Rachel Reeves signals first budget will be painful mix of spending cuts, tax rises and higher borrowing
Chancellor Rachel Reeves has signalled her first budget as chancellor could be a painful mix of spending cuts, tax rises and increased borrowing.
Speaking to Sky News after official figures showed the economy flatlined in July with GDP growth of 0.0%, she refused to rule out increasing business and wealth taxes, or further cuts to already strained departmental budgets, as she seeks to address what she says is a dire economic inheritance from the last government.
“I’ve been really honest that there are difficult decisions to come in the budget, on spending, on taxation and welfare, after the mess that the previous government created with the public finances and the state that they are in, that was inevitable,” she said.
“I was clear during the election campaign that, if I became chancellor of the exchequer, tough choices lie ahead.”
Ms Reeves has ruled out increasing personal income taxes, National Insurance and VAT as well as corporation tax, leaving a limited field of other taxes on private wealth and business.
She said her choices in the budget would be directed at getting a grip on the public finances.
“It is important to bring stability back to our economy, but we will do that in a way that helps promote growth, so we can grow our economy and make our country better off,” she said.
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The need to stimulate growth was emphasised by the figures from the Office for National Statistics that showed the economy stalled in June and July, consecutive months of zero expansion, after above-expectation growth in the first half of the year.
The new administration has pinned its entire programme for government on stimulating growth to allow public spending to increase and stay within strict fiscal rules limiting borrowing.
At the same time, they are imposing new obligations on businesses including a slate of workers’ rights reforms that industries fear will increase costs.
Ms Reeves cited an £8bn investment by Amazon Web Services in new data centres as evidence that businesses back her vision.
“Microsoft are investing £8bn here in Britain to create new jobs in technical skills, in AI and digital infrastructure,” she said.
“They’re making those investments, and other businesses too, because this government is bringing stability back to our economy and working in partnership with business to unlock the huge potential. And if we can do that, we can make our country better off.”
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‘We will not water down winter fuel plan’
The chancellor also defended her decision to remove winter fuel payments from 10 million pensioners, after the government weathered a 50-strong rebellion by its own MPs in a parliamentary vote last night.
She said it was a response to a £22bn “black hole” in public finances for this year that had to be addressed, and that the loss of up to £300 would be compensated by rising pensions.
“These were not decisions that I wanted to make, but they were the right decisions in the circumstances that we faced,” she said.
“All pensioners this winter have benefited from the increase in the new state pension, which means pensions are worth £900 more than they were a year ago. The state pension is likely to go up by a further £460 next year. That’s not means-tested.
“So we are protecting the most vulnerable pensioners, whilst also starting to get a grip on our public financing years of mismanagement because we expect.”
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The chancellor also suggested more cuts to public services are likely.
Asked if the prisons and justice system could absorb further cuts despite having to release thousands of prisoners early, she said: “On spending, on taxation and on welfare, but those decisions are necessary to start to get a group of our public finances so that we can turn our economy around.
“I am determined not to allow these problems to continue to fester in the way that the previous government allowed that we’re honest about the challenges that we face.”
Former deputy prime minister Sir Oliver Dowden has become the most senior ally of Rishi Sunak to be interviewed in the official investigation into betting on the date of the general election, Sky News understands.
He follows Mr Sunak’s former parliamentary aide Craig Williams and former Downing Street chief of staff Liam Booth-Smith in being questioned by the Gambling Commission, the statutory body that regulates betting in the UK.
Mr Sunak has not yet been interviewed, Sky News understands, though “numerous people” including Conservative Party officials have been.
Tory conference latest: Maternity pay is ‘excessive’, Badenoch argues
A source close to Sir Oliver said the former senior cabinet minister is not and was never under investigation himself.
It is understood Sir Oliver spoke to the police to assist with their inquiries as part of their investigation into others. This is said to have taken place in early summertime and the officers involved were part of the Gambling Commission.
The inquiry – launched in June – is set to continue for another three to six months.
News of Sir Oliver’s interview, along with the seizing of “hundreds of documents” from Tory HQ by the commission, has emerged on the day the Conservative Party Conference opened in Birmingham.
Ironically, the Gambling Commission’s head office, on the fourth floor of Victoria Square House, Victoria Square, Birmingham, is just a half-mile, 10-minute walk from the ICC, where the Tory conference is taking place.
Sir Oliver was knighted and Mr Booth-Smith was awarded a peerage in the former prime minister’s dissolution honours, announced less than an hour before the polls closed on 4 July.
The commission is investigating whether bets were placed on a July election by people with inside knowledge – in breach of gambling rules – in the days leading up to Mr Sunak’s shock announcement of the election date on 22 May.
A source told Sky News: “The general election betting investigation is still ongoing. Hundreds of documents have been seized by the Gambling Commission from CCHQ.
“The Gambling Commission has also employed more ex-police as investigators to take the case forward. It’s expected the case will continue for three to six months.”
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Gambling scandal: Another bruise for the Tories?
