aren’t getting the money that’s owed to them. The system is broken and the ministers need to get rid of it.”
‘I was frustrated that I wasn’t being believed,’ Arthur tells Sky News’ Alice Porter
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A government spokesperson said: “Last year, more than £164m was paid out under the Criminal Injuries Compensation Scheme to victims, and we are going further by removing the time limit for civil personal injury claims and doubling Home Office funding for services supporting adult victims and survivors of child sexual abuse.
“Changes to the way we compensate victims have been considered by successive governments, and our priority must always be to treat all victims of violence equally.”
Devon and Cornwall Police said: “Tackling sexual offending is a key priority for Devon & Cornwall Police and we are working hard to bring offenders to justice.
“We take reports of all sexual offences seriously and will carry out thorough investigations into reports, looking at all viable lines of enquiry.”
Nathan Gill was at Manchester airport, about to board a flight to Russia, when accepting bribes finally caught up with him.
Gill, the former leader of Reform UK Wales and a one-time member of the European Parliament, who on Friday was jailed for 10-a-half-years, was stopped by police before boarding and had his phone seized in 2021.
While they interrogated him, his home in Anglesey was raided, with detectives discovering more electronics and cash piles of €5,000 (£4,400) and $5,000 (£3,800) respectively.
Nathan Gill being questioned. Pic: Met Police
The evidence on Gill’s phone would damn him – he was in contact with a pro-Russian politician in Ukraine, Oleg Voloshyn, and had agreed to boost pro-Russia viewpoints in exchange for money.
Voloshyn would dictate the statement, and Gill would repeat it – in some cases, almost word for word – in the media or the European Parliament.
In one instance, Gill appeared on the now-banned Ukrainian TV channel, 112 Ukraine, which was known for its pro-Russian stance.
In the interview, he was critical of the Ukrainian decision to open criminal proceedings against Viktor Medvedchuk, the owner of the television channel and a personal friend of Vladimir Putin.
Nathan Gill. Pic: Met Police
Speaking to the outlet, he said he was “very concerned” about the investigation, and wondered whether it was meant to silence “opposition politicians”.
Prosecutors said messages on Gill’s phone showed that this was at his paymaster’s instruction, with Voloshyn offering a “reward” if he would say that it was unacceptable to persecute a person for their political convictions.
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Voloshyn also offered the MEP €2,000 (£1,750) if he would express concern that Mr Medvedchuk could no longer mediate with Russia on Ukraine’s behalf, the court heard.
He added that “V” – understood to be Mr Medvedchuk – did not believe Ukrainian President Volodymyr Zelenskyy had “true intentions to pursue a peace agenda”, prosecutors said.
Bundles of cash were recovered from Gill’s home. Pic: Met Police
Sure enough, Gill appeared on 112 Ukraine saying it was “very sad” that Mr Medvedchuk felt he no longer had Mr Zelensky’s backing to act as a mediator with Russia, and suggested that using him “would be a sensible thing to do”.
The messages traded in innuendo, referring to the exchange of “Xmas gifts” or “postcards” instead of money.
But as the pair grew more comfortable with each other, they bargained more explicitly, with the sum of “£5k” quoted for Gill’s work.
Dominic Murphy, head of Counter Terrorism Command at the Met Police, said Gill had also offered access to other MEPs.
“This is where we get into that slightly odd situation where it feels very much like a real effort to undermine democracy here,” he said.
“This is Nathan Gill reaching out to individuals that he knows, who are Brits, who might be willing to be paid to go and make speeches.”
Commander Murphy declined to name names, but said there was an ongoing investigation and that other people had been spoken to.
None of the pro-Brexit MEPs Gill allegedly approached have been interviewed under caution.
Pic: Met Police
Police confirmed there was no evidence to suggest Reform UK leader Nigel Farage was involved.
Gill was stopped at Manchester Airport on 13 September 2021, under schedule 3 of the Counter Terrorism and Borders Security Act 2019.
He offered police no explanation for his actions and answered no comment in a March 2022 police interview.
But the 52-year-old is believed to have had financial problems.
Mr Murphy added that while Gill appeared to have pro-Russian sympathies, he was primarily motivated by money.
The ex-MEP has been jailed for 10-and-a-half years after pleading guilty to eight counts of bribery between December 2018 and July 2019.
Following an investigation by counter-terrorism police, officers said they believe Gill likely took a minimum of £40,000 in cash and was offering to introduce other British MEPs so they could be bribed.
Voloshyn was picked up by the authorities on a trip to the US in 2021, which enabled the FBI to discover his end of the conversation.
He is now believed to be in Russia, but has been sanctioned by the UK government over allegations of trying to destabilise Ukraine.
Nathan Gill pleaded guilty to eight counts of bribery over pro-Russian statements. Including to media outlet 112 Ukraine. Pic: Met Police
He remains wanted in both Britain and Ukraine.
A Reform UK spokesman said: “Mr Gill’s actions were reprehensible, treasonous and unforgivable.
“We are glad that justice has been served and fully welcome the sentence Nathan Gill has received.”
Mr Farage, the Reform UK leader, said: “An investigation into Russian and Chinese influence over British politics would be welcome.”
The MP for Clacton previously described his former colleague as a “bad apple” and said he was “shocked” after Gill pleaded guilty to eight counts of bribery.
He said: “Any political party can find in their midst all sorts of terrible people.
“You can never, ever guarantee 100% that everyone you meet in your life, you shake hands with in the pub, is a good person.”
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