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Reeves Pledges History-Making UK Budget as Markets Await Details

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Rachel Reeves said her crucial first budget on Wednesday will be a “new settlement” for the UK, as she prepares to announce a package of tax rises and increased borrowing plans that will define British politics for the rest of the decade.

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Bloomberg News

Joe Mayes and Joe Easton

Published Oct 27, 20243 minute read

(Bloomberg) — Rachel Reeves said her crucial first budget on Wednesday will be a “new settlement” for the UK, as she prepares to announce a package of tax rises and increased borrowing plans that will define British politics for the rest of the decade.

“In 1945, we rebuilt after the war; in 1964, we rebuilt with the white heat of technology; and in 1997, we rebuilt our public services,” Reeves said in an interview with the Observer newspaper, referring to famous budgets in Labour’s history. “We need to do all of that now.”

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Reeves — who will be the first female chancellor to deliver a budget — is due to reveal up to £40 billion ($51.9 billion) in tax hikes and spending cuts in her fiscal plan, including increasing payroll levies on business and hiking capital gains tax and inheritance tax. She wants to use the funds to cover a £22 billion shortfall she said she inherited from the previous Conservative administration, while also spending more on the National Health Service and ensuring no government department faces real-terms cuts to their funding.

She’s also set to give herself space to borrow as much as an extra £70 billion over the course of the Parliament to invest in capital projects by changing the debt measure the government targets.

“This is a new settlement on Wednesday to rebuild our country and seize the massive opportunities in technology and energy that are out there,” Reeves said. “If we can unlock that investment, public and private, then we can do great things as a country again.”

Yet Reeves is braced for a potential backlash on Wednesday, with Labour facing criticisms that it is due to break its manifesto promises on tax, all while financial markets watch the government’s borrowing plans closely. On tax, the party had committed in its manifesto not to increase taxes on “working people,” and explicitly ruled out increasing income tax, the national insurance payroll tax and VAT.

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Instead, the Chancellor is due to hike national insurance paid by employers, drawing charges that she will hurt people who run businesses, who could also be considered to be “working.” Speaking on BBC TV on Sunday, Education Secretary Bridget Phillipson declined to comment on whether a small business owner constituted a “working person.”

“Working people will not see higher taxes in the pay slips that they receive,” Phillipson said. “I can’t speculate on precise tax measures.”

The other concern for Labour is how the fiscal plan will be received by financial markets. The UK’s borrowing costs have risen in recent days, in response to Reeves signaling that she is set to borrow more for investment. Phillipson defended the borrowing plans, saying the government would be careful with how it spends public money.

“There’s actually been widespread support for what the Chancellor has announced where it comes to her fiscal rules,” she said. “We do need to invest in the infrastructure of our country.”

The budget will also include £1.8 billion to go into an expansion of childcare services, including an increase in the number of nurseries across the country. Bloomberg reported in September that Reeves was considering proposals for a funding package to expand childcare services.

In its election manifesto, Labour promised to create 3,000 nurseries in schools at a cost of £35 million, to be paid for by ending the party’s key policy to end the VAT exemption on private school fees. The Treasury also said that £1.4 billion will go to a nationwide schools rebuilding program, that’ll aim to fund 50 school renovations a year.

—With assistance from Alex Wickham.

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Sir Keir Starmer has found himself at the centre of an international storm over his government’s decision to restrict arms sales to Israel just as mourners were burying six hostages killed in Gaza.

The move to halt 30 of the 350 arms export licences was condemned by Benjamin Netanyahu as “shameful”, while the White House has made it clear it will not be following Britain’s lead.

Joe Biden’s national security communications adviser, John Kirby, said: “Every nation can speak for themselves, on how and to what degree that they support Israel. We’re going to continue to do what we have to do to support Israel’s defensive capabilities.”

The issue has also blown up in the Tory leadership contest, with candidates lining up to attack foreign secretary David Lammy’s announcement.

Even Boris Johnson got involved, tweeting: “Why are Lammy and Starmer abandoning Israel? Do they want Hamas to win?”

