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The Guardian - UK
The Guardian - UK
Politics
Andrew Sparrow

UK politics: Starmer insists pro-growth policies on way after OBR’s budget warnings – as it happened

Budget OBR Rachel Reeves United Kingdom Ed Conway Ed Davey ​​Rishi Sunak Sir Keir Starmer Ed Balls Kemi Badenoch
Keir Starmer and Rachel Reeves with members of staff, during a visit to University Hospital Coventry and Warwickshire.
Keir Starmer and Rachel Reeves with members of staff, during a visit to University Hospital Coventry and Warwickshire. Photograph: Darren Staples/Reuters

Afternoon summary

  • Keir Starmer has played down claims from the Office for Budget Responsibility that the budget will do little to boost growth, saying more pro-growth policies are coming. (See 2.19pm.)

  • Voting has closed in the Tory leadership contest, and on Saturday the winner – either Kemi Badenoch or Robert Jenrick – will be announced. As PA Media reports, the two candidates have declared another £112,500 in campaign donations. Badenoch has now received a total of £422,500 in campaign donations, and Jenrick has received £480,000.

Updated

Tories launch petition against Labour's 'family farm tax'

For 14 years the Conservative party were in government. Now they’re out of office, and a sign of how little power they have is the fact that they’ve been reduced to organising petitions. Earlier this week they presented a petition to the Treasury calling for the winter fuel payment cut to be reversed, and now they are organising one saying farms should remain exempt from inheritance tax.

Steve Barclay, the shadow environment secretary, said:

Labours introduction of the family farm tax marks a shameful betrayal of British farmers everywhere.

It will harm rural communities, risk our food security, and make it harder to pass farms to the next generation.

Farmers toil, day and night, to put food on our tables, and foster our countryside - so I am proud to launch this petition, to fight for our farmers, and call on Labour to ditch this cruel tax.

Perhaps Ed Balls will sign? (See 5.11pm.)

Ed Balls, the former Labour shadow chancellor, has suggested Rachel Reeves will have to rethink the decision to impose inheritance tax on farms worth more than £1m.

Speaking on his Political Currency podcast, he said:

This issue of inheritance tax on family farms, where the limit is £1m before you pay inheritance tax, I think this is going to be one of those things which may become a growing issue in the coming weeks and months. It’s one of those things where you just wonder, ‘Has the Treasury really thought through all the hard cases’.

It’s quite easy to have a low-income, hard-working farming family, which have had their farm for generations, where, if you actually add up the 100 acres of land and the house, is more than £1m, and if the dad dies, have they got to sell the farm to pay the inheritance tax?

To Rachel Reeves and her team that £1m sounds like a big number. I wonder whether, actually, when you really dig into the cases, £1m is a big number or small number for cash-poor, asset-rich farmers.

Downing Street has refused to comment on the rise in gilt yields (government borrowing costs) this afternoon. At the afternoon lobby briefing, a spokesperson said it was “government policy not to comment on market fluctuations”.

The spokesperson also said the aim of the budget was to restore economic stability.

Rupert Harrison, who was George Osborne’s chief adviser when he was chancellor, claims the rise in UK borrowing costs this afternoon has already wiped out Rachel Reeves’s budget headroom. (See 2.35pm and 3.48pm.)

Market moves since the Budget will have already wiped out the headroom against the new fiscal rules.

This is from Mohamed El-Erian, President of Queens’ College, Cambridge, and chief economic adviser at Allianz, on the rise in UK government borrowing costs.

Another leg up in UK borrowing costs, with the yield on 10-year government bonds currently trading at 4.47% after peaking earlier above 4.50%.

This move takes place in the context of an active debate, fueled in part by the OBR report, on whether yesterday’s budget will result in higher growth.

There is more comment on the significance of the increase on our business live blog.

Updated

Ed Davey claims Lib Dems will achieve more as opposition party by avoiding 'combative' approach favoured by Tories

The Liberal Democrats could achieve more than the Conservatives in opposition by taking a less “combative” approach and trying to be constructive where it is helpful, Ed Davey has argued.

Speaking to journalists at a parliamentary press gallery lunch, Davey said the way his party chose to act might “surprise people”, contrasting this with the stances taken both by the Tories and the SNP, the latter of whom were supplanted as the third party by the Lib Dems in the general election.

The SNP’s use of “political game-playing” often did not land well with voters, the Lib Dem MP argued, saying they often preferred a more mature and collegiate approach. For example Lib Dems are offering to work cross-party to reform the care system.

This was also the case with the Conservatives, Davey said, contrasting Rishi Sunak’s final performances in the Commons as opposition leader on Wednesday. He explained:

Prime minister’s questions was quite fun, but then we got to the budget response, and it was back to normal, and Rishi was really quite combative.

I’m not saying he shouldn’t have had a go at the government, he had every right to do that. I just think the tone was the wrong tone to adopt, and I like to think that ours, being clear where we agree and disagree, is a better one.

