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Rachel Reeves will keep her remarks short when she delivers the spring statement on Wednesday.

But the enormity of what she is saying will be lost on no one as the chancellor sets out the grim reality of the country’s finances.

Her economic update to the House of Commons will reveal a deteriorating economic outlook and rising borrowing costs, which has forced her to find spending cuts, which she’s left others to carry the can for (more on that in a bit).

Politics Live: Polling suggests almost everyone is pessimistic

The independent Office of Budget Responsibility (OBR) is expected to forecast that growth for 2025 has halved from 2% to 1%.

That, combined with rising debt repayment costs on government borrowing, has left the chancellor with a black hole in the public finances against the forecasts published at the budget in October.

Back then, Reeves had a £9.9bn cushion against her “iron-clad” fiscal rule that day-to-day spending must be funded through tax receipts not debt by 2029-30.

More on Rachel Reeves

But that surplus has been wiped out in the ensuing six months – now she finds herself about £4bn in the red, according to those familiar with the forecasts.

That’s really uncomfortable for a chancellor who just months ago executed the biggest tax and spend budget in a generation with the promise that she would get the economy growing again.

At the first progress check, she looks to be failing and has been forced into finding spending cuts to make up the shortfall after ruling out her other two options – further tax rises or more borrowing via a loosening of her self-imposed fiscal rules.

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What to expect in the spring statement

‘World has changed’

When Reeves gets up on Wednesday, she will put it differently, saying the “world has changed” and all that means is the government must move “further and faster” to deliver the reforms that will drive growth.

But her opponents will be quick to lay economic woes at her door, arguing that the unexpected £25bn tax hike on employers’ national insurance contributions last October have choked off growth.

But it’s not just opposition from the Conservative benches that the chancellor is facing – it is opposition from within as she sets about cutting government spending to the tune of £15bn to fill that black hole.

Politically, her allies know how awkward it would have been for the chancellor to announce £5bn in welfare cuts to avoid breaking her own fiscal rules, with one acknowledging that those cuts had to be kept separate from the spring statement.

There’s also expected to be more than £5bn of extra cuts from public spending in the forecast period, which could see departments that don’t have protected budgets – education, justice, home – face real-term spending cuts by the end of the decade.

Pic: PA
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Pic: PA

Not an emergency budget

We won’t see the detail of that until the Spending Review in June.

This is not an emergency budget because the chancellor isn’t embarking on a round of tax raising to fix the public finances.

But these are, however they are framed, emergency spending cuts designed to plug her black hole and that is politically difficult for a government that has promised no return to austerity if some parts of the public sector face deep cuts to stick with fiscal rules.

If that’s the macro picture, what about the “everyday economics” of peoples’ lives?

I’d point out two things here. On Wednesday, we will get to see where those £5bn of welfare cuts will fall as the government publishes the impact assessment that it held back last week.

Read more:
Corbyn brands benefit cuts a ‘disgrace’
Expect different focus from Reeves at spring statement

Up to a million people could be affected by cuts, and the reality of who will be hit will pile on the pressure for Labour MPs already uncomfortable with cuts to health and disability benefits.

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Benefits cuts explained

The second point is whether the government remains on course to deliver its key pledge to “put more money in the pockets of working people” during this parliament after the Joseph Rowntree Foundation think-tank produced analysis over the weekend saying living standards for all UK families are set to fall by 2030.

The chancellor told my colleague Trevor Phillips on Sunday that she “rejects” the analysis that the average family could be £1,400 worse off by 2030.

But that doesn’t mean that the forecasts published on Wednesday calculating real household disposable income per head won’t make for grim reading as the economic outlook deteriorates.

Nervousness in Labour

Ask around the party, and there is obvious nervousness about how this might land, with a degree of anxiety about the economic outlook and what that has in store for departmental budgets.

But there is recognition too from many MPs that the government has political space afforded by that whopping majority, to make these decisions on spending cuts without too much fallout – for now.

Because while Wednesday will be bad, worse could be yet to come.

Staring down the barrel

The chancellor is staring down the barrel of a possible global trade war that will only serve to create more economic uncertainty, even if the UK is spared from the worst tariffs by President Donald Trump.

The national insurance hike is also set to kick in next month, with employers across the piece sounding the warnings around investment, jobs and growth.

Six months ago, Reeves said she wouldn’t be coming back for more after she announced £40bn in tax rises in that massive first budget.

Six months on she is coming back for more, this time in the form of spending cuts. And in six months’ time, she may well have to come back for more in the form of tax rises or deeper cuts.

The spring statement was meant to be a run-of-the-mill economic update, but it has morphed into much more.

