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Telegraph
44 minutes ago
- Telegraph
Rachel Reeves won't break her fiscal rules, she'll destroy them
For those not paying attention, this Labour Government is turning deception into a fine art. The technique is simple enough: make a pledge that seemingly provides reassurance, then drive a Challenger tank through the pretence, while claiming the literal promise has been maintained. The obvious example is Labour's pledge not to raise the taxes of working people. From the Prime Minister, Sir Keir Starmer, to the Chancellor, Rachel Reeves, on to the Chief Secretary to the Treasury, Darren Jones, and any Labour minister being grilled in an interview, the mantra is repeated. Income tax, employee National Insurance contributions and VAT have not been increased – so there have been no taxes raised on working people. The undeniable fact that increases in employers' National Insurance contributions and other taxes result in costs being borne by working people causes no shame, no embarrassment and no admission of a promise being broken. The next big promise to be broken but not betrayed is that the tax and spend plans of Reeves will stay within the fiscal rules she has set herself. By this, the Chancellor means that a responsible government matches its day-to-day spending with its income and only borrows to invest. The latest public borrowing figures have taken a howitzer to this pretence, effectively blowing it out of the water. The deficit for June was £6.6bn higher than the same month last year, while the gap has grown by £7.5bn when you compare this financial year to the previous – and we're only three months in. Andrew Sentance, a former Bank of England economic adviser who served on its Monetary Policy Committee for five years, suggests the 'deficit for 2025/26 [is] heading for £170bn, 5.5-6pc of GDP, even higher than last year – totally unsustainable and over £50bn above the OBR forecast'. Unfortunately for the Government, the many tax rises Reeves announced in her Budget of October 2024 accelerated behavioural responses in the British public to avoid tax increases. The result has been – at best – erratic economic growth, unpredictable tax revenues and a rise in borrowing to meet its everyday commitments. In reality, Reeves is borrowing now to pay for past borrowing and Labour's additional spending that we cannot afford. That is why even the dogs in the street are barking loudly about higher taxes being necessary for her next Budget to stay within the fiscal rules. Were Reeves to abandon her talk of supposed prudence, there would likely be a market response akin to her experiencing skydiving without a parachute. What can the Chancellor do to avoid such a fate? This was signalled in March 2024, when in her Mais Lecture, she revealed an approach to debt financing that would augur greater use of the EU's style of borrowing that, like old Private Finance Initiative (PFI) schemes, could be used to 'invest' in net zero and other politically driven infrastructure. It will keep some beneficiaries in the private sector happy while allowing Labour to claim it is making investments for our future without driving up the debt burden. Bob Lyddon, an international banking and finance consultant, explained her cunning plan in his paper Decoding Rachel Reeves and remains convinced that while tax rises to meet everyday funding will undoubtedly be necessary, the Chancellor will attempt to balance her bromides with honeyed announcements of grand schemes that promise much but deliver little. Reeves signalled how a small amount of 'borrowing for investment' by the Government could be multiplied by having intermediate public entities (like Great British Energy and the National Wealth Fund) borrow as well, and by the resultant schemes also borrowing, this time from investment companies like BlackRock and UK pension schemes. The result will be an Enron-style debt mountain costing 10pc per annum plus the repayments, all falling on the hapless UK business and personal taxpayers one way or another. It is an EU 'bait and switch' that grows off-balance sheet debt that eventually crystallises and has to be paid, just like off-balance sheet PFI still has to be paid. This vision is consistent with Labour's ambition of realignment with the EU and will result in the UK experiencing the same sub-optimal levels of economic growth. It allows Labour to say it is meeting its commitments to splurge great dollops of money into our economy without us feeling the hit. The price would be paid over a 50-year-long commitment that will not immediately result in higher taxes but will drive up the running costs of the public sector. We should be afraid. When Reeves talked up the supposedly halcyon days of Gordon Brown's grandiose public borrowing and especially his use of PFI 'investment' she ignored how it still costs us billions to repay today. The total PFI payments from 1996/97 up to the final transaction not due until 2052/53 are £278.3bn – representing an astonishing 555pc of the £50.1bn capital sum. Of the total of 669 PFI contracts, 588 were under Labour's Blair and Brown governments. An estimate by the Left-leaning Institute of Public Policy Research (IPPR) priced £13bn of Labour's 1998 PFI-funded NHS capital investment to have a cost of £80bn, and by 2019, it still had £55bn to pay. My money's on Lyddon being right, meaning Labour's next big political double-cross will be to say its fiscal rules are being met when she's driving that tank right over them. While she distracts us with carefully composed doublespeak about the need to increase taxes (because Reeves knows no other way to make her numbers add up and will not be allowed to cut spending), hidden borrowing will be conjured up, too. Ultimately, that will mean yet further tax rises for our grandchildren and their children too. Whether or not our economy or our people can bear it, we shall never know – for none of us are likely to be around to see the carnage.