At the Downing Street lobby briefing earlier, the PM’s spokesperson echoed what Keir Starmer said in his BBC interview in response to the OBR saying the budget won’t do much for growth. (See 2.19pm.) The spokesperson said:

This is not the limit of [the chancellor’s] ambitions when it comes to growth. The OBR figures don’t take into account a significant range of other reforms that the government’s undertaking, whether it’s planning reform, reforms of the skills system ...

This is not the limit of our agenda on growth. Do we want to see higher growth figures to bring in the revenues to fund our public services? Yes, but yesterday was a start.

And the value of sterling has been falling too, Ed Conway reports.

Ed Conway, economics editor at Sky News, has posted a good thread on social media on the significance of the post-budget rise in government borrowing costs. (See 3.30pm.)

How worried should we (and @RachelReevesMP) be about the slightly nervy reaction from financial markets towards her first Budget?
Short answer: certainly a bit worried.
But perhaps not for the reasons you might expect..

Worth saying at the outset: these markets are volatile.

Trying to interpret movements in govt bonds is v tricky.

They’re moved by all sorts of factors - fiscal, monetary, economic and structural - from all over the world.

So yesterday’s Budget is only one of many factors here...

Even so, there has been a marked rise in UK bond yields following the Budget which is greater than what we’re seeing in other markets.
This morning the UK 10 year bond yield hit the highest level in nearly a year. It’s up 1.7% since yday - far more than US or German equivalents

Now, perhaps the most important thing to say is: this is NOTHING like the reaction we saw following the Truss mini Budget.
Gilts are NOT going up as quickly as they did around then.

Even so, there has definitely been SOME reaction. The pound weakened a bit and gilt yields rose. This despite the fact that most of this Budget was pre-briefed long in advance. Investors are actively re-pricing UK debt. And that matters...

The issue at present isn’t the one @trussliz had to grapple with - a near financial crisis - but something else. The cost of debt servicing is going up. And if debt interest costs goes up it has a direct bearing on the govt’s fiscal plans...

Consider the following line from the OBR’s report yday. If gilt yields go more than 1.3 percentage points above their projections then the govt will break its fiscal rules. Which implies having to change its plans. That would be... awkward
Now consider this in chart form...

👀Right now gilt yields are pretty much halfway towards the danger zone👇
Now... it’s only day one after the Budget. Plenty could happen in the coming weeks and months.
But upshot is @RachelReevesMP‘s room for manoeuvre is ALREADY diminishing because of market moves.
Not good.

Post-budget sell-off of government bonds by worried City traders intensifies, pushing up UK borrowing costs

The sell-off of UK government bonds has gathered pace, pushing up borrowing costs for the Treasury, Julia Kollewe reports. She says investors have become increasingly alarmed about the sharp rise in borrowing to fund investment.

There are more details on the business live blog.

Ed Davey: care sector will be ‘pushed to brink’ by national insurance hike and should be exempt

Ed Davey, the Lib Dem leader, says social care companies should be exempt from the rise in employers’ national insurance. Peter Walker has the story.

Streeting suggests social care companies won't be compensated for extra costs generated by national insurance hike

Wes Streeting, the health secretary, has suggested that social care companies will not be compensated for rise in employers’ national insurance.

In an interview on Radio 4’s World at One, asked if the NHS would be compensated for having to pay national insurance, Streeting said the NHS was “the biggest employer in the land” and that the chancellor had made allowance for this in the budget.

Asked if that would also apply to GPs and to private firms providing NHS services, Streeting said:

Of course there are a number of others involved in delivering health services that will be affected by employer national insurance contributions. I’m working through that now, and I’ll have more to say about that in the coming weeks in terms of what we can do more quickly to deliver the shift I’ve wanted to see for some time, [getting] NHS investment spending out of hospitals into primary care.

Asked again if private companies, and social care companies, which are also having to pay a higher minimum wage, would have to pay the extra national insurance, Streeting said:

Bear in mind, as well, in terms of the increases in local government funding, the £600m allocated to social care in the budget, the chancellor has taken into account those pressures when making budget decisions.

Sarah Montague, the presenter, said that, according to the care sector, the chancellor had definitely not taken those costs into account. She said Care England has claimed the care sector faces extra costs worth £2.4bn as a result of the minimum wage and national insurance increases. She said £600m would not “even touch the sides”.

Streeting said there were various measures in the budget that would help this sector, like the boost to special educational needs funding.

When it was put to him that he seemed to be saying that, while the NHS would be refunded for the national insurance increase, private healthcare companies would not get help, Streeting just repeated his point about wanting to shift more care into primary care.

Montague said: “We’ll take that as a no.”

OBR chair says Reeves has left herself 'very little headroom' in budget, implying further tax rises might be necessary

In an interview with the Today programme this morning, Richard Hughes, chair of the Office for Budget Responsibility, suggested that Rachel Reeves, the chancellor, could end up having to raise more in tax in future budgets because she left herself so little headroom in her figures.

Asked if there was a risk of the chancellor needing to “come back for more”, he replied:

The chancellor has changed the fiscal rules in this budget, but she’s kept the practice of her predecessors in setting aside very little headroom, very little margin for manoeuvre against those rules.

