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Chancellor Rachel Reeves will deliver her first budget at the end of October, providing the first chance for her to change the fiscal rules.

Upon entering government in July, the government said the Conservatives left it with a £22bn black hole, so the chancellor is expected to use the 30 October budget to raise some of that.

Ms Reeves said in November, when asked if she would consider changing the debt target, she was “not going to fiddle the figures or make something to get different results”.

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However, she has been urged to alter the rules to let the government access £57bn, according to the Institute for Public Policy Research (IPPR) thinktank.

Six days before the budget, Ms Reeves revealed she will be changing the rules.

Sky News looks at what a fiscal rule is, what the Labour government’s rules currently are and how they will change.

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Sir Keir Starmer congratulated Rachel Reeves after she addressed the Labour Party conference in Liverpool. Pic: PA
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Sir Keir Starmer and Rachel Reeves at the Labour conference. Pic: PA

What are fiscal rules?

A fiscal rule is a limit or restriction governments put in place to constrain how much they can borrow to fund public spending.

They can be set by an independent body but since 1997 UK governments have set their own constraints.

Rules apply to the fiscal deficit – the gap between public expenditure and tax revenues in a year – the public debt – the total amount borrowed to finance past deficits – or public spending relative to GDP.

In 2010, the Office for Budget Responsibility (OBR) was set up to remove the Treasury’s ultimate control over the forecasts that underpin fiscal policy.

The Economics Observatory said the OBR’s creation means fiscal rules should be seen as an “expression of a government’s objectives, not something that dictates those objectives”.

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Chancellor expected to change fiscal rules

What are the current fiscal rules?

The Labour Party’s manifesto laid out the new government’s fiscal rules, describing them as “non-negotiable”. They are:

1) The current budget must move into balance so day-to-day costs are met by revenues

2) Debt must be falling as a percentage of GDP by the fifth year of the forecast – this was carried over from the Conservative government.

How will the fiscal rules change?

The rules themselves will not change.

However, the chancellor has confirmed she will change how debt is calculated, which will alter how much debt the UK officially has “so we can free up that money to invest”, she said.

Ms Reeves told Sky News she is changing the way debt is measured “because there are massive opportunities to invest in Britain and to get the growth and the jobs of the future here for the UK”.

She told the Labour conference “borrowing for investment” is the only plausible solution to the UK’s productivity crisis.

By changing her definition of debt, she could find up to £50bn in additional headroom.

However, the Institute for Fiscal Studies (IFS) has warned against borrowing that much money.

Paul Johnson, director of the IFS, said Labour’s pledge not to increase income tax, national insurance or VAT, coupled with a promise to balance the current budget, means she will not be able to free up additional resources for day-to-day spending.

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Will Rachel Reeves U-turn on her budget promise?

How will debt now be calculated?

The chancellor said she would set out details of how debt will be measured at the budget.

However, she is widely expected to use “public sector net financial liabilities” (PSNFL) to measure debt.

This is a wider measure of the balance sheet than public sector net debt, the most commonly used measure of debt since 1997.

It effectively creates more room for borrowing by reclassifying some government debt as assets.

Funded pension schemes, such as local government schemes, and outstanding loans, including student loans, are the main liabilities included in PSNFL.

Using this method to measure debt is expected to leave about £50bn of headroom for borrowing to invest.

Ed Conway speaks to Bank of England governor Andrew Bailey after he announced interest rates would be cut
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Bank of England governor Andrew Bailey introduced quantitative tightening in 2022

Quantitative Easing

Another idea the chancellor is said to be weighing up is excluding the £20bn to £50bn annual losses being incurred by the Bank of England winding down its quantitative easing (QE) bond-buying programme.

Since the 2008 financial crisis, the Bank of England has repeatedly used QE to stimulate the economy and meet the 2% inflation target – creating £875bn of new money in 13 years.

During QE, the Bank buys bonds (debt security issued by the government) to push up their prices and bring down long-term interest rates on savings and loans.

Read more:
How fiscal rules are impeding long-term investments – and what Rachel Reeves can do about it

Abolishing national insurance ‘could take several parliaments’

Since November 2022, the Bank has been carrying out quantitative tightening, where it does not buy other bonds when bonds it holds mature, or by actively selling bonds to investors, or a combination of the two.

The aim is not to affect interest rates or inflation but to ensure it is possible QE can happen again in the future, if needed.

In February, the cross-party Treasury committee raised concerns quantitative tightening could have losses of between £50bn and £130bn and said it could have “huge implications” for public spending over the next decade.

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What will the budget include?