The chancellor now has to make the hard sell from a very hard place, that could soon become even tougher still.

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Teenager guilty of murder of schoolboy Harvey Willgoose during lunch break

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Teenager guilty of murder of schoolboy Harvey Willgoose during lunch break

A 15-year-old boy has been found guilty of the murder of Sheffield schoolboy Harvey Willgoose.

Harvey, also 15, was killed by a fellow student outside their school cafeteria in February this year.

His parents, Mark and Caroline Willgoose, have told Sky News that school knife crime is “a way of life for kids”.

The defendant, who cannot be named for legal reasons, had brought a 13cm hunting knife with him into All Saints Catholic High School, Sheffield, stabbing Harvey twice in the chest just a few minutes into the lunch break.

The boy had previously admitted manslaughter but denied murder. He was found guilty by a jury on Friday.

Harvey and his father
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Harvey and his father

His defence told the court the defendant had “lost control”, stabbing Harvey after years of bullying and “an intense period of fear at school”.

Moments after stabbing Harvey, he told teachers, “you know I can’t control it” and “I’m not right in the head”.

Giving evidence, the boy told the court he had no recollection of the moment he killed Harvey, something the prosecution said was “a lie”.

They told the jury the schoolboy “wanted to show he was hard” and had become “obsessed” with weapons in the lead up to Harvey’s death, with photographs of him posing with knives found on his phone.

Chris Hartley, of the Crown Prosecution Service, expressed the organisation’s “huge sympathies” for Harvey’s family and friends.

“The CPS and South Yorkshire Police were able to prove that the defendant did not lose self-control but intended to deliberately attack 15-year-old Harvey,” he said in a statement after the verdict.

“We remind teenagers that there can be horrendous and serious consequences of carrying knives. It has been proven that if you carry these weapons, you are more likely to use them or be a victim of knife crime. You are putting yourself, other people and your future at risk. Please stop carrying knives and stop putting lives in danger.”

Harvey Willgoose and his mother
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Harvey Willgoose and his mother

Speaking to Sky News ahead of today’s verdict, Harvey’s mother, Caroline Willgoose, said she felt she had “led [her son] into the lion’s den”.

She said Harvey was a “school avoider” who had “anxiety” about going to school.

“We badgered Harvey into going to school but I don’t think people realise that there is a problem in all schools with knives,” says Mrs Willgoose.

“It’s a way of life now for kids, and it needs to stop.”

During the trial, it was revealed that the defendant had had previous violent outbursts at school, and, a few months before Harvey was stabbed, the school had called the police when the defendant’s mother contacted them to say she had found a weapon in her son’s bag at home.

Harvey’s parents told Sky News’ Katerina Vittozzi they feel that the school did not take previous knife-related incidents “seriously enough” and felt “100%” the outcome might have been different if they had.

The head of St Clare Catholic Multi Academy Trust – a group of schools including All Saints – also told Sky News Harvey’s death “was an unimaginable tragedy for all”.

Steve Davies said: “We think especially of Harvey’s family, loved ones and friends today. We cannot begin to imagine the immeasurable impact the loss of Harvey has had on them.

“Harvey was a much-loved, positive and outgoing pupil whose memory will be cherished by all who knew him. As a community, we have been devastated by his death, and we continue to think of him every day.”

He added: “Harvey’s death was an unimaginable tragedy for all, and one that understandably gives rise to a number of questions from his family and others.

“Now that the trial has finished, a number of investigations aimed at addressing and answering these questions will be able to proceed.

“We will engage fully and openly with them to help ensure every angle is considered and no key questions are left unresolved.”

Describing her son as “a character” who “never stopped smiling, never stopped singing”, Mrs Willgoose said she was now campaigning for “all schools and colleges” to use knife arches.

“I want people to go into schools and talk about the devastation of what knife crime does.”

In an emotional interview with Sky News’ Katerina Vittozzi, Mrs Willgoose said she felt her son was “put here for a reason” and “I can’t let go until I put things right for him”.

“There’s no winners when it comes to knife crime,” she said.

The defendant “has ruined his life, his parent have got an empty bed”, she added. “He’s got to live with this for the rest of his life.”

Harvey’s father, Mark Willgoose, said that his son had had “a short life, but a good life”.

“He crammed everything in, and you’ve just got to try and see the positives in that,” Mr Willgoose added.

“Whatever happens in court, it’ll never be justice. It’ll never be enough.

“I think we’ve just got to make sure Harvey’s death is not going to be in vain, and if whatever we do saves one life, then it’s been worth us doing it.”

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Why Rachel Reeves may want to rethink one of her pivotal policies

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Why Rachel Reeves may want to rethink one of her pivotal policies

What do we do about the non-doms? 