She’s just got £10bn pounds worth of headroom against her target to balance the current budget, £16bn pounds against getting net financial liabilities falling. These are about a third of what her predecessors have set aside against their rules. It’s a tiny fraction of the changes to our borrowing forecasts over a five-year horizon.

Small changes in interest rates, smaller than ones we even saw in terms of the changes in interest rates between the March budget and this budget, would be enough to eliminate that kind of headroom.

Asked again if that meant Reeves would have to come back for more tax revenue, Hughes replied:

There are always risks to the outlook. Chancellors have to set their fiscal policy in light of those risks. This chancellor has set aside very little margin for manoeuvre against the target she has set for herself.

Starmer plays down OBR claims budget will do little to help growth, saying more pro-growth policies coming

Yesterday the Office for Budget Responsibility said that the measures in the budget would boost growth in the short term, but that after five years they would not be making any difference.

Asked about this forecast, in an interview with the BBC Keir Starmer said that he wanted to do “better than that” and that the budget was just the “first step”. He said other policies, like planning reform and deregulation, would “help towards growth”.

Updated

More than 13,000 prisoners released early under scheme started by Tories, MoJ figures show

More than 13,000 prisoners in England and Wales were released early under a scheme introduced by the previous Conservative government, PA Media reports. PA says:

The move is likely to have contributed to a sharp rise this year in the number of offenders recalled to custody for breaching the conditions of their release.

Some 13,325 prisoners were released early between October 17 2023 and September 9 2024, according to data published by the Ministry of Justice (MoJ).

The scheme, known as End of Custody Supervised Licence (ECSL), continued for a few months after the Conservatives lost the general election in July this year, until it was superseded in September by a separate early-release programme introduced by the new Labour government.

Just over a quarter (26%) of those released under the ECSL scheme had been found guilty of an offence classed as violence against the person, a similar proportion (26%) had been convicted of a theft offence, while nearly one in seven (15%) had been jailed for drug offences.

No prisoners serving time for a sexual offence were released.

The scheme initially allowed prisoners in certain jails to be released a maximum of 18 days early, but this was increased in March 2024 to a maximum of 35 days, then again in May to a maximum of 70 days.

Separate figures published today show there were 9,782 recalls to custody in April to June 2024 of offenders who had breached the conditions of their release, up 44% from 6,814 in the equivalent period in 2023.

John Swinney says Treasury should fully compensate Scottish government for £500m cost of national insurance hike

John Swinney, the first minister, has urged the Treasury to fully compensate the Scottish government for the expected loss of £500m to its budget from the hike in national insurance (NI) payments by employers.

Rachel Reeves, the Chancellor, appears to have been wrongfooted by the impact her decision to increase NI rates for employers will have on the already stretched finances of Scotland’s public sector, which is larger than England’s.

The Scottish government estimates Scotland’s health service, schools, police, courts and other public services will have to spend £500m extra – money which will now flow to the HM Revenue and Customs in London.

Scotland’s public sector employs around 600,000 people, 22% of the national workforce, compared to 17% across the UK as a whole.

Swinney told Anas Sarwar, the Scottish Labour leader, during first minister’s questions he broadly welcomed Reeves’ budget. It adds £3.4bn to his spending next year, while the extra money this year will help the Scottish government meet the soaring costs of its public sector pay deals and inflation.

But the NI anomaly needed to be addressed, he added, before the Scottish budget is published on 4 December. He said:

There remains significant uncertainty about the impact of the increase in employers’ national insurance contributions on public spending in Scotland [and] whether our finances will be compensated in full for all that’s involved.

That of course is not an insignificant sum, it’s £500m.

Reeves was pressed about this on BBC Radio Scotland on Thursday morning, and appeared to suggest that no additional money would be provided. “We’ve given £3.4bn in the settlement to Scotland, which takes into account all of those pressures,” she said. “The challenge now for the SNP in Scotland is to use that money wisely.” (See 9.35am.)

However, other UK government sources have said extra money would be given to Scotland to cover those costs, but were not clear how much. Scottish ministers fear the Treasury will give them a flat rate population-based share of those extra NI receipts, without recognising Scotland’s larger public sector.

Updated

The Institute for Fiscal Studies has published on its website the slides shown at the presentation this morning where it explained its analysis of the budget.

This one illustrates the point made by Paul Johnson, the IFS director, in his opening statement about how health was not the department that did best, in relative terms, from the spending allocations. (See 11.49am.)

Voting in the Tory leadership contest closes at 5pm this afternoon, and the two candidates, Robert Jenrick and Kemi Badenoch, have both been attacking the budget in final media appearances.

Jenrick, who is the underdog in the contest, claimed that Rachel Reeves was acting like “a compulsive liar”. He said:

What we saw yesterday was a Halloween horror show. This was the biggest political heist in modern British history.

£40 billion of tax rises hurting people across this country and just three months ago the Labour party won an election on a pledge not to raise taxes. I am afraid Rachel Reeves is acting like a compulsive liar.

She said during the general election she wasn’t going to raise taxes. She just has. She said she wasn’t going to increase debt. She just massively increased debt.