Exclude new institutions

There are suggestions the chancellor could move GB Energy and the National Wealth Fund, both created by Labour, off the government’s books.

Andy King, a former senior official at the OBR, estimates that could unlock a further £15bn for borrowing.

Exclude projects

Another option would be to exclude certain projects from the debt calculation.

Government officials have said they are working on a plan to publish estimates for how much new capital projects could stimulate growth and how much money they would generate directly for the Treasury.

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Sir Keir Starmer could be ousted as PM within months, two senior Labour MPs tell Sky News

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No 10 backs Chancellor Rachel Reeves and says she 'is going nowhere' after tearful appearance in Commons

Two senior Labour MPs have suggested the prime minister may have to go within months if the government continues to perform poorly.

Sky News’ deputy political editor Sam Coates said his sources – a member of the government and a prominent politician – have “put Sir Keir Starmer on notice”.

Both warned that, if Labour performs badly in next May’s elections across Wales, Scotland and London, it could mark the end of his time in Downing Street.

Coates added: “The level of unhappiness and despair in parts of the Labour Party is so striking that right now, on the first anniversary, I am hearing from ministers in government that Starmer might have to go in months.”

Reform UK is surging in the polls in Wales, while Labour faces a threat from left-wing parties such as the Greens in London.

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Why was the chancellor crying at PMQs?

It comes as the prime minister made it clear that Rachel Reeves has his “complete support” as chancellor and remains integral to his project, Sky News’s political editor Beth Rigby understands.

She looked visibly upset during Prime Minister’s Questions, with a spokesperson claiming she had been affected by a “personal matter”.

A day earlier, Sir Keir’s controversial welfare bill was passed despite a sizeable rebellion from Labour MPs, with major U-turns meaning a new £5bn black hole has appeared in the country’s finances.

One senior figure told Rigby that the pair were as “as close politically” as any chancellor and prime minister have ever been.

“She is going absolutely nowhere,” they added.

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Welfare vote ‘a blow to the prime minister’

Ms Reeves’s tears sent markets spiralling, with the value of the pound and long-term government bonds falling sharply.

Later in the day Sir Keir, said Ms Reeves will be chancellor for a “very long time to come”.

The prime minister said it was “absolutely wrong” to suggest her tearful appearance in the Commons related to the welfare U-turn.

“It’s got nothing to do with politics, nothing to do with what’s happened this week. It was a personal matter for her,” he said while speaking to the BBC’s podcast Political Thinking with Nick Robinson.

“I’m not going to intrude on her privacy by talking to you about that. It is a personal matter.”

Read more from Sky News:
Just 25% of public think Starmer will win next election
Analysis: Emotional Reeves a reminder of tough decisions ahead

Asked if she will remain in post, he said: “She will be chancellor by the time this is broadcast, she will be chancellor for a very long time to come, because this project that we’ve been working on to change the Labour party, to win the election, change the country, that is a project which the chancellor and I’ve been working on together.”

He said Ms Reeves has done a “fantastic job” and added: “She and I work together, we think together. In the past, there have been examples – I won’t give any specific – of chancellors and prime ministers who weren’t in lockstep. We’re in lockstep.”

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Starmer to set out 10-year vision for NHS

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Starmer to set out 10-year vision for NHS

Sir Keir Starmer will set out his 10-year vision for the NHS in what the government says is “one of the most seismic shifts” in the health service’s history.

He will pledge three main facets of the plan: moving care into the community, digitising the NHS, and a focus on sickness prevention.

The prime minister will announce neighbourhood health services will be rolled out across England to improve access to the NHS and to shift care out of overstrained hospitals.

PM ‘might have to go in months’ – politics latest

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What will the NHS 10-year health plan focus on?

Sir Keir has already promised thousands more GPs will be trained, and to end the 8am “scramble” for an appointment.

He also previously said his government will bring the NHS into the digital age, with “groundbreaking” new tools to support GPs rolled out over the next two years – including AI to take notes, draft letters and enter data.

And he will promise new contracts that will encourage and allow GP practices to cover a wider geographical area, so small practices will get more support.

Unite, one of the UK’s largest healthcare unions, welcomed the plan cautiously but said staff need to be the focus to ensure people are better looked after.

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Do you want AI listening in on chats with your doctor?

‘Reform or die’

Sir Keir said: “The NHS should be there for everyone, whenever they need it.

“But we inherited a health system in crisis, addicted to a sticking plaster approach, and unable to face up to the challenges we face now, let alone in the future.

“That ends now. Because it’s reform or die.”

He said the government’s plan “will fundamentally rewire and futureproof our NHS, so that it puts care on people’s doorsteps, harnesses game-changing tech and prevents illness in the first place”.

