ALEX BRUMMER: Labour has trapped us all in a doom loop of ever higher taxes and welfare spending. Things are bad now but, with four years to go, this is how much worse they can get
As every football fan knows, the moment the club chairman is forced to quell rumours of the manager's imminent demise by issuing a vote of confidence, the gaffer's days are numbered.
And so, as Sir Keir Starmer approaches the end of his first year in power, his Chancellor Rachel Reeves looks like a dead woman walking.
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The Guardian
19 minutes ago
- The Guardian
Shiploads of cars ready to set sail for US from UK as trade deal kicks in
Shiploads of Minis, Aston Martins and Range Rovers will set sail for the US on Monday as the UK-US trade deal kicks in, but British farmers say they have been used as collateral to save the car industry. Auto shipments across the Atlantic were down more than half in May after Donald Trump's imposition of a 25% tariff on 3 April on top of an existing 2.5% levy. However, as of one minute past midnight US time on Monday – 5am in the UK – that has been reduced to 10% for cars, and UK manufacturers expect pent-up demand to be unleashed. Aston Martin's chief executive, Adrian Hallmark, said the luxury carmaker had stopped shipping between April and June, something he said had been 'not catastrophic, but slightly uncomfortable'. The outline of the trade deal was agreed between Trump and Keir Starmer in early May, the first such bilateral pact to mitigate the president's import taxes. However, delays in agreeing the fine print meant the higher tariff had continued to apply, pushing the cost of British cars up by more than a quarter for US importers. Hallmark told a British car industry conference last week that he was 'planning to invoice three months' worth of sales in a 24-hour period', with stocks in the US down by 50% due to the pause. Aston Martin exports 90% of its cars, but its customers are wealthy and were willing to wait. 'The demand has been strong and will be in good shape when we start to invoice cars like fury on Monday next week,' he said. On the eve of the trade deal coming into force, the business secretary, Jonathan Reynolds, received reassurances from the sportscar maker Lotus that it had no plans to close its UK factory, in Hethel, Norfolk. Reynolds contacted Lotus bosses after it emerged that the carmaker was considering shifting production to the US – a move that would jeopardise 1,300 jobs. A Department for Business and Trade spokesperson said Reynolds met Lotus and its owner, Geely, on Sunday to clarify the company's situation, and 'was reassured by management that they are committed to their UK operations and have no plans to close their Hethel plant'. A decision to relocate manufacturing abroad by a prestige brand such as Lotus would be embarrassing for the UK government. Labour's industrial strategy, published last week, singled out automotive production as among the strategic sectors it wants to support. The car industry welcomed the US-UK trade deal when it was struck, with it preventing job losses at JLR, the maker of the Jaguar and Land Rover brands. Range Rovers are particularly popular in the US. However, the lower 10% duty only applies to a quota of 100,000 cars a year – slightly below last year's export numbers – leaving little room for growth. JLR alone exported 84,000 cars in the year up to April 2025. The initial trade deal also included a promise of zero tariffs on steel but this has been held up by negotiations over the origin of some raw materials for smelting, particularly at Tata's plant at Port Talbot in south Wales. Concessions were won with new tariff-free quotas for British and US beef in each other's markets, as well the controversial removal of a 19% tariff on American ethanol imports, which the UK industry says leaves biofuel plants facing closure. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion The president of the National Farmers' Union, Tom Bradshaw, said the government must stop using agriculture as a bargaining chip in talks and urged Starmer to take the sector off the table in the talks on steel and remove the 10% baseline tariff Trump has applied to all imports. 'Agriculture has borne the responsibility of removing tariffs for other sectors. At some point they've got to stop relying on agriculture to take the burden,' Bradshaw said. 'Agriculture has nothing left to give.' On the upside for farmers, they can now sell 13,000 tonnes of British beef to the US, but again there is a catch. They will not be able to sell until January next year because beef is part of a wider tariff deal with other countries, and this year's quota has already been filled by Brazilians who stockpile beef in storage near the Mexican border. The UK steel industry has at least won a temporary exemption from the 50% tariff imposed by Trump at the start of this month until 9 July, but it still faces a 25% tariff on exports. It is waiting anxiously for delivery of the promised zero rate tariff. 'Time is running out to secure a UK-US steel deal and remove damaging tariffs,' said Gareth Stace, the director general of UK Steel. 'Every day of delay costs our steelmakers dearly. Contracts are being lost, investment decisions remain on hold, and uncertainty is paralysing business decisions. We urgently need a swift, positive resolution to these talks to protect jobs, unlock growth, and restore confidence in the sector.' Yet even in a zero-tariff deal, Port Talbot may still face issues. The UK operations of the Indian conglomerate are relying on imports of steel melted and poured in its sister plants in India and the Netherlands while they move from a polluting blast furnace to the greener electric arc furnace to smelt steel. However, UK Steel is hoping there can be an exception to the tariffs agreed for the Welsh operation along with the five other plants in the UK. UK trade officials are understood to be optimistic they can secure such an exemption.
Sky News
27 minutes ago
- Sky News
Does Starmer read his speeches?
👉Listen to Politics At Sam And Anne's on your podcast app👈 Sky News' Sam Coates and Politico's Anne McElvoy serve up their essential guide to the day in British politics. The prime minister has made significant concessions on the welfare bill after the threat of a mass rebellion from his own MPs. The changes have left Chancellor Rachel Reeves with another black hole in the public finances and some MPs are still planning on voting against the bill when it comes in front of the House of Commons tomorrow. Also, as Sir Keir Starmer celebrates his first full year in power, has this latest U-turn left him in a vulnerable position with his party and the wider public?