And Badenoch said the budget would be “terrible” for small businesses. She told GB News:

We are a party that believes not just in business, but in real business, in entrepreneurialism. Small business in particular, is full of entrepreneurs, and this Budget is terrible for them.

What they have done on employers’ NI is going to destroy jobs. It is going to lower wages. People will not see pay rises. Employment, disposable income, and salaries are all going to be lower than [they were] under the Conservatives.

That is what the OBR, pretty much, has said. The OBR has basically said that Labour have chosen tax over growth.

Starmer urges NHS staff to use their 'right' to tell him what they think and put their 'fingerprints' on plan for health reform

Keir Starmer ended his Q&A with health workers at at University Hospitals Coventry and Warwickshire by urging them to contribute to the public consultation on the future of the NHS. Being able to tell the government what they thought was a right, not a gift, he said.

After the election I stood outside Downing Street and said we’d be a government of service. And that means that we’re a government which is in your service.

So the opportunity to talk to us, that’s not a great gift that we’re giving you this morning. That’s actually your right. You have every right to tell me and Rachel [Reeves] what you think. You’ve every right to be heard on this.

Starmer also said, if people had any points they wanted to raise that they had not done already, they should do so via the members of his team there organising the event. He went on:

I’m one of these people that, on the train on the way home, ruminate about what people have said to me and think about it. So it really is impactful if you do that.

So you have the right to tell us what you think. You’ve got the right to put your fingerprints on the future of your country. Please exercise that right.

Starmer says workload for NHS staff 'likely to go up', because people living longer, but government wants to make it easier too

Back at the hospital event, Keir Starmer was asked about an NHS worker what Labour would do to promote more collaborative working in the health service.

Starmer said it was important to create an environment where staff felt valued. He went on:

But I also want to be honest with you; we are going to be asking more of you.

There’s no point me standing here and saying, your workload will go down. The whole point is, people are living longer. They’ve got more conditions. What the NHS is facing now is different to what it was facing in the post war period. Your workload is likely to go up, not down.

Now, in a way, that is a good thing, because we’re living longer. We shouldn’t see that as a bad thing, but it does make your life more complicated.

So are we making a bigger ask of you? Yes. Are we going to help you? Therefore, yes.

As examples of what government might do to help, Starmer said it would make sure they had the right number of trained staff, and that AI and technology was used properly. He said patients were fed up of the fact that it is not always easy for doctors to access their notes.

There would also be more focus on preventative health, he said. He went on:

So you’re doing more, but actually the pressure will come off if we do it in the way that we need to do it.

GB News fined £100,000 by Ofcom for breaking impartiality rules with soft Q&A event with Rishi Sunak

Ofcom said it has imposed a £100,000 fine on GB News for “breaking due impartiality rules” following a question and answer-style debate with former prime minister Rishi Sunak earlier this year, PA Media reports. PA says:

The media watchdog began an investigation into GB News three days after the airing of a programme on February 12 titled People’s Forum: The prime minister, which saw Sunak answer questions from a studio audience and a presenter.

GB News chief executive Angelos Frangopoulos said the channel is challenging the “unnecessary, unfair and unlawful” Ofcom ruling in the courts.

In a statement, Ofcom said Sunak “had a mostly uncontested platform to promote the policies and performance of his government in a period preceding a UK general election, in breach of Rules 5.11 and 5.12 of the Broadcasting Code”.

“Given the seriousness and repeated nature of this breach, Ofcom has imposed a financial penalty of £100,000 on GB News Limited,” it added.

“We have also directed GB News to broadcast a statement of our findings against it, on a date and in a form determined by us.

“GB News is challenging our original breach decision in this case by judicial review, which we are defending. Ofcom will not enforce this sanction decision until those proceedings are concluded.”

The rules state that “due impartiality must be preserved on matters of major political and industrial controversy” and “an appropriately wide range of significant views” should be included.

Back to the hospital event, and a consultant has asked Keir Starmer how he can assure here that the extra money for the NHS will ensure there are extra staff to fill the rota gaps. Staff are suffering burnout because of the pressure, she says.

Starmer says, in the first place, there will be a “mindset change”. He says this government will repect the NHS workforce in a way the last government didn’t. There will have to be a workforce plan too. He says he cannot pretend things will change immediately, but he says the extra money for the NHS in the budget is a “downpayment’ on a better future for the NHS.

This is from Faisal Islam, the BBC’s economics editor, reporting what Paul Johnson, the IFS director, told him when Islam asked him if Rachel Reeves’s future spending figures were more realistic than Jeremy Hunt’s (which were described as fiction by the head of the OBR). See 11.49am.

“Light fiction rather than science fiction” @PJTheEconomist @theIFS response to my q of whether the Budget ended what was called the “fiscal fiction” of previous spending plans… Budget assumes two years of spending growth (4.3%, 2.6%) then tight at 1.3% in following 3 years

Rachel Reeves and Keir Starmer are talking about the budget at University Hospitals Coventry and Warwickshire. Their opening comments have been routine, but they are due to take questions shortly.

