OBR challenges claims Reeves dropped income tax rise due to rosier forecasts
The Office for Budget Responsibility (OBR) has cast doubt on claims Rachel Reeves dropped plans to raise income tax in this week’s budget because of rosier forecasts, pointing out she knew about these well before the change of heart.In a move likely to exacerbate tensions with the Treasury, the OBR chair, Richard Hughes, has taken what he acknowledged was the “unusual step” of writing to the Treasury select committee to explain how its forecast evolved, “given the circumstances in this case”.Reeves’s budget was preceded by a flurry of speculation and briefing, even before the OBR accidentally made its documents available online earlier than intended on Wednesday.The chancellor took the rare step of delivering an early morning “scene setter” speech, on 4 November.This was widely interpreted as an attempt to clear the way for breaching the letter of Labour’s manifesto pledge on income tax by raising rates.
Reeves repeatedly refused to deny that she would do so.Days later, however, when final policy decisions were being made, Reeves and Keir Starmer decided to ditch that idea – a development the Financial Times reported on 13 November.The next morning, as bond markets reacted badly to the news, with yields – effectively interest rates – on government bonds rising, Treasury sources briefed journalists that the income tax plan was no longer necessary, because of improved OBR forecasts.In particular, these sources suggested, higher than expected inflation and wage growth meant the adjustment needed to meet Reeves’s fiscal rules was smaller than expected.A headline on the Bloomberg website – widely read in financial markets – said “Reeves’ Tax U-Turn Came After Better Forecasts from UK Watchdog”, citing “people familiar with the matter”.
However, Hughes’s letter includes a chart showing the evolution of the OBR’s forecasts through the autumn – information the watchdog would not usually release,It confirms that these did indeed improve; but that even by 3 October, the first forecast round, Reeves was set to breach her first fiscal rule by just £2,5bn,That would have required an adjustment of £12,5bn to restore headroom of £10bn against the rules; or £22.
5bn to give herself a £20bn margin of error – plus the £7bn costs of policy U-turns on the winter fuel allowance and disability cuts,By round three of the forecasting process, delivered to Reeves on 31 October, she was set to meet her first rule, on balancing day-to-day spending and tax revenues, with £4,2bn to spare,The OBR makes clear that after this date – more than 10 days before Reeves and Starmer apparently dropped the income tax plan – no significant alterations were made to its forecast, except to accommodate Treasury policy decisions,In the OBR’s economic and fiscal outlook document, it said, “no further adjustments were made to our economy or fiscal forecasts” after 31 October.
In the event, Reeves chose to increase taxes by £26bn by the end of the forecast period, in order to raise her headroom to a more cautious £21,7bn and fund policy changes including the scrapping of the two-child limit,Treasury sources flatly reject the idea that the OBR’s letter contradicts their account of pre-budget decision-making,They say it was not until the OBR had sent Reeves forecasts incorporating planned budget measures – including their impact on growth – that a final decision could be made,The shadow chancellor, Mel Stride, said: “It appears the country has been deliberately misled.
Rachel Reeves spent the months leading up to the budget claiming she would need to make difficult choices because of a downgrade in the economic forecasts that was not of her making,“She even let it be known she was considering raising income tax rates,But it was all a smokescreen,Labour knew all along that they did not need to raise taxes and break their promises,It was an active choice to do so.
”Fraught relations between No 11 and the watchdog sometimes spilled into the open in the run-up to Reeves’s make-or-break second budget.The chancellor was publicly critical of the timing of the OBR’s decision to reevaluate its productivity forecasts over the summer – the driver of the downgrade in its expectations for growth.“I think that it would have been a lot better if they had adjusted their forecasts the year before the election, or even last summer, to enable the new government to really understand the economic position,” she said last month.She has also complained about its failure to incorporate what the Treasury regards as pro-growth policies, such as the government’s reset with the EU and the prospect of a youth mobility scheme, into its forecasts.Hughes is to appear before the Treasury select committee on Tuesday, with the issue of what Reeves knew when about the forecasts expected to be discussed – as well as the results of an inquiry into the inadvertent early release of the forecasts.
