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”.
Key events
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Ed Davey claims Lib Dems will achieve more as opposition party by avoiding ‘combative’ approach favoured by Tories
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Post-budget sell-off of government bonds by worried City traders intensifies, pushing up UK borrowing costs
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Ed Davey: care sector will be ‘pushed to brink’ by national insurance hike and should be exempt
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Streeting suggests social care companies won’t be compensated for extra costs generated by national insurance hike
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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
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… pic.twitter.com/EpY0zfoBmh— Mohamed A. El-Erian (@elerianm) October 31, 2024
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.
Ed Davey claims Lib Dems will achieve more as opposition party by avoiding ‘combative’ approach favoured by Tories
Peter Walker
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.
Now the pound is falling.
Over the past three days sterling (in trade weighted terms) is down by 1.2%.
That’s the biggest fall in more than 18 months. pic.twitter.com/sTqE3Mcpzt— Ed Conway (@EdConwaySky) October 31, 2024
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… https://t.co/W96ISmRwEw— Ed Conway (@EdConwaySky) October 31, 2024
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 pic.twitter.com/LdVoHHxv3Y— Ed Conway (@EdConwaySky) October 31, 2024
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. Look 👇 pic.twitter.com/KD77n23JZu— Ed Conway (@EdConwaySky) October 31, 2024
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… pic.twitter.com/Xpe0x6WzzT— Ed Conway (@EdConwaySky) October 31, 2024
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. pic.twitter.com/Dc0eaWInUT— Ed Conway (@EdConwaySky) October 31, 2024
👀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”.