National insurance hike won't raise as much as budget book implies, IFS says

And here are some more lines from Paul Johnson’s opening briefing at the IFS press conference this morning.

  • Johnson, director of the IFS, said the government needed a “more coherent tax strategy” to promote growth. He explained:

As for the rest of the tax changes [after the national insurance rise], I will only say that the lack of any apparent strategy or appetite for reform is deeply disappointing. Unlike the coalition’s corporate tax “road map” the one published yesterday is more of a parking space – an ambition not to take a big journey in any direction. That the chancellor decided to increase stamp duty, if only on second properties, is most disappointing of all. It again reduces transactions, increases again the bias in favour of owner occupation, and against renting, and at least part of the consequence will be to reduce the supply of rental housing and so increase rents …

If this government really wants to focus on growth, then part of the plan needs to be a much more coherent tax strategy than we saw yesterday. Let’s hope for better next year.

  • He said the Treasury should be more honest about what it was doing.

Also disappointing is some of the presentation – even after the “conspiracy of silence” entered into during the election campaign. How the budget red book can include the sentence “it [the government] is not increasing the basic, higher or additional rates of income tax, National Insurance contributions or VAT” is beyond me. The continued pretence that these changes will not affect working people risks further undermining trust.

Johnson may have drafted this statement before Rachel Reeves’s interview round this morning, where she did concede the national insurance rise would affect workers. (See 8.02am.)

  • He said the national insurance rise would raise much less than the £25bn implied in the budget red book.

It is also worth noting that, net, this increase will not actually get the Treasury anything like the £25bn stated on the scorecard. As the OBR note, it will result in lower wages, reducing the amount raised from employer NI and reducing employee NI and income tax revenues. That takes the net revenue down to some £16 billion. On top of that there will be an effective £6bn of compensation for public sector employers.

  • He said Reeves was right to prioritise investment.

[Reeves] chose to increase borrowing in order to increase investment spending – or at least to stop it falling as a fraction of national income. Given that the growth benefits of this take some time to arrive, this is a courageous move and a welcome focus on the long term. This was the right thing to do.

  • He said the the spending allocation for the NHS was not a lot higher than it was for other departments.

Unusually the NHS is not scooping the pool. It is getting about the average spending increase. Equally unusually local government is doing rather well, as is the justice department, reflecting the severe pressures each is facing.

  • He said that Reeves was right to say the Tories left her with public spending plans that were not properly funded.

The increases in spending look big relative to the previous government’s plans, but that is in large part because their plans were unrealistic. Despite the apparent scale of the increases, this is not going to feel like Christmas has come for the public realm. Ms Reeves may be overegging the £22 billion black hole, but she is not wrong to stress that she got a hospital pass on the public finances.

  • He said the Tory cuts to national insurance before the election were irresponsible.

Rachel Reeves was faced with a genuinely difficult inheritance and the last government must take a lot of the responsibility. Its spending plans for this year and for the future lacked credibility. To cut £20 billion from employee national insurance last year in the face of known fiscal pressures was not responsible.

IFS says Reeves's long-term government spending figures almost as unrealistically low as Tories' were

One of the great traditions of a British budget is that, whichever party is in power, and whoever is chancellor, the Institute for Fiscal Studies always comes out the next day and picks holes in it. It has been doing it again this morning.

The IFS is not universally critical, it is more positive about some budgets than others, and overall it is more complimentary about what Rachel Reeves announced than it was about the efforts from some of her predecessors. But it is still finding fault, and in his opening presentation at the IFS press conference this morning Paul Johnson, the IFS director, said that Reeves’s longterm spending plans were almost as unrealistically low as Jeremy Hunt’s. He explained:

Much the most striking aspect of the spending decisions is how incredibly front loaded the additional spending is. Day-to-day public service spending, after inflation and the additional cost to public sector employers of rising NI, is set to rise by 4.3% this year and 2.6% next year, but then by just 1.3% each year thereafter …

I am willing to bet a substantial sum that day-to-day public service spending will in fact increase more quickly than supposedly planned after next year. 1.3% a year overall would almost certainly mean real terms cuts for some departments. It would be odd to increase spending rapidly only to start cutting back again in subsequent years.

I’m afraid this looks like the same silly games playing as we got used to with the last lot. Pencil in implausibly low spending increases for the future in order to make the fiscal arithmetic balance. It sounds like it was hard enough to get agreement from departmental ministers to relatively generous settlements in the short term. When it comes to settling with departments for the period after 2025-26 keeping within that 1.3% envelope will be extremely challenging. To put it mildly ….

[Reeves] is meeting her borrowing target only by repeating the same silly manoeuvres as her predecessors used to make it look as if the books will balance. Let’s pretend we’ll increase fuel duties next time, but not do it this year. Let’s pretend that we’ll really rein in spending in a couple of years after splurging this year. That’s not going to happen. The spending plans will not survive contact with her cabinet colleagues.

I will post more from the briefing soon.

Updated

Firms with workers on low wages will face highest proportional rise in labour costs from national insurance hike, says IFS

The Institute for Fiscal Studies’ briefing on the budget is underway.