Times
29 minutes ago
- Times
Labour must get a grip or its entire economic plan could unravel
Twelve months on from Labour's general election landslide, it is a good time to ditch the slogans and soundbites — and I am afraid there will be plenty of those this week — and assess what the latest economic data says about Labour's stewardship of the economy. From my standpoint its record is neither disastrous, nor dazzling. There is a credible argument that things could have been considerably worse given the structural challenges inherited from the Conservatives. Yet a series of policy missteps have needlessly sapped momentum. In essence, Labour's first year has been defined less by a transformative economic mission and more by steady progress, punctuated by damaging miscalculation. To give credit where it is due, this government appears to be learning on the job. But it is also true that there has been a lot to learn from — unforced errors on welfare reform, labour market policy and the management of the public finances have blunted early optimism among the UK business community. A persistently tricky international backdrop has not helped either. Let us begin our assessment with GDP — that most central, yet blunt, measurement tool. Growth in GDP since Labour entered office in July last year has not collapsed, nor has it accelerated meaningfully. On an international comparative basis, the UK has largely tracked the G7 average, growing by a compound 0.8 per cent in US dollar terms across the last three quarters. GDP per capita, a more revealing metric of national wellbeing, has risen by a modest 0.3 per cent. This is an improvement after two years of declines, but hardly a stirring renaissance. Inflation remains central to household perceptions of the government's economic competency, and its record here is mixed. Headline inflation peaked at more than 11 per cent well before Labour took power and has markedly softened since. However, the core problem, quite literally, lies in 'core inflation' which remains stubbornly high at an annualised 3.5 per cent. Above-inflation increases to the national living wage and public sector pay have added volatility to service prices just as the Bank of England was seeking calm. April's spike in consumer price inflation, though partially driven by regulated costs like air fares and energy levies, has muddied the water for monetary policy. This dissonance — between a government talking up interest rate cuts and simultaneously fuelling wage pressures — has not gone unnoticed at the Bank. We should be wary of attributing lower interest rates as the fruit of government policy. They are being delivered despite it. Turning to fiscal policy and the record is equally chequered. While the cost for the UK government to borrow for ten years — the ten-year gilt yield — has held steady in nominal terms, the interest rate spread that the UK pays compared with its G7 peers has widened to a worrying 1.25 percentage points. This reflects heightened debt issuance pressure after the October budget, and market suspicion about the UK's long-term fiscal sustainability. If rebellious Labour backbenchers think this arithmetic magically improves with a change of chancellor I have some bad news for them. The financial markets see Rachel Reeves as considerably more credible than the vast majority of alternatives within the Labour parliamentary party. Against this backdrop the autumn budget now looms large. Having left herself just £9.9 billion of headroom against her primary fiscal rule back in March, the chancellor now faces slippage on multiple fronts. Public sector borrowing has risen faster than forecast. The headwinds from U-turns on welfare reform and winter fuel payments threaten to eat into nearly half of the existing cushion. Visa reforms that suppress labour force growth and murmurings about the two-child benefit cap could further erode fiscal wriggle room. And the private sector is signalling unease with what is to come on tax. Since the general election, both deposits and the household savings rate have risen. This looks like a quiet vote of no confidence in the economic outlook and shows that speculative fiscal noise has a real cost: muted consumer spending, and deferred investment. But Labour's biggest headache is that it has sowed itself problems in the jobs market. Payroll employment, once a bright spot, has stalled since July 2024. Critics rightly argue that employer national insurance increases, combined with expanded employment rights and minimum wage hikes, have depressed hiring appetite. Two caveats are worth considering. First, payroll data may understate real employment if more workers are now classifying as self-employed to avoid higher employer contributions. Indeed Labour Force Survey data — though statistically compromised — shows overall employment still rising. Nonetheless, qualitative data from the Bank of England's decision maker panel confirms a palpable pullback in hiring intentions. This is consistent with the broader trend: firmer labour market regulation may be well-intentioned, but it is weighing on labour demand. The second caveat is that green shoots are now emerging in labour market participation which has inched upwards — possibly aided by NHS capacity improvements. Yet the metric that matters most for fiscal arithmetic — productivity — remains worryingly flat. If the Office for Budget Responsibility downgrades its productivity assumptions in the coming weeks, the government's already tight headroom could vanish entirely ahead of the budget. So what happens this autumn? The chancellor faces a vexing equation. Maintain fiscal rules, avoid tax rises on working people (her words, not mine!), protect spending pledges, and hold her parliamentary party together. At least one of these constraints looks certain to give. Options are narrowing. Loosening rules risks a bond market backlash. New taxes or spending cuts risk backbench revolt and sap economic momentum. Supply-side tweaks — such as speeding up infrastructure approvals or revisiting the North Sea tax and licencing regime — offer some room, but their fiscal payoff is modest and long term. The chancellor may also be tempted to revisit the policy of interest paid on central bank reserves. This is a potentially lucrative move but one fraught with risks to monetary policy effectiveness as her governor, Andrew Bailey, has recently noted in response to similar proposals from Reform UK. None of these options are easy. Some are not credible. But the current fiscal impasse is even less sustainable. Yet mere policy competence will not be enough. The fiscal debate is increasingly constrained not by in-year numbers, but by a refusal to confront long term trade-offs on healthcare spending and pensions. If the government truly wishes to spark the 'renewal' it promised, it must move from a mindset of management to one of reform. The alternative is a parliament of drift — marked by tactical retreats, fiscal fudge and faster growth that never quite arrives. In the months ahead, the OBR's pen may prove more consequential than the chancellor's speeches. Should productivity assumptions fall, the government's entire economic strategy could yet unravel. The risk, as ever, is not that the centre cannot hold — but that no one dares to grip the centre at all.
