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 Reevesâs longterm spending plans were almost as unrealistically low as Jeremy Huntâs. 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 â¦
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.
Iâm 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 â¦.
[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. Letâs pretend weâll increase fuel duties next time, but not do it this year. Letâs pretend that weâll really rein in spending in a couple of years after splurging this year. Thatâs not going to happen. The spending plans will not survive contact with her cabinet colleagues.
I will post more from the briefing soon.
Key events
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OBR chair says Reeves has left herself ‘very little headroom’ in budget, implying further tax rises might be necessary
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Starmer plays down OBR claims budget will do little to help growth, saying more pro-growth policies coming
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More than 13,000 prisoners released early under scheme started by Tories, MoJ figures show
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John Swinney says Treasury should fully compensate Scottish government for £500m cost of national insurance hike
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Starmer urges NHS staff to use their ‘right’ to tell him what they think and put their ‘fingerprints’ on plan for health reform
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Starmer says workload for NHS staff ‘likely to go up’, because people living longer, but government wants to make it easier too
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GB News fined £100,000 by Ofcom for breaking impartiality rules with soft Q&A event with Rishi Sunak
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National insurance hike won’t raise as much as budget book implies, IFS says
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IFS says Reeves’s long-term government spending figures almost as unrealistically low as Tories’ were
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Firms with workers on low wages will face highest proportional rise in labour costs from national insurance hike, says IFS
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Reeves offers alternative explanation for how Tories left £22bn black hole, after OBR does not endorse original calculation
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Current parliament set to be ‘not much better’ than last one for household income, says Resolution Foundation
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Hunt says he was wrong to accuse OBR of preparing pro-Labour report into alleged £22bn black hole in accounts
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Hunt says Reeves took ‘easy route’ to better services by raising taxes, claiming Tories would have focused instead on reform
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Reeves brushes aside IFS analysis saying this parliament set to be second worst for household incomes for 75 years
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Reeves defends making some farms subject to inheritance tax, saying 73% of farms will not be affected
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Reeves says she had ‘no idea’ about extent of Tories’ unfunded spending commitments during election campaign
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Reeves says her investment plans will boost growth over the longer term
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IMF backs budget plan to reduce deficit ‘by sustainably raising revenue’
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Rachel Reeves accepts workers face lower pay rises due to national insurance hike as she defends budget in interviews
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 âcome back for moreâ, he replied:
The chancellor has changed the fiscal rules in this budget, but sheâs kept the practice of her predecessors in setting aside very little headroom, very little margin for manoeuvre against those rules.
Sheâs 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. Itâs 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 âbetter than thatâ and that the budget was just the âfirst stepâ. He said other policies, like planning reform and deregulation, would âhelp towards growthâ.
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
Severin Carrell
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 Scotlandâs public sector, which is larger than Englandâs.
The Scottish government estimates Scotlandâs health service, schools, police, courts and other public services will have to spend £500m extra â money which will now flow to the HM Revenue and Customs in London.
Scotlandâs 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 ministerâs questions he broadly welcomed Reevesâ 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 employersâ national insurance contributions on public spending in Scotland [and] whether our finances will be compensated in full for all thatâs involved.
That of course is not an insignificant sum, itâs £500m.
Reeves was pressed about this on BBC Radio Scotland on Thursday morning, and appeared to suggest that no additional money would be provided. âWeâve given £3.4bn in the settlement to Scotland, which takes into account all of those pressures,â she said. âThe challenge now for the SNP in Scotland is to use that money wisely.â (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 Scotlandâs larger public sector.
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 âa compulsive liarâ. 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 wasnât going to raise taxes. She just has. She said she wasnât going to increase debt. She just massively increased debt.
And Badenoch said the budget would be âterribleâ 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 employersâ 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 weâd be a government of service. And that means that weâre a government which is in your service.
So the opportunity to talk to us, thatâs not a great gift that weâre giving you this morning. Thatâs actually your right. You have every right to tell me and Rachel [Reeves] what you think. Youâve 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:
Iâm 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. Youâve 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.
Thereâs no point me standing here and saying, your workload will go down. The whole point is, people are living longer. Theyâve 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 weâre living longer. We shouldnât 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 youâre 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 âbreaking due impartiality rulesâ 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 Peopleâs 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 âunnecessary, unfair and unlawfulâ Ofcom ruling in the courts.
In a statement, Ofcom said Sunak âhad 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 Codeâ.
âGiven the seriousness and repeated nature of this breach, Ofcom has imposed a financial penalty of £100,000 on GB News Limited,â it added.
âWe have also directed GB News to broadcast a statement of our findings against it, on a date and in a form determined by us.
âGB 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.â
The rules state that âdue impartiality must be preserved on matters of major political and industrial controversyâ and âan appropriately wide range of significant viewsâ 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 âmindset changeâ. He says this government will repect the NHS workforce in a way the last government didnât. 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 âdownpaymentâ on a better future for the NHS.
This is from Faisal Islam, the BBCâs economics editor, reporting what Paul Johnson, the IFS director, told him when Islam asked him if Rachel Reevesâs future spending figures were more realistic than Jeremy Huntâs (which were described as fiction by the head of the OBR). See 11.49am.
âLight fiction rather than science fictionâ @PJTheEconomist @theIFS response to my q of whether the Budget ended what was called the âfiscal fictionâ 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.