One point it is making is that the rise in employers’ national insurance will, proportionally, have the biggest impact on firms employing people on low wages.

Reeves offers alternative explanation for how Tories left £22bn black hole, after OBR does not endorse original calculation

In July Rachel Reeves published a document claiming there was a £22bn black hole in the Tories’ spending plans, which Labour inherited, for 2024-25. The figure was widely quoted, although when the Financial Times tried to use a freedom of information request to get details of how the Treasury arrived at the £22bn figure, the Treasury would not release the information.

Yesterday the Office for Budget Responsibility published a report saying spending pressures were not fully disclosed by the last goverment. But it did not endorse the £22bn figure, and it implied that, if there was a black hole, it was more like £9.5bn.

This morning, in her interview on the Today programme, Reeves, rather ingeniously, suggested there was an alternative way of arguing that the Tories left a £22bn black hole. She did not withdraw or disown the Treasury calculation released in July. But when the presenter, Nick Robinson, put it to her that she should have known during the election campaign that the Tory spending plans were unrealistic, because that is what all the experts were saying (see 8.27am), she replied:

I think this is really important. Nobody knew about this in-year overspend.

It’s why, when we get the monthly borrowing numbers, in the six months of this year, they are already running £11bn pounds higher. Times that by two to take us to the full year, that’s £22bn pounds more than the OBR forecast in March because the previous government withheld that information.

Labour has got a history of redefining contested “black hole” figures. In May Labour claimed that there was a £71bn annual black hole in Tory spending plans. The figure was dismissed by most commentators as a wild exaggeration, not least because it assumed that the Tories would abolish national insurance in its entirety without replacing it with an alternative source of income (something that Jeremy Hunt had floated as a very long-term aspiration, but that was not widely seen as a realistic aim). Later, during the proper election campaign, Labour produced a more realistic assessment of the black hole in Tory plans, focusing on what the five-year figure would be, not the annual figure. Conveniently, this also came to £71bn.

The Institute for Fiscal Studies is about to hold a press conference to present its own, detailed budget analysis. You can watch it here.

Current parliament set to be 'not much better' than last one for household income, says Resolution Foundation

The Resolution Foundation thinktank has this morning published a 61-page analysis of the budget.

Like the IFS (see 8.50am), the Resolution Foundation says this parliament is set to be the second worst since the war for rising living standards. It explains:

Indeed, the outlook for living standards looks weaker than the OBR projected in March 2024, with real household disposable income (RHDI) per person set to increase slightly (up 1.5 per cent) between 2024 and 2025, compared to a projected increase of 1.7 per cent in the March 2024 forecast. Notably, the living standards outlook later in the forecast period has been revised down more significantly … In March, the OBR projected RHDI per person to grow by 1.3 per cent between 2027 and 2028 – but in its latest set of forecasts, the OBR projected RHDI per person to grow by just 0.4 per cent during this period (and then to grow by only 0.7 per cent between 2028 and 2029).

Some might view any income growth as a cause for celebration, since the last parliament remains the worst since at least the 1950s for living standards improvements. As figure 30 [see below] shows, RHDI per person rose by an average of just 0.3 per cent a year during the 2019-2024 parliament. But the forecast for this parliament is not much better: RHDI is set to rise by 0.5 per cent a year across this parliament, equating to a total income gain of £700 per person between the 2024 and 2029 elections (in 2024-25 prices). This projected income growth is a far cry from the living standards increases that were experienced during the last Labour government, during which even the worst term for living standards (the 2005-2010 parliament) recorded 0.8 per cent annual growth. When we look across the entire period of the last Labour government (between 1997-2010), RHDI rose by a relatively strong 1.9 per cent on an annualised basis – equating to an overall income boost of £5,400 per person – even though this period of government included the financial crisis.

That said, this historically tepid projected real income growth over the course of the parliament needs to be seen in the broader context. Given its inheritance, the government presumably felt that increasing taxes to better fund day-to-day public services was the priority, even if that put downward pressure on incomes directly or, in the case of the employer NI rise, indirectly through the second-order earnings and employment effects. In this respect, the government has clearly gambled on the hope that the public will accept limited income growth over the parliament in exchange for improvements to public services.

And here is the figure 30 chart.

Updated

In his interview on ITV’s Good Morning Britain, Jeremy Hunt also confirmed that he will leave the shadow cabinet at the end of this week, when a new leader takes over. He said:

I have told [Kemi Badenoch and Robert Jenrick, the two leadership candidates left in the contest] that I will step back.

I think it is the right thing to do when a party suffers a loss of the scale that we have, so I will step back from the shadow chancellor role for a few years whilst the party recovers – but I will be very active on the back benches.

Hunt says he was wrong to accuse OBR of preparing pro-Labour report into alleged £22bn black hole in accounts

Earlier this week Jeremy Hunt, the shadow chancellor, suggested that the Office for Budget Responsibility was about to publish a report biased in favour of Labour. Referring to the news that the OBR was going to release the outcome of its review into Rachel Reeves’s claim that the last government had an undisclosed £22bn black hole in its spending plans, Hunt said:

Straying into political territory and failing to follow due process like this demeans it and also is deeply problematic for perceptions of the impartiality of the civil service.