Politics tamfitronics Netanyahu is furious over UK arms ban

Netanyahu is furious over UK arms ban (AP)

But while critics on the right attacked the decision, Labour MPs and charities questioned whether the government has gone far enough, particularly after defence secretary John Healey conceded it would have little effect.

Oliver Feeley-Sprague, military, security and police programme director at Amnesty International UK, said: “Suspending a handful of licences while continuing to allow UK components to be fitted into F-35 fighter jets used by the Israeli military in Gaza makes a nonsense of ministers’ claims to be concerned about Israel’s well-documented breaches of international humanitarian law.

“A supposedly ‘robust’ arms control system shouldn’t be leaving open huge loopholes that will almost certainly fuel further Israeli war crimes in Gaza.”

Mr Kirby acknowledged that Downing Street had given the White House “a heads-up” over the decision, but declined to support the move. “We’ll let other nations decide for themselves if they’re going to support Israel and to what degree that’s their decision,” he said. “That’s what sovereignty is all about.”

Politics tamfitronics Keir Starmer’s commitment to allies has been questioned

Keir Starmer’s commitment to allies has been questioned (PA Wire)

Mr Netanyahu’s office said: “Britain’s misguided decision will only embolden Hamas.”

“This shameful decision will not change Israel’s determination to defeat Hamas, a genocidal terrorist organization that savagely murdered 1,200 people on 7 October, including 14 British citizens,” it said. “Hamas is still holding over 100 hostages, including five British citizens.”

There was also fury from former foreign secretary James Cleverly and former security minister Tom Tugendhat.

Mr Cleverly said Mr Lammy has “damaged two of our most important relationships at a crucial time – and it won’t have the impact he wants”.

Answering questions at his leadership campaign launch, a visibly angry Mr Tugendhat said: “Let us be clear what the Labour government has done. On the day that the Israeli government discovered the bodies of more hostages, on the day they had to share that news of grief and trauma with families … the British government decided that it was the right day to stand against Israel’s right to defend itself.

“That is remarkable. And it will be a decision that has been heard not just in Washington and Tel Aviv but around the world. If we are not willing to stand by our allies when they are literally discovering the bodies of their murdered citizens what is the point of an alliance?”

The decision has severely strained Britain’s relationship with Tel Aviv.

Politics tamfitronics Tom Tugendhat condemned the decision

Tom Tugendhat condemned the decision (PA)

Mr Healey informed his counterpart, Yoav Gallant, ahead of Monday’s announcement. He told Times Radio that Mr Gallant “found the call unwelcome”.

“That’s not surprising, but sometimes your closest friends are the ones that need to tell the hardest truths,” he said.

Chief Rabbi Sir Ephraim Mirvis said the decision “beggars belief” while Phil Rosenberg, president of the Board of Deputies of British Jews, said the decision sent a terrible message” in Israel’s “hour of need”.

The list of suspended items includes important components which go into military aircraft, including F-16 jets and drones, as well as naval systems and targeting equipment.

Mr Healey said the change “will not have a material impact on Israel’s security”.

Israel’s foreign minister, Israel Katz, said it was the latest in a series of decisions which had raised concern in Tel Aviv, including the restoration of UK funding for the UN agency for Palestinian refugees, and the decision not to challenge the International Criminal Court’s application for an arrest warrant against Mr Netanyahu.

Summary papers published by the government showed the assessment Mr Lammy relied upon for his decision found that “Israel has not fulfilled its duty as Occupying Power to ensure – to the fullest extent of the means available to it – those supplies essential to the survival of the population of Gaza,” adding that the level of humanitarian aid in Gaza “remains insufficient”.

However, the government suggested it had not been possible to come to a “determinative judgement” on “allegations regarding Israel’s conduct of hostilities”, partly because of the “opaque and contested information environment in Gaza”.

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UK politics live: Reeves refuses to rule out capital gains and inheritance tax raids as PM vows Germany treaty

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Keir Starmer promised Labour will work towards a ‘once-in-a-generation’ Germany-UK treaty

Keir Starmer and Olaf Scholz shake hands as prime minister arrives in Berlin

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Sir Keir Starmer has been greeted by Emmanuel Macron ahead of the Paralympics opening ceremony in Paris, after meeting in Germany with chancellor Olaf Scholz as the prime minister pursues his post-Brexit reset agenda.