It’s a question more than a handful of people have been asking themselves at the Treasury lately.

Politics Hub: Follow latest updates

It had seemed simple enough. In her first budget as chancellor, Rachel Reeves promised a crackdown on the non-dom regime, which for the past 200 years has allowed residents to declare they are permanently domiciled in another country for tax purposes.

Under the scheme, non-doms, some of the richest people in the country, were not taxed on their foreign incomes.

Then that all changed.

Standing at the despatch box in October last year, the chancellor said: “I have always said that if you make Britain your home, you should pay your tax here. So today, I can confirm we will abolish the non-dom tax regime and remove the outdated concept of domicile from the tax system from April 2025.”

The hope was that the move would raise £3.8bn for the public purse. However, there are signs that the non-doms are leaving in such great numbers that the policy could end up costing the UK investment, jobs and, of course, the tax that the non-doms already pay on their UK earnings.

If the numbers don’t add up, this tax-raising policy could morph into an act of self-harm.

Rachel Reeves has plenty to ponder ahead of her next budget. File pic: Reuters
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Rachel Reeves has plenty to ponder ahead of her next budget. File pic: Reuters

With the budget already under strain, a poor calculation would be costly financially. The alternative, a U-turn, could be expensive for other reasons, eroding faith in a chancellor who has already been on a turbulent ride.

So, how worried should she be?

The data on the number of non-doms in the country is published with a considerable lag. So, it will be a while before we know the full impact of this policy.

However, there is much uncertainty about how this group will behave.

While the Office for Budget Responsibility forecast that the policy could generate £3.8bn for the government over the next five years, assuming between 12 and 25% of them leave, it admitted it lacked confidence in those numbers.

Worryingly for ministers, there are signs, especially in London, that the exodus could be greater.

Property sales

Analysis from the property company LonRes, shows there were 35.8% fewer transactions in May for properties in London’s most exclusive postcodes compared with a year earlier and 33.5% fewer than the pre-pandemic average.

Estate agents blame falling demand from non-dom buyers.

This comes as no surprise to Magda Wierzycka, a South African billionaire businesswoman, who runs an investment fund in London. She herself is threatening to leave the UK unless the government waters down its plans.

Magda Wierzycka, from Narwan nondom VT
Image:
Magda Wierzycka, from Narwan nondom VT

“Non-doms are leaving, as we speak, and the problem with numbers is that the consequences will only become known in the next 12 to 18 months,” she said.

“But I have absolutely no doubt, based on people I know who have already left, that the consequences would be quite significant.

“It’s not just about the people who are leaving that everyone is focusing on. It’s also about the people who are not coming, people who would have come, set up businesses, created jobs, they’re not coming. They take one look at what has happened here, and they’re not coming.”

Lack of options for non-doms

But where will they go? Britain was unusual in offering such an attractive regime. Bar a few notable exceptions, such as Italy, most countries run residency-based tax systems, meaning people pay tax to the country in which they live.

This approach meant many non-doms escaped paying tax on their foreign income altogether because they didn’t live in those countries where they earned their foreign income.

In any case, widespread double taxation treaties mean people are generally not taxed twice, although they may have to pay the difference.

In one important sense, Magda is right. It could take a while before the consequences are fully known. There are few firm data points for us to draw conclusions from right now, but the past could be illustrative.

Read more on Sky News:
Reeves warned over tax rises
What is a wealth tax?

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Are taxes going to rise?

The non-dom regime has been through repeated reform. George Osborne changed the system back in 2017 to limit it to just 15 years. Then Jeremy Hunt announced the Tories would abolish the regime altogether in one of his final budgets.

Following the 2017 reforms there was an initial shock, but the numbers stabilised, falling just 5% after a few years. The data suggests there was an initial exodus of people who were probably considering leaving anyway, but those who remained – and then arrived – were intent on staying in the UK.

So, should the government look through the numbers and hold its nerve? Not necessarily.

Have Labour crossed a red line?

Stuart Adam, a senior economist at the Institute for Fiscal Studies, said the response could be far greater this time because of some key changes under Labour.

The government will no longer allow non-doms to protect money held in trusts, so 40% inheritance tax will be due on their estates. For many, that is a red line.

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‘Rachel Reeves would hate what you just said’

Mr Adam said: “The 2017 reform deliberately built in what you might call a loophole, a way to avoid paying a lot more tax through the use of existing offshore trusts. That was a route deliberately left open to enable many people to avoid the tax.