Telegraph
2 hours ago
- Telegraph
The small boats crisis could make Blair's digital ID dream a reality
The last time a Labour government tried to introduce ID cards, Britain was a very different place. It was a pre-smartphone era, and less than half of the population had an internet connection, let alone social media. Privacy was expected. In 2002, five months after 9/11, David Blunkett, home secretary at the time, proposed a national 'entitlement card' designed to crack down on fraudulent use of benefits and the NHS. The plan ultimately morphed into an ID card scheme tied to a national identity register, a central record of citizens. Civil liberties campaigners howled, and despite the then prime minister Tony Blair's enthusiasm, the public never bought into the idea. The coalition government scrapped the idea in 2011, with immigration minister Damian Green personally feeding the hard drives into an industrial shredder. Few lamented the scheme's downfall. But Britain was also a different country in another way. In 2002, net migration into Britain was 172,000, compared with 431,000 last year. Illegal migration is more difficult to measure, but estimates suggest the size of this population has exploded, and small boat crossings have made the problem painfully visible. Asylum claims are at a record high. Immigration is now seen as the most important political issue by the British public, whereas two decades ago the NHS and terrorism were stronger priorities. Blair's ID card push came in the wake of terrorist attacks and was justified on national security grounds. Modern-day promoters of ID cards now believe that concerns around immigration could be the secret to reviving public appetite for a national scheme. Labour Together, the Westminster think tank seen as being closest to the Labour leadership, said last month that a digital 'BritCard' would be the most effective way for people to prove they have the right to be in the UK. Rather than the plastic cards proposed under New Labour, this would involve a mandatory free ID, downloadable on to a smartphone, that could be used to check people's age, their right to drive, work, rent and open bank accounts. The group says that 80pc of the public supports a digital identity in some form. The joint most popular reason for backing the idea is it would deter people from coming to the UK illegally to work. 'The polling is pretty conclusive that people like the idea of a system by which you can prove who you are', says Jake Richards, a Labour MP who supports the idea. 'I don't think there's this big civil liberties argument against it as there was in the Noughties.' Richards points out that many pieces of a digital ID are already in the works, although ministers do not call it that. The Government's digital services are already being combined into a single online system known as 'One Login' used to access childcare benefits, apply for grants and apply for training. Ministers are launching a digital driving licence later this year through a wallet service. Legal migrants must already display an eVisa when applying for jobs. Wes Streeting, the Health Secretary, is trying to centralise NHS data as a 'patient passport' by 2028. Blunkett recently argued that the Government should admit this effectively amounts to a digital ID. 'If something's going to happen, you might as well get some credit for it,' he wrote in Prospect magazine. Today, proving one's identity and right to work can involve an array of different documents and processes. There are 16 different ways for UK nationals to prove they have the right to work in the UK. A government-issued ID that displays credentials such as a person's name, right to work, whether they are over 18 and whether they have a driver's licence would, in theory, be harder to game. Proponents also claim that a digital ID card would cost significantly less than its analogue counterpart. In 2005, one analysis claimed that ID cards could cost around £18bn, or roughly £300 per person. Labour Together has estimated that the digital equivalent would cost between £150m and £400m, less than what the Home Office spends annually tackling illegal immigration. Rachel Coldicutt, a technology strategist who has studied digital IDs, says that this may be optimistic. 'Conservatively, you need to put another zero on those figures,' she says. 