In a press conference in Berlin, the prime minister said a new treaty between Britain and Germany will help “deliver for working people” and create “deeper links on science, technology, development, people, business, and culture”.

Sir Keir promised that Labour will work towards a “once-in-a-generation” Germany-UK treaty in a bid to boost post-Brexit trade.

It comes as chancellor Rachel Reeves has refused to rule potential increases on capital gains tax warning that Labour will “have to make difficult decisions in a range of areas”.

The PM has been accused by the Tories of planning to hike capital gains and inheritance tax in a fresh “raid on pensions”. Shadow chief secretary to the Treasury Laura Trott claimed the government will bring “ruinous tax rises”.

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Doctors call for ‘bold actions’ to tackle ‘vaping epidemic’ among youngsters

Top doctors have called for legislation aimed at tackling youth vaping to include a total ban on disposable e-cigarettes and all flavours apart from tobacco.

The British Medical Association (BMA) urged ministers to “take bold and brave actions” to protect the health of children and young people amid a “vaping epidemic”.

Former prime minister Rishi Sunak introduced the Tobacco and Vapes Bill earlier this year, which included plans to ban disposable e-cigarettes and introduce restrictions on flavours and packaging.

However, it was shelved after the General Election was announced in May.

Prime Minister Sir Keir Starmer revived the Bill following Labour’s victory at the July 4 vote, although details on the measures included in the proposed legislation are yet to be published.

Dr Penelope Toff, chair of the BMA’s public health medicine committee, called on the current Government “to go even further” than the plans outlined by Mr Sunak.

She described the BMA report – Taking our breath away: why we need stronger regulation of vapes – as a “blueprint” of the actions that should be taken by ministers.

It calls for a ban on the sale of disposable vapes “on the grounds of disproportionate and harmful use by children and young people and their adverse impact on the environment”.

The BMA also suggests all vape flavours apart from tobacco should be banned, with measures introduced to prohibit the use of imagery, colouring and branding on packaging and e-cigarettes, as well as further restrictions on all advertising and marketing.

Salma Ouaguira28 August 2024 22:30

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Economic growth in Scotland matched UK in second quarter, GDP figures show

GDP growth in Scotland was level with the UK in the second quarter of this year – with Deputy First Minister Kate Forbes saying the latest figures show a “growing and resilient economy”.

She was speaking after initial figures revealed GDP for the period April to June was up by 0.6 per cent from the first three months of 2024.

That meant Scotland enjoyed the same level of economic growth as the UK as a whole in the second quarter.

With the latest rise coming after GDP grew 0.5 per cent over January to March, it means Scotland’s economy is now estimated to be 0.9 per cent larger than it was in April to June 2023, with this growth again matching that of the UK.

It comes after initial GDP figures for the second quarter of this year showed that while output in the construction sector fell by 0.1 per cent, the services sector – which accounts for the bulk of the economy – grew by 0.6 per cent. In addition, output in the production sector was up 0.8 per cent.

Ms Forbes, also the Economy Secretary, said: “Overall these figures paint a picture of a growing and resilient economy.

“The Scottish Government has made economic growth a clear priority and I am pleased to see consistent overall growth over the past six months despite harsh economic climates.

“We are investing more than £5 billion in 2024-25 to drive the economy and further initiatives will be detailed in the forthcoming Programme for Government and our Green Industrial Strategy.”

Salma Ouaguira28 August 2024 22:00

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Starmer greeted by Macron in Paris ahead of Paralympics opening ceremony

Following his engagements in Berlin, Sir Keir Starmer was heading to Paris for the start of the Paralympics and talks with French President Emmanuel Macron, where he will continue to pursue his reset agenda.

The prime minister was greeted by Mr Macron at the Elysee Palace ahead of the opening ceremony on Wednesday.