The PM said it would not be an “overnight fix”, but claimed Labour are “already turning the tide on years of decline”, pointing towards more than four million extra appointments, 1,900 more GPs, and waiting lists at a two-year low.

“But there’s more to come,” he promised. “This government is giving patients easier, quicker and more convenient care, wherever they live.”

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Why has Starmer axed NHS England?

Neighbourhood health services

The newly announced neighbourhood health services will provide “pioneering teams” in local communities, so patients can more conveniently access a full range of healthcare services close to home.

Local areas will be encouraged to trial innovative schemes like community outreach door-to-door to detect early signs of illness and reduce pressure on GPs and A&E.

The aim is to eventually have new health centres open 12 hours a day, six days a week to offer GP services as well as diagnostics, post-operative care and rehab.

They will also offer services like debt advice, employment support, stop smoking help or weight management.

More NHS dentists

Dentists will also be part of the plan, with dental care professionals part of the neighbourhood teams.

Dental “therapists” will carry out check-ups, treatments and referrals, while dental nurses could give education and advice to parents or work with schools and community groups.

Newly qualified dentists will be required to practice in the NHS for a minimum period, which they have said will be three years.

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‘Trust and confidence lost’ over grooming gang failures in Manchester, watchdog warns

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'Trust and confidence lost' over grooming gang failures in Manchester, watchdog warns

Despite making “significant improvements”, Greater Manchester Police (GMP) has lost the “trust and confidence” of some victims of grooming gangs, according to a report by the police watchdog.

Michelle Skeer, His Majesty’s Inspector of Constabulary, said that since 2019, when GMP started to review its non-recent child sexual exploitation investigations, “the force has improved its understanding and approach to investigating allegations of child criminal and sexual exploitation”.

The document, published today, said police have live investigations into “multi-victim, multi-offender” child sexual exploitation inquiries, involving 714 victims and survivors, and 1,099 suspects.

Grooming gangs scandal timeline

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‘Our chance for justice’

But despite recording improvements, a report by His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services (HMICFRS) also identified:

• Various training gaps within the investigation team
• Lack of consistency in evaluating case files between social care, health and police
• Failures to initially support victims meant they had “lost trust and confidence” in police

The report was commissioned by the Mayor of Greater Manchester Andy Burnham in 2024 to evaluate whether police, councils and health services can protect children from sexual exploitation in the future.

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Its release comes days after Sir Keir Starmer announced he was launching a new national inquiry into grooming gangs after previously arguing one was not necessary,

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Starmer to launch new grooming gang inquiry

The findings were issued as the final part of the CSE (child sexual exploitation) Assurance Review process which started in 2017. The first three reports examined non-recent child sexual exploitation in Manchester, Oldham and Rochdale.

Mr Skeer said that the force has been trying to improve its service to those who have experienced sexual exploitation, but previous failings have badly affected trust in GMP.

He said: “For some, trust and confidence in the police had been lost, and the force would not be able to rectify their experiences.

“It is vital that improvements are led by victims’ experiences, and if they do come forward, they are supported, protected and taken seriously.”

A recent report by Baroness Casey found a significant over-representation of Asian men who are suspects in grooming gangs in Greater Manchester, adding though authorities are in “denial” more needs to be done to understand why this is the case.

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Teen caught in child sex exploitation

Inspectors also said there were “training gaps” in some investigation teams and issues with data sharing, with local councils sometimes not willing to provide detectives with information, leading to “significant delays in investigations” into grooming gangs.

It cites problems with intelligence provided by Manchester City Council, which took months to arrive and “was so heavily redacted that some pages contained only a few words”, the report said.

Read more from Sky News:
Analysis: Badenoch’s grooming gangs outrage
Grooming survivor wants apology from Starmer

GMP is the only force in the country to set up a dedicated team to investigate grooming gangs. Called the Child Sexual Exploitation Major Investigation Team (CSE MIT) it has about 100 staff and a ringfenced budget.

In October 2024, the force told inspectors there were 59 live multi-victim, multi-offender child sexual exploitation investigations, of which 13 were being managed by the CSE MIT.

The report adds: “The force fully accepts that it made mistakes in the past.

“It has taken positive and effective steps to learn from these mistakes and improve how it investigates recent and non-recent child sexual exploitation.”

Separately, the Baird Inquiry published in July 2024 found officers at GMP were abusing their power – making unlawful arrests, unlawful and demeaning strip searches, sometimes treating victims as perpetrators, and traumatising those who have suffered sexual abuse or domestic violence.

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