Asked if Mr Sunak has been interviewed, the source said: “I don’t believe so. Numerous people have been interviewed, in and out of CCHQ.
“Gambling Commission investigators have made numerous visits to CCHQ. Oliver Dowden was interviewed.”
What is the election betting scandal?
The election date betting scandal began in June when Craig Williams, formerly MP for Montgomeryshire and Mr Sunak’s parliamentary private secretary, admitted he was being investigated by the Gambling Commission.
Mr Williams had placed a £100 bet on a July election at Ladbrokes in his constituency just days before Mr Sunak announced on 22 May that the election would be held on 4 July. Based on odds at the time, he would have won £500.
“I put a flutter on the General Election some weeks ago,” he said in a post on X on 13 June. “This has resulted in some routine inquiries and I confirm I will fully co-operate with these.
“I don’t want it to be a distraction from the campaign. I should have thought through how it looks.”
The commission is investigating whether bets were placed on a July election. Pic: Reuters
Mr Williams, who admitted he had made a “huge error”, was dropped by the Tories as their candidate in the new seat of Montgomeryshire and Glyndwr but remained on the ballot paper, but was defeated, coming third behind Labour and Reform UK.
As the Gambling Commission proceeded, Tony Lee, the party’s director of campaigns, and his wife Laura Saunders, who was Tory candidate for Bristol North West, were placed under investigation.
In a statement on the day news of the investigation was first reported, Saunders said she would be “cooperating with the Gambling Commission”, while Lee took a leave of absence from his role.
Then Nick Mason, the party’s chief data officer, became the fourth Conservative candidate or official to be investigated. He took a leave of absence and denied any wrongdoing.
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In a bizarre twist, a Labour candidate in the election, Kevin Craig, was then suspended by his party after betting against himself and the Gambling Commission launched an investigation into him.
Mr Craig, candidate in Central Suffolk and North Ipswich, posted on X that he had “enjoyed the odd bet for fun” throughout his life.
“A few weeks ago when I thought I would never win this seat I put a bet on the Tories to win here with the intention of giving any winnings to local charities,” he said.
“While I did not place this bet with any prior knowledge of the outcome, this was a huge mistake, for which I apologise unreservedly.”
Craig Williams admitted to betting on the election date. Pic: PA
Then on 27 June Sky News revealed that Mr Booth-Smith, then Mr Sunak’s most senior adviser in Downing Street, had been interviewed by senior Gambling Commission officials and questioned about who knew about the timing of the election.
Sources emphasised, however, that Mr Booth-Smith was not a suspect and was interviewed as a witness and was “asked for help”.
Sky News has approached Mr Dowden and the Conservative Party for comment.
According to the FTX bankruptcy estate, total claims from injured parties top $11 billion, as a court hearing to confirm the plan looms.
Kemi Badenoch has said her remarks about maternity pay have been “misrepresented”, as she called for an “honest campaign” for the Tory leadership.
The first day of the Conservative Party conference saw a row erupt over comments made by the shadow housing secretary, where she appeared to call the current level of the benefit “excessive”.
But speaking to Sky News on Sunday evening, Ms Badenoch said she believed maternity pay was “a good thing”, adding: “I don’t think it is excessive.”
Politics live: All the news from Tory party conference
Instead, she claimed there was “some mischief being made on social media trying to misrepresent me” amid the race to take over from Rishi Sunak.
“I want to talk about serious things, hard truths during this campaign,” said the leadership hopeful. “I want to talk about my previous job as business secretary, what businesses told me [about] excessive business regulation.
“Maternity pay isn’t one of those, but other things are. That is how we are going to get back on track.”
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She added: “It is really important that this leadership contest is one where we have honesty and truth and not misrepresentation of remarks.
“I am not somebody who is fazed by that [but] the members of our party want to see an honest campaign, and that’s what I am fighting for.”
Ms Badenoch first made her remarks about maternity pay on Times Radio, saying the benefit was a “function of tax”.
“Tax comes from people who are working, we’re taking from one group of people and giving to another,” she added. “This, in my view, is excessive.”
Challenged on saying maternity pay is “excessive”, the former minister said: “I think it’s gone too far, too far the other way, in terms of general business regulation, we need to allow businesses, especially small businesses, to make more of their own decisions.
“The exact amount of maternity pay, in my view, is neither here nor there. We need to make sure that we are creating an environment where people can work and people can have more freedom to make their individual decisions.”
After the interview, one of her rivals in the Tory leadership contest, Robert Jenrick, told a fringe event at the conference he disagreed with her, and as a father of three daughters, he “wants to see them get the support they need”.
The former immigration minister said maternity pay in the UK was already “among the lowest in the OECD (Organisation for Economic Co-operation and Development)”, before adding: “We should firmly be on the side of… working mums trying to get on… why would we want to make it harder on them?”
However, when asked by reporters if he would like maternity pay to rise, he said he would like it to stay “at the level where it is” – just not lowered further.
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