Politics tamfitronics Emmanuel Macron welcomed Keir Starmer at the Elysee Palace ahead of the Paris 2024 Paralympics Games

Emmanuel Macron welcomed Keir Starmer at the Elysee Palace ahead of the Paris 2024 Paralympics Games (REUTERS/Sarah Meyssonnier)

Andy Gregory28 August 2024 21:57

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Starmer accused of lacking ambition as he launches Brexit reset in Germany

Sir Keir Starmer has been criticised for lacking ambition in his bid to reset relations with the EU, after he rejected the idea of free movement for under-30s and rejoining the students’ Erasmus scheme even before talks got underway.

The prime minister made it clear he was not open to a deal that would make it easier for young people from the UK and the European Union to travel, when he held a joint press conference with German chancellor Olaf Scholz on Wednesday.

Despite Sir Keir having described the renegotiation as “a once-in-a-generation opportunity”, there are concerns that he is not willing to be flexible on a proposal that is strongly supported in the EU.

Our political editor David Maddox reports:

Andy Gregory28 August 2024 21:55

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Pictured: Chancellor Rachel Reeves visits National Manufacturing Institute in Scotland

Politics tamfitronics Britain's Chancellor of the Exchequer Rachel Reeves talks with apprentices during a visit to the National Manufacturing Institute Scotland (NMIS), west of Glasgow

Britain’s Chancellor of the Exchequer Rachel Reeves talks with apprentices during a visit to the National Manufacturing Institute Scotland (NMIS), west of Glasgow (POOL/AFP via Getty Images)

Salma Ouaguira28 August 2024 21:30

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Energy bosses urge Labour to ease burden on ‘struggling industry’

Energy UK’s chief executive Emma Pinchbeck said suppliers were already doing a lot to help households struggling with bills.

She told BBC Radio 4’s Today: “It’s important for people to understand that the retail sector doesn’t make huge profits, and most of the time I’ve been doing this job, they’ve been losing money.

“That’s because they’re exposed to the high gas prices that everyone else is, and they buy gas to sell to customers. Under the price cap they’re also limited in the profit they can make.”

She added that along with compulsory measure to support households “we also have our own voluntary commitments as a sector, and in the last year that provided £54 million of discretionary support, on top of the more than £2 billion worth of mandatory schemes”.

She called for green policy costs to be shifted from bills to general taxation to help ease the burden

“We’ve got record levels of debt amongst our consumers. It is, if anything, worse than any other time in the crisis,” she said.

“And so we’ve been advocating quick things to do, and we think a smart thing to do would be to move a portion of the policy costs off electricity bills into general taxation to rebalance some of the costs between electricity and gas, and to, lastly, double the warm homes discount.”

Salma Ouaguira28 August 2024 21:00

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Keir Starmer attempts to recreate David Cameron’s 2010 deal

The prime minister is looking to recreate David Cameron’s 2010 deal with France during his European tour in Germany and France.

French president Nicolas Sarkozy at the time signed the The Lancaster House treaties in a bid to strengthen defense security with the UK.

Keir Starmer now wants to forge new agreements on defence and security with Berlin and France – with immigration and trade also on top of the agenda.

Sir Keir has faced pressure from the opposition over his move to reset relations with Europe.

But the PM previosuly reiterated he wil not reverse Brexit measures.

Politics tamfitronics David Cameron is welcomed by France's president Nicolas Sarkozy prior to meeting members of Libya's National Transitional Council (NTC) in Paris 2010

David Cameron is welcomed by France’s president Nicolas Sarkozy prior to meeting members of Libya’s National Transitional Council (NTC) in Paris 2010 (GETTY IMAGES)

Salma Ouaguira28 August 2024 20:30

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Scottish Government as bad as Tories on finances, says Chancellor

Chancellor Rachel Reeves has said the Scottish government is “as guilty” as the previous Tory government on the country’s finances.

The chancellor was speaking during a visit to the National Manufacturing Institute Scotland near Renfrew, Renfrewshire, on Wednesday.

Experts at the Scottish Fiscal Commission (SFC) said on Tuesday that Scottish ministers may struggle to balance the country’s budget due to above-expectation public sector pay deals, the council tax freeze and benefit reforms, as well as uncertainty about the level of funding coming from Westminster.

