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Telegraph
4 days ago
- Business
- 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.
BBC News
5 days ago
- Business
- BBC News
Work placements offered to care leavers in Midlands
Severn Trent Water is to create hundreds of work placements for young people who have been in care across the have been calls in recent years for better support for young people leaving care, rather than what has been described as a "care cliff" as they reach 18. Part of that is around work Trent said it planned to offer placements directly for 100 care leavers over he next four years, with another 300 available through a partnership with other employers across the region. "Our ultimate goal is to ensure that every young person leaving care in the Midlands has access to a meaningful work experience opportunity," said HR Director Neil Harrison. "We must continue to work together for those living in our region and give people the opportunity to reach their true potential," he added.A spokesperson for Severn Trent said it had the "ultimate aim" to see more young people in work, and out of risk of said the announcement came at a time where the number of young people not in education, employment or training was nearing one million, the highest in a released last year also showed a huge rise in the number of care leavers in England facing Jones, chief secretary to the Treasury, said the firm's commitment to helping people into work, including care leavers and ex-offenders, was an example of how business can "drive real change in our communities". Follow BBC Coventry & Warwickshire on BBC Sounds, Facebook, X and Instagram.
Yahoo
22-07-2025
- Business
- Yahoo
Government borrowing soars to second highest level on record
Government borrowing rose significantly more than expected last month as debt interest payments soared. Official figures show the cost of public services and interest payments on government debt are rising faster than the increases in income tax and national insurance contributions. It means government borrowing reached the second-highest level last month since records began in 1993, according to the data from the Office for National Statistics. June's borrowing figures - £20.684bn - were second only to the highs seen in the early days of the COVID-19 pandemic in 2020, when many workers were furloughed. State borrowing was more than £6bn higher than the same month last year. But despite this latest rise, borrowing this year is in line with the March forecast from the independent forecasters at the Office for Budget Responsibility (OBR). It's bad news for Chancellor Rachel Reeves, who has vowed to bring down government debt and balance the budget by 2030 as part of her self-imposed fiscal rules. She's expected to increase taxes to meet the gap between spending and tax revenue. Ms Reeves's deputy, the chief secretary to the Treasury, Darren Jones, said, "We are committed to tough fiscal rules, so we do not borrow for day-to-day spending and get debt down as a share of our economy." "This commitment to economic stability means we can get on with investing in Britain's renewal". This breaking news story is being updated and more details will be published shortly. Please refresh the page for the fullest version. You can receive breaking news alerts on a smartphone or tablet via the Sky News app. You can also follow us on WhatsApp and subscribe to our YouTube channel to keep up with the latest news.
Glasgow Times
16-07-2025
- Business
- Glasgow Times
'Glasgow must be given the same resources as English city regions'
City regions across these islands – and indeed across our planet – are vital drivers of growth and addressing poverty and inequalities. Glasgow is no exception. In a relatively short space of time, and during some very difficult years, our own City Region has been delivering exactly the types of benefits that people want to see. The City Deal, for example, is transforming not just the look and feel of communities with new bridges and new neighbourhoods but also our very economy. We're right up there with Europe's best for science and technology while creating more employment opportunities for ordinary citizens. Meanwhile, the partnerships between the eight member councils, businesses, and academia are helping ensure Glasgow actually outperforms those UK city regions we're regularly compared to. For example, the total value of what our economy produces here in Metropolitan Glasgow has recently been higher than either the West Midlands or Greater Manchester. At the same time, levels of child poverty and unemployment are lower. We're clearly doing a lot of things right. As chair of the cross-party Glasgow City Region Cabinet, I've always been clear that to take our ambitions to the next level we need more powers and more resources. And that has to come from both the Scottish and UK Governments. So, I was obviously delighted when, at our annual State of the City Economy Conference in December, Scottish and UK ministers pledged to work together with us to drive those ambitions forward. However, over the past month, many of us within these partnerships have become increasingly disappointed with what's emerging from the UK Government. I'll be the first to say that my party colleagues at Holyrood really do have to get a move on delivering on their promises to better empower Glasgow. But what's emerging from Westminster looks increasingly like a rollback. And if that's the case, Glasgow and our fellow City Region authorities will start to fall behind our peers south of the border. The UK Government's Spending Review made clear the gulf in how Scottish and English city regions are resourced. Manchester, West Yorkshire, West Midlands, and several others are provided with large integrated settlements with which they can make their own investment decisions. Yet Glasgow is reduced to administering UK Government programmes. That makes it extremely difficult to grow our economy in the ways we know we can – and must. Now, Scotland's Secretary of State, Ian Murray, and his colleague, Chief Secretary to the Treasury, Darren Jones MP, both insist that the UK Government has no role in delivering for Glasgow the type of devolution deal awarded for our English City Region comparators. It is certainly the case that the vast majority of the powers we seek are in the gift of the Scottish Government. However, devolving powers without the accompanying funding to match would be almost meaningless. The Glasgow City Region partners are clear that we require integrated funding deals, equivalent to those being delivered to our English peers. Those deals have not generated the all-important Barnett consequentials, meaning no equivalent funding has ever been provided to the Scottish Government. It's clear then that the funding for a devolution deal for the Glasgow City Region remains the responsibility of the UK Government. Crucially, the Core Cities Group, which represents the 12 biggest cities outside London and which Glasgow is part of, has collectively called on the UK Government to provide parity of funding support for the city regions in the devolved nations. And it too believes that the Spending Review was a missed opportunity to begin to address the inequities between English city regions and Glasgow, Edinburgh, Cardiff, and Belfast. If the UK Government wants to properly address the very poor growth figures undermining its own economic mission, then it needs to reconsider how it funds city regions in the devolved nations. The Secretary of State for Scotland has asked that I join him in writing to the First Minister in demanding the Scottish Government gives the Glasgow City Region the powers it's been asking for. I'm happy to do that. But a joint letter also needs to go to the UK Prime Minister and Chancellor demanding parity with our English peers. Glasgow needs both of our governments to step up to devolution.