“So it’s not then surprising that they didn’t up sticks and leave. Part of the reform that was announced last year was actually not having that kind of gap in the system to enable people to avoid the tax using trusts, and therefore you might expect to see a bigger response to the kind of reforms we’ve seen announced now, but it also means we don’t have very much idea about how big a response to expect.”

With the public finances under considerable pressure, that will offer little comfort to a chancellor who is operating on the finest of margins.

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Homelessness minister Rushanara Ali resigns after ‘extortionate’ rent hike claims

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Homelessness minister Rushanara Ali resigns after 'extortionate' rent hike claims

Homelessness minister Rushanara Ali has resigned after reportedly hiking the rent on a property she owns by hundreds of pounds – something described by one of her tenants as “extortion”.

That was just weeks after the previous tenants’ contract ended, The i Paper said.

Four tenants who rented a house in east London from Ms Ali were sent an email last November saying their lease would not be renewed, and which also gave them four months’ notice to leave, the newspaper reported.

The property was then re-listed with a £700 rent increase within weeks, the publication added.

In a letter to the prime minister, Ms Ali said that remaining in her role would be a “distraction from the ambitious work of this government”.

She added: “Further to recent reporting, I wanted to make it clear that at all times I have followed all relevant legal requirements.

“I believe I took my responsibilities and duties seriously, and the facts demonstrate this.”

Laura Jackson, one of Ms Ali’s former tenants, said she and three others collectively paid £3,300 in rent.

Weeks after she and her fellow tenants had left, the self-employed restaurant owner said she saw the house re-listed with a rent of around £4,000.

“It’s an absolute joke,” she said. “Trying to get that much money from renters is extortion.”

Sir Keir Starmer said Ms Ali's work in government would leave a 'lasting legacy'. Pic: PA
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Sir Keir Starmer said Ms Ali’s work in government would leave a ‘lasting legacy’. Pic: PA

Ms Ali’s house, rented on a fixed-term contract, was put up for sale while the tenants were living there, and was only relisted as a rental because it had not sold, according to The i Paper.

The government’s Renters’ Rights Bill includes measures to ban landlords who end a tenancy to sell a property from re-listing it for six months.

The Bill, which is nearing its end stages of scrutiny in Parliament, will also abolish fixed-term tenancies and ensure landlords give four months’ notice if they want to sell their property.

Something Sir Keir’s increasingly unpopular government could have done without


Jon Craig - Chief political correspondent

Jon Craig

Chief political correspondent

@joncraig

Rushanara Ali’s swift and humiliating demise is a classic example of paying the price for the politician’s crime of “Do as I say, not as I do”.

She was Labour’s minister for homelessness, for goodness’ sake, yet she ejected tenants from her near-£1m town house then hiked the rent.

A more egregious case of ministerial double standards it would be difficult to imagine. She had to go and was no doubt told by 10 Downing Street to go quickly.

MP for the East End constituency of Bethnal Green and Stepney, Ms Ali was the very model of a modern Labour minister: a degree in PPE from Oxford University.

In her resignation letter to Sir Keir Starmer, she said she is quitting “with a heavy heart”. Really? She presumably didn’t have a heavy heart when she ejected her four tenants.

She’d previously spoken out against “private renters being exploited” and said the government would “empower people to challenge unreasonable rent increases”.

She was charging her four former tenants £3,300 a month. Yet after they moved out, she charged her new tenants £4,000, a rent increase of more than 20%.

In an area represented by the left-wing firebrand George Galloway from 2005 to 2010, Ms Ali had a majority of under 1,700 at the election last year.

Ominously for Labour, an independent candidate was second and the Greens third. No doubt Jeremy Corbyn’s new party will also stand next time.

In her resignation letter to the PM, Ms Ali said continuing in her ministerial role would be a distraction. Too right.

A distraction Sir Keir and his increasingly unpopular government could have done without.

Responding to her resignation, shadow housing secretary Sir James Cleverly said: “I said that her actions were total hypocrisy and that she should go if the accusations were shown to be true.”

A Liberal Democrat spokesperson said: “Rushanara Ali fundamentally misunderstood her role. Her job was to tackle homelessness, not to increase it.”

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Previously, a spokesperson for Ms Ali said the tenants “stayed for the entirety of their fixed term contract, and were informed they could stay beyond the expiration of the fixed term, while the property remained on the market, but this was not taken up, and they decided to leave the property”.

The prime minister thanked Ms Ali for her “diligent work” and for helping to “deliver this government’s ambitious agenda”.

Sir Keir Starmer said her work in putting in measures to repeal the Vagrancy Act would have a “significant impact”.

And he said she had been trying to encourage “more people to engage and participate in our democracy”, something that would leave a “lasting legacy”.

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