While the Scottish government has attacked decisions made at Westminster for the country’s financial strife, the chancellor used her visit north of the border to hit back.

“The SNP government is as guilty as the Conservative government of spending more than they were bringing in, and now the Scottish Government are having to make difficult decisions,” she said.

“Anas Sarwar and the Labour opposition in Scotland were warning the SNP about the unsustainable position they were in.

“They SNP refused to listen, they made decisions that were not sustainable and now it is Scottish people who are paying the price for the decisions of the Scottish Government.”

Responding to the chancellor’s comments, First Minister John Swinney told the PA news agency during a visit to Stirling: “The Scottish government has balanced its budget for every single year – we have lived within the resources available to us.

“The problem we’ve got is that the UK government has not faced up to the reality of the pressures and the issues that have faced our public finances.”

Politics tamfitronics Scottish First Minister John Swinney and Chancellor of the Exchequer Rachel Reeves during a visit to Atlantic Quay in Glasgow, Scotland

Scottish First Minister John Swinney and Chancellor of the Exchequer Rachel Reeves during a visit to Atlantic Quay in Glasgow, Scotland (Getty Images)

Salma Ouaguira28 August 2024 20:00

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Editorial: Painful times lie ahead for Britain – and for Keir Starmer

Editorial: Gritty, glum, realistic – the prime minister’s keynote speech in the rose garden of No 10 held few surprises (and very little joy)

Salma Ouaguira28 August 2024 19:50

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Robert Jenrick slams £22 black hole claim was Labour’s ‘own making’

The former immigration minister and Tory leadership hopeful has accused the Labour party of making up claims about a £22 black hole left by the Tories.

Mr Jenrick told Sky News: “The black hole was one of Keir Starmer and Rachel Reeves’ own making. They’ve made political choices and I think they are selfish choices.

“They’ve chosen to spend £10bn a year paying off their union paymasters with excessive public sector pay for train drivers and others, and they’re choosing to spend £8bn on an energy company, a fantasy of Ed Miliband’s, that doesn’t even produce any energy.

“The political choices that they’ve made in just 53 days are bad choices. They’re doing this on the backs of middle class people, because they’re about to break their promises and hike taxes this autumn, and on the backs of our pensioners, for whom they’re removing their winter fuel allowances.”

Salma Ouaguira28 August 2024 19:30

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Reeves to ‘kitchen sink’ bad news to justify tax rises of up to £25bn, says ex-Bank official

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Top Stories Tamfitronics What happened overnight

Asian stocks mostly fell on Wednesday as markets digested Japanese and Australian business data.

Japan’s benchmark Nikkei 225 slipped 0.2pc in morning trading to 39,508.84, with the Japanese yen trading at its highest level in months ahead of a Bank of Japan policy decision next week.

A business survey released on Wednesday showed Japan’s factory activity contracted in July, as weak demand weighed on the manufacturing sector. Services were on the rise, helping to drive growth in overall activity in Japan’s private sector.

Elsewhere in Asia, Hong Kong’s Hang Seng shed 0.6pc to 17,370.09, led by the Hang Seng Tech Index which dropped 0.9pc. The Shanghai Composite was nearly unchanged at 2,915.46.

Australia’s S&P/ASX 200 edged 0.1pc higher to 7,973.20 after its services sector saw weaker growth in July. Manufacturing improved slightly but remained in contractionary territory.

South Korea’s Kospi shed 0.3pc to 2,772.55, as heavyweight Samsung Electronics plunged 1.1pc after talks between the company and its largest workers’ union ended with no agreement. Earlier this month, the workers declared an indefinite strike to pressure the company to accept their calls for higher pay and other benefits.

On Wall Street, the S&P 500 lost 8.67 points, or 0.16pc, to 5,555.74 points, while the Nasdaq Composite lost 10.22 points, or 0.06pc, to 17,997.35. The Dow Jones Industrial Average fell 57.35 points, or 0.14pc, to 40,358.09.

Eight of the major S&P sectors ended in negative territory, with the energy index the worst performer, down 1.6pc, as US crude prices hit a six-week low.

The yield on benchmark US 10-year Treasury bonds gained 0.9 basis points to 4.246pc.