But when the report came out yesterday, although it said that the Treasury withheld information from the OBR about spending pressures in the accounts at the time of the spring budget, it did not endorse the Labour claim about Hunt leaving his successor a £22bn black hole.

Speaking on ITV’s Good Morning Britain today, Hunt said he was wrong to imply the OBR was going to be party political. He said:

I was worried about the process through which they compile their report, but I am happy to say that I was wrong.

I was worried if they would criticise the previous government, but there were no criticism of the previous government in their report.

Hunt says Reeves took 'easy route' to better services by raising taxes, claiming Tories would have focused instead on reform

The Conservatives claim the budget includes a series of broken promises by Labour – about not planning to raise taxes, about ruling out a national insurance increase, about the pre-election fiscal rules being non-negotiable – and in interviews this morning Jeremy Hunt, the shadow chancellor, restated these claims. The budget was “a bad day for trust in British politics”, he claimed. Labour say they haven’t broken promises, and that during the election the Tories were criticising them for things like not ruling out a rise in employers’ national insurance.

But Hunt also accused Rachel Reeves this morning of “taking the easy route” in her budget, instead of finding an alternative to higher taxes that could also lead to better public services.

Speaking on ITV’s Good Morning Britain, he said:

I would always welcome more money for the NHS and we all want it to get back on its feet.

But there are choices in how you decide to do that and [Reeves] took the easy route – which is to pick the pockets of businesses.

He said the Conservatives would have adopted a different approach. Speaking on Sky News, he said:

With an ageing population, with all the pressures of what [Russian president Vladimir] Putin is doing in Ukraine, how do you fund our public services without really damaging rises in taxation?

We would have made difficult decisions on welfare reform, on the public sector, and productivity.

If you cut the number of people claiming benefits to 2019 levels – in other words before the pandemic – that releases £34bn a year.

The government has chosen to do nothing on that and, as a result, the adult working-age benefit bill is going to be more than £100bn by this end of this period.

We would have taken that harder path, because we know that the result of higher taxes is lower growth, and that is bad for ordinary families.

In an interview with BBC Radio Scotland’s Good Morning Scotland, Rachel Reeves, the chancellor, insisted that the Scottish government was getting extra money to reimburse the public sector for the extra cost of the national insurance hike.

She was asked about a comment from Shona Robison, the Scottish finance secretary, who said the employers’ national insurance increase could cost the public sector an extra £500m in Scotland.

Reeves replied:

We’ve given £3.4bn in the settlement to Scotland, which takes into account all of those pressures and the challenge now for the SNP in Scotland is to use that money wisely to start reducing waiting times, because, you know, frankly, the performance of the NHS in Scotland under the SNP is worse than in any part of the United Kingdom, and that money now needs to be used to address the priorities of the Scottish people.

Talking to Scottish MPs yesterday in parliament, this settlement was very welcome, the biggest settlement in the history of devolution.

The Scottish government now need to deliver.

UPDATE: An article by Full Fact, the factchecking organisation, published in July points out that it is hard or even impossible to properly compare NHS performance in the four countries in the UK because “the four services have different targets and different ways of measuring performance”.

Updated

Reeves brushes aside IFS analysis saying this parliament set to be second worst for household incomes for 75 years

Rachel Reeves is now being interview on ITV’s Good Morning Britain.

She is being interviewed by Ed Balls, the former Labour shadow chancellor who is now a TV presenter. He asks her to confirm that workers will end up losing out because of the employers’ national insurance contributions (NICs) increase.

Reeves says the NICs increase will have an impact. But she says living standards are expected to rise during this parliament.

Balls pays a clip from the budget speech, where Reeves explained why she was freezing fuel duty.

Q: If raising fuel duty was the wrong choice for working people during a cost of living crisis, why was cutting the winter fuel allowance the right choice?

Reeves says, if she had not frozen fuel duty, petrol costs would have gone up sharply.

On pensioners, she says the state pension is going up by £470.

And she says the investment in the NHS will help everyone who uses the NHS.

Kate Garraway, Balls’ co-presenter, asks why the elderly should take a hit.

Reeves says the government is trying to get more people to claim pension credit, which will mean they can continue to get the winter fuel payment, as well as potentially thousands of pounds in pension credit. She says applications for pension credit are up 151%.

Q: You are gambling on growth. But some forecasts say it won’t do very well. Will people feel better off at the end of this parliament.

Reeves says the OBR says people will be better off at the end of this parliament.

Balls chips in again. He says the Institute for Fiscal Studies is predicting the second worst rise in living standards for any parliament since the war. That feels like a miserable rise in living standards.

Reeves says the government is just getting started. There is more to do, she says. But the OBR says real disposable income will increase, she says.

And that’s the end of the ITV interview, and all the early morning broadcast interviews Reeves is doing.

Reeves defends making some farms subject to inheritance tax, saying 73% of farms will not be affected

Rachel Reeves is now being interviewed on Radio 5 Live.