'Any solution needs to be absolutely rock solid from a technical perspective, and getting that right and usable by everyone is much, much harder than sending out a driver's licence. The real issue is that this could be a white elephant.' Debate on digital ID benefits Coldicutt is also sceptical about the benefits. ' People smugglers won't be scanning IDs before letting people onto small boats, and employers who don't check ID won't suddenly start obeying the law,' she says. While not a silver bullet for solving the problem of illegal migration, supporters argue that making it easier to check IDs would at least help. Verifying the multitude of potential documents can be expensive for employers, so many do not bother, and the multitude of potential documents makes it trivial to fake them. Measures such as last week's announcement that the Government will share the location of asylum hotels with food delivery companies to cut down on illegal working suggest the system, as it stands, can be easily bypassed. A free ID checking app, in comparison, would provide instant answers. Opposition to ID cards in Britain has often stemmed from historical liberties. Critics say digital IDs are reminiscent of a 'papers, please' society that Britain has never been. The only times they have existed have been during the two world wars, as well as the postwar period when practices such as rationing remained. But that argument holds less weight in a world in which we regularly part with personal information to shop online, or, in social media's case, merely to show off. As of last week, adult websites and social media sites must now verify users' ages, so that children are not shown inappropriate material. In other words, people must show ID. Opponents argue that digital IDs would be exclusionary to those without modern smartphones, but the argument is fading as more jobs require staff to be tethered to WhatsApp. Even if there are potential difficulties, Labour MPs are desperate to find a way to counter the rise of Nigel Farage's Reform UK, for whom each immigration scandal leads to a potential bump in the polls. In April, a group of more than 40 Labour MPs said digital ID cards were needed to take control of the migration system, saying 'this Government will only succeed if it is able to get a grip on illegal migration'. 'Lots of colleagues come up and say yes, that time has come', says Richards, the Labour MP. 'I think there's a lot of hunger for it.' The Government itself is yet to commit to the idea, beyond saying it is 'examining' proposals for a BritCard. But if the boats keep coming and the public gets behind the idea, Sir Keir Starmer may yet succeed in doing what Sir Tony couldn't.
Reuters
17 hours ago
- Reuters
UK backs future Palestinian statehood but says Gaza ceasefire is priority
LONDON, July 25 (Reuters) - Britain's immediate priority is alleviating suffering in Gaza and securing a ceasefire between Israel and Hamas, a cabinet minister said on Friday, even as Prime Minister Keir Starmer comes under growing pressure to recognise a Palestinian state. Macron announced on Thursday that France would be the first major Western country to recognise a Palestinian state, a plan that drew strong condemnation from Israel and the United States. Starmer will later on Friday discuss ways with other European leaders to pressure Israel to end its war in Gaza. Speaking ahead of that meeting British science and technology minister Peter Kyle told Sky News: "We want Palestinian statehood, we desire it, and we want to make sure the circumstances can exist where that kind of long-term political solution can have the space to evolve." "But right now, today, we've got to focus on what will ease the suffering, and it is extreme, unwarranted suffering in Gaza that has to be the priority for us today." London's Labour Mayor Sadiq Khan, opens new tab and Labour lawmakers on parliament's foreign affairs select committee said this week that Britain should recognise a Palestinian state. A Starmer cabinet minister, Shabana Mahmood, said doing so would bring "multiple benefits" and send a message to Israel. Successive British governments have said they would formally recognise a Palestinian state at the right time, without ever setting a timetable or specifying the conditions for it to happen. Parliament's influential foreign affairs committee said on Friday "the government cannot continue to wait for the perfect time, opens new tab because experience shows that there will never be a perfect time." Starmer was due to hold a call with German and French leaders on Friday over the situation in Gaza, which he described as an "unspeakable and indefensible" humanitarian catastrophe. But in a statement announcing the call, Starmer said while statehood was the "inalienable right of the Palestinian people", Britain would not support it before a ceasefire was agreed. One Labour member of parliament told Reuters that there was unhappiness with Starmer in the party over the government's failure to take more diplomatic steps to condemn Israel. "Most of us are outraged by what is happening in Gaza and think we are being too timid," the lawmaker said. Starmer's approach to the issue was further complicated by the arrival in Scotland later on Friday of U.S. President Donald Trump, with whom he has built warm relations. In foreign policy terms, Britain has rarely diverged from the United States.