The Independent
15-07-2025
- Business
- The Independent
Labour wants us live like working people and do whatever working people do – but what exactly is that?
There are 109 paid members of the government (there'd be more if it wasn't limited by law), and, as we've come to learn, each one has their own definition of what constitutes 'working people'. This includes non-definition definitions, such as the one most recently offered by Chancellor Rachel Reeves: 'I don't think we need to define more than that, really. We made a commitment in our manifesto to not increase those taxes. We didn't last year. It remains our commitment for this parliament'. To be fair, she was referring back to her party's well-known manifesto commitment ('income tax, VAT and National Insurance are the key taxes that working people pay'). And that's undeniable to the point of truism. But what that fails to acknowledge is that lots of the idle rich pay considerable sums in VAT every time they buy a private jet or dine out at a fancy restaurant. Should we consider those people 'working people'? Her deputy, Darren Jones, chief secretary to the Treasury, has been a bit more specific lately, stating 'working people' covers 'anyone with a payslip'. That could be extremely broad in the figurative sense of doing paid work for an employer – or very narrow if it literally means you get a physical slip of paper with your gross and net pay, tax, NI and pension contributions typed out. Of course, when she was under less pressure, in those easy, balmy days of opposition, Reeves was more forthcoming – well, a bit – when she suggested that 'working people are people who go out to work and work for their incomes… There are people who do have savings, who have been able to save up, and those are working people as well.' How big are the savings, though? No figure has ever been suggested. The nearest we've got was when Keir Starmer said that his idea of 'working people' are those 'who earn their living, rely on our services and don't really have the ability to write a cheque when they get into trouble'. That's not bad, except that even the richest people rely on the council to get their gold-plated bins collected – and if, say, Lord Montagu of Beaulieu had gotten run over by one of his fine classic cars and had been taken to an NHS hospital in an NHS ambulance and fixed up by an NHS doctor. More recent still, at the weekend, transport secretary Heidi Alexander had a stab at it – and said working people were folk on 'a modest income'. Then again, Lisa Nandy, culture secretary and professional Northerner, conceded that people with six-figure salaries can be 'working people' too (which is just as well, seeing as she's on £159,851 per annum). In her own words: 'I mean, if they go to work obviously they will be working'. Unarguable, but inconsistent with colleagues. Bridget Phillipson, over on education, meanwhile, refuses to say if the self-employed are 'working people', confining herself to those 'whose main income arises from the fact that they go out to work every day' – which must surely include small business owners who are plumbers, window cleaners or pest controllers; the ones who cannot work from home and whose only boss is themselves. I suppose that trying to define 'working people' is like the old saying about trying to define an elephant – you know one when you see one. On that basis, the endless variety of categorisations offered by Labour politicians make some sense, because nearly everyone works for a living, has worked for a living (pensioners), will work for a living (students) or would work for a living if they could get a job, or, come to think of it, start their own business. If Labour said that they wouldn't put taxes on 'working people' up, then they meant nearly everyone, and that's how they got to win the election – because no one thought that any prospective tax hikes would affect them. This impression was greatly amplified by the high-profile changes they did propose – VAT on private school fees, attacking the super-rich non doms and ending the use of offshore truest to avoid tax. 'Working people' was a way of saying 'not you' to the floating voter of 2024 worried about the state taking even more of their income away. It's better than 'working-class', which is pejorative, or 'middle class', which would be too exclusive – and, besides, we don't like talking about class these days. It's a bit divisive. We can see another reason why Labour relied on such a rubbery concept as 'working people' – it was based on the searing experience of previous – lost – elections. It's because as soon as a shadow chancellor mentioned any kind of figure about who might actually be worse off under a Labour government, the media went mad and the Tories used it as an 'attack on aspiration' and labelled it a 'tax bombshell', even though few people would ever have been injured by this legendary socialist missile. If Labour's tax and spend plans that would revolutionise health and education cost anyone as much as a quid a week, the press crucified the hapless Labour leader of the day. So now they don't get too specific and they left much unsaid in 2024, sticking to the equally banal slogan of 'change'. Well, we all know what happened next. And what was a meaningless but useful slogan for Opposition has turned into a terrible burden in government, precisely because every 'working person' pays council tax (up), income tax (thresholds frozen, probably for the rest of the decade), has savings and a pension (hit by capital gains tax rises), and, realistically, is affected by the rise in employers' national insurance contributions. Starmer and Reeves left themselves no room for manoeuvre even in good times, and were critically vulnerable to making their pledge sound like a sick joke in the bad times. They should never have given the British people the impression that only the richest would have to make any financial sacrifice to put the public finances on a sustainable basis. But, then again, given that the British are a devoutly cakeist people, who think they can enjoy fine public services without paying much for them, Labour would never have won the election if they'd told the truth – which is that Brexit, which we voted for, is still costing us dearly. In the end, it's all our own fault, and we 'working people' have only ourselves to blame. Still, there's always Reform UK, more than happy to tell us we can have our cake and eat it. Irresistible, isn't it?