Asked about a business leader saying he now has to raise an extra £500,000 to pay the national insurance increase, Reeves says she recognises the challenges businesses face. But she had to stabilise the national finances, she says.

She is also asked to respond to complaints from a farmer about the budget, and farms worth more than £1m losing their exemption from inheritance tax.

Reeves says 73% of farms will not be affected at all.

Some landowners will have to pay more inheritance tax. But they will still pay less inheritance tax (20%) than many families pay.

Reeves says she had 'no idea' about extent of Tories' unfunded spending commitments during election campaign

Q: Are you embarrassed when I remind you you said at the election that every Labour policy was fully costed?

Reeves says:

When I became chancellor on 5 July, I had no idea about all the unfunded commitments that the previous government had made.

Robinson says, if she had listened to the Today programme, she would have heard them repeatedly heard reports about claims that the Tories’ spending plans did not add up. [The IFS was issuing press releases about this almost daily during the election campaign.]

Reeves says government borrowing is running much higher than forecast.

And that’s the end of that interview.

Updated

Q: Wes Streeting said recently it was a mistake to keep pouring money into the NHS without reform. But isn’t that what you are doing?

Reeves says the NHS needed immediate help. But she says it has also been set a 2% efficiency target.

Q: The OBR says interest rates will be higher as a result of the decisions you took?

Reeves says that is not exactly right. She says the OBR is forecasting higher interest rates than it forecast in March. But it has also said that in March it was not given full details of the government’s spending commitments.

Overall, the OBR is forecasting interest rates to come down, she says.

Reeves says people paying four people on the national minimum wage won’t pay any more in national insurance. And she says 1 million firms will pay the same or less national insurance than they do now.

Q: Why are you putting what you have called a “jobs tax” on business, worth £25bn?

Reeves says the government recently held an investors summit that showed there was a vote of confidence in the UK.

And stability is important, she says. If the budget has involved half measures, with the chance of taxes going up again in the future, that would not provide stability, she says.

Q: A business leader told us that a firm making profits of £8m would have higher costs of £1.5m. Do you accept the rise in employers’ national insurance will take money out of people’s pockets.

Reeves says she does accept that this will have “an impact on wage growth”.

Reeves says her investment plans will boost growth over the longer term

Rachel Reeves is being interviewed on the Today programme by Nick Robinson.

Q: How disappointed were you by the OBR saying the budget would not boost growth?

Reeves says she has to set a budget in circumstances at the time. She says she wanted to be “open and transparent” about the problems she faced.

She says the OBR has, for the first time, looked at the growth impact of the budget beyond the next five years. It says the plans, especially on infrastructure, will boost growth by 1.5% over the longer term.

IMF backs budget plan to reduce deficit 'by sustainably raising revenue'

As Julia Kollewe reports on the business live blog, the IMF has praised the budget. An IMF spokesperson said:

We support the envisaged reduction in the deficit over the medium term, including by sustainably raising revenue.

Rachel Reeves accepts workers face lower pay rises due to national insurance hike as she defends budget in interviews

Good morning. The day after budget day is normally when the most thorough and considered budget analysis starts to emerge, and rarely has there been more to chew over than there was in Rachel Reeves’s first budget as chancellor – a mammoth, £40bn-tax-raising fiscal reset with huge consequences for Britain for the rest of the decade. Reeves and her Tory shadow, Jeremy Hunt, are doing full media rounds this morning, and the leading budget thinktanks are publishing full studies of what was announced yesterday.

In an interview with BBC Breakfast, Reeves accepted that people would get lower pay rises as a result of her decision to increase employers’ national insurance. She said:

I said that [the national insurance increase] will have consequences.

It will mean that businesses will have to absorb some of this through profits and it is likely to mean that wage increases might be slightly less than they otherwise would have been.

But, overall, the Office of Budget Responsibility forecast that household incomes will increase during this parliament.

That is a world away from the last parliament, which was the worst Parliament ever for living standards.

Here is the agenda for the day.

9am: The Resolution Foundation publishes its full budget analysis.

10.30am: The Institute for Fiscal Studies holds a press conference to present its budget analysis.

11.30am: Downing Street holds a lobby briefing.

After 11.30am: MPs resume their budget debate, with Pat McFadden, the Cabinet Office minister, opening for the government.

5pm: Voting closes in the Conservative leadership contest. The results will be announced on Saturday morning.

If you want to contact me, please post a message below the line (BTL) or message me on social media. I can’t read all the messages BTL, but if you put “Andrew” in a message aimed at me, I am more likely to see it because I search for posts containing that word.

If you want to flag something up urgently, it is best to use social media. I’m still using X and I’ll see something addressed to @AndrewSparrow very quickly. I’m also trying Bluesky (@andrewsparrowgdn) and Threads (@andrewsparrowtheguardian).

I find it very helpful when readers point out mistakes, even minor typos (no error is too small to correct). And I find your questions very interesting too. I can’t promise to reply to them all, but I will try to reply to as many as I can, either BTL or sometimes in the blog.

Updated

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