Soon-to-be-axed 7am Manchester-London train will still run – but without passengers
The good news for rail travel between Manchester and London is that a morning train will continue to link England’s biggest cities in under two hours. The bad news: passengers will no longer be able to get onboard.The rail regulator has axed one of Britain’s fastest and most lucrative intercity services, the 7am Avanti West Coast from Manchester Piccadilly to London Euston, as part of a timetable shake-up that will take effect in mid-December.What will heap on frustration for passengers, as well as the operator, is that the exact same train service will continue to run between the stations from 7am each weekday: crewed, fast and empty.The train and staff still need to travel from Manchester as they are rostered to operate subsequent services out of Euston on the new December timetable, under rail’s complex planning
Jetstar cancels 90 domestic flights across Australia after global Airbus A320 recall
Jetstar has grounded some of its Airbus fleet in Australia and cancelled domestic and international flights after the aerospace manufacturer ordered software changes to thousands of its A320 planes following a mid-air incident.Ninety Jetstar flights were affected on Saturday with disruption expected to continue until Sunday, the airline’s head of flying operations, Tyrone Simes, told reporters at Melbourne airport.Airbus said on Friday it was ordering an immediate software change on a “significant number” of its bestselling A320 family of aircraft, a narrow-body plane which is also used by Virgin Australia and Qantas.Simes said on Saturday Airbus had issued Jetstar with a maintenance directive to reverse a software upgrade that had been installed on some planes and resulted in a malfunction.He said 34 of Jetstar’s 85 Airbus fleet were affected, but engineers could complete the software update on the ground in Australia, which would take about two to three hours for each plane
More than 1,000 Amazon workers warn rapid AI rollout threatens jobs and climate
More than 1,000 Amazon employees have signed an open letter expressing “serious concerns” about AI development, saying that the company’s “all-costs justified, warp speed” approach to the powerful technology will cause damage to “democracy, to our jobs, and to the earth.”The letter, published on Wednesday, was signed by the Amazon workers anonymously, and comes a month after Amazon announced mass layoff plans as it increases adoption of AI in its operations.Among the signatories are staffers in a range of positions, including engineers, product managers and warehouse associates.Reflecting broader AI concerns across the industry, the letter was also supported by more than 2,400 workers from companies including Meta, Google, Apple and Microsoft.The letter contains a range of demands for Amazon, concerning its impact on the workplace and the environment
After a teddy bear talked about kink, AI watchdogs are warning parents against smart toys
As the holiday season looms into view with Black Friday, one category on people’s gift lists is causing increasing concern: products with artificial intelligence.The development has raised new concerns about the dangers smart toys could pose to children, as consumer advocacy groups say AI could harm kids’ safety and development. The trend has prompted calls for increased testing of such products and governmental oversight.“If we look into how these toys are marketed and how they perform and the fact that there is little to no research that shows that they are beneficial for children – and no regulation of AI toys – it raises a really big red flag,” said Rachel Franz, director of Young Children Thrive Offline, an initiative from Fairplay, which works to protect children from big tech.Last week, those fears were given brutal justification when an AI-equipped teddy bear started discussing sexually explicit topics
North Melbourne v Brisbane: 2025 AFLW grand final – live
The AFLW grand final is a sell-out for the third straight year – and the second consecutive season under lights at Ikon Park – with more than 12,500 fans set to watch North Melbourne and Brisbane lock horns yet again.Let’s hope the AFL can find a solution over the next 12 months for a suitable venue that would allow even more fans to be part of what should be a celebration of women’s football as much as the season decider between the competing clubs.The best things come in threes.Hello and welcome to live coverage of the 2025 AFLW grand final between North Melbourne and Brisbane as the pair of powerhouse sides meet in the decider for a third straight season. The premiership ledger over that time stands at one-all, which gives each team an opportunity to claim to be the ‘best of three’ and the standout of the stretch
Looking for Lando: My crash course at the track where F1 star Norris learned to drive
Monaco, Las Vegas, Singapore. The list of pitstops on Lando Norris’ road to the top of Formula One is like a luxury travel agent’s catalogue.So when I was asked to trace the young man’s journey ahead of a weekend in which he could become the first British champion driver since Lewis Hamilton, my hopes were high.As the taxi pulled up outside the Clay Pigeon Raceway in Dorchester, however, my excitement was taken down a few gears.It may seem an inauspicious place to blood the talent of those who will become some of the most glamorous, fiery competitors in sport, but here, in the shadow of an industrial estate not far from Yeovil, is where a growing number of Formula One stars are made
Only people power can save us from populism | Letters
A public inquiry on Brexit might make it easier for us to rejoin the EU | Letters
The Green party’s policies on Israel are appealing to young British Jews | Letter
No 10 dismisses claim that OBR revelations show Reeves misled public about need for tax rises in budget – UK politics live
Sadiq Khan recalls past abuse as he urges Nigel Farage to apologise over racism claims
Budget has preserved Starmer’s job until at least May elections, say Labour MPs