Why radical tax reform may be only way for Reeves to balance the books
Despite a good month for the public finances, the Treasury won’t be putting in any champagne orders.Higher self-assessment tax receipts and an increase in national insurance payments by employers filled the government’s coffers by more than expected in July.The result was that Rachel Reeves’s spending deficit fell to £1.1bn, down by £2.3bn from the same month a year earlier.
That would be cheery news in normal circumstances, but hemmed in by tight fiscal rules, jittery financial markets and a restless public, the chancellor knows not to be complacent.There is every likelihood that the Office for Budget Responsibility (OBR) will downgrade its outlook for economic growth when Reeves presents her autumn budget, forcing the government to take further action to balance the books.By how much we don’t know.There are wildly different estimates from the UK’s main thinktanks and economic consultancies.At the moment, government spending is on track to come in at £105.
5bn in this financial year, a shade below the OBR forecast of £105,7bn,Capital Economics says a review of the outlook by the OBR will lead to downwards revisions totalling £17bn, creating a £27bn gap once Reeves has restored her target of a £10bn buffer,The National Institute of Economic and Social Research used its own modelling to arrive at a gap of £41bn, and £51bn if the buffer is maintained,These are big numbers, even when they are spread over the OBR’s five-year timeline.
It would be nice to think that Britain’s reputation for responsible government and sound public finances meant it could borrow freely to fill the debit side of the ledger.Most City economists say this facility is heavily circumscribed.No longer do international lenders believe governments when they say they need to borrow for the short-term.Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionOnly Germany has managed that in the last 20 years, and it has paid a similar price to the UK in lost investment and deteriorating public services.Italy is enjoying favourable treatment by the debt markets at the moment because it is seen to have a solid grip on its deficit, unlike France, which is being punished with high borrowing rates for seemingly losing its way.
Without much leeway to increase borrowing or political capital to revise spending plans – inside or outside the Labour party – Reeves must examine ways to raise tax.She knows that a repeat of last year’s tax grab will be a growth killer.Instead, she is examining ways to reform the tax system that releases much-needed funds and spurs activity, especially in the depressed property market.It is a bold chancellor who embarks on radical tax reform.At the moment, it seems to be her only escape route.
David Lammy given warning after fishing with JD Vance without licence
David Lammy has received a formal warning after reporting himself for fishing without a licence with the US vice-president, JD Vance.The foreign secretary took Vance angling at his official country retreat in Chevening, Kent, on 8 August as he hosted him at the start of a holiday in Britain.It later emerged Lammy did not possess the required licence for rod fishing, with a Foreign Office spokesperson blaming an “administrative oversight” and saying the minister had subsequently bought a licence.Lammy referred himself to the Environment Agency over the incident.Anglers in England and Wales aged 13 or over must have a rod licence to fish for freshwater species such as carp, and can face a fine of up to £2,500 if they do not
Sir George Reid obituary
Sir George Reid, who has died aged 86, was a Scottish politician, broadcaster and all-round public figure who also spent a dozen years as director of public affairs for the International Red Cross and Red Crescent in Geneva, a post he held between two separate phases of his political career.Reid was elected as a Scottish National party MP to the House of Commons in the general election of February 1974, but lost his seat five years later. Twenty years on he was elected to the new Scottish parliament, and in 2003 became its second presiding officer.Reid later reflected that in his 12 years with the Red Cross he “did far more good than at any other time in my life”. As well as overhauling the organisation’s image and communications strategy, he served on the frontline in war and disaster zones around the world, including following the Ethiopian famine and the 1988 Armenian earthquake
Diane Abbott: I advised Jeremy Corbyn not to start new party
Diane Abbott has said she advised her longtime friend Jeremy Corbyn not to launch a new political party because she believed it would struggle to make inroads under the first-past-the-post system.Abbott, the MP for Hackney North and Stoke Newington, said last month she would not be leaving Labour in favour of Corbyn’s as yet unnamed party, despite the pair having worked closely together in the past.Speaking at the Edinburgh international book festival in conversation with the campaigner and commentator Talat Yaqoob, Abbott confirmed she had spoken to Corbyn before the party’s launch to warn him against it.“There were people around Jeremy encouraging him to set up a new party and I told him not to,” she said. “It’s very difficult under the first-past-the-post system for a new party to absolutely win
Why Shabana Mahmood’s outlook on prisons is wrong | Letter
Shabana Mahmood’s tenure as justice secretary is more problematic than your profile suggests (Shabana Mahmood: justice secretary and rising star of the Labour party, 16 August). First, she has endorsed yet another prison-building programme, a policy that has failed so dismally for the past 200 years. If the answer to the current crisis is more prisons, then she, like her predecessors, is asking the wrong question.Second, she has said prisons should be regarded as being of “national importance”. Why should they be seen as more important than developing welfare-oriented, radical alternatives to custody, or abolishing the structural inequalities that are central to who is criminalised and imprisoned?Third, the profile mentions that her plans include chemical castration for sex offenders
Action to tackle number of asylum seekers coming to UK is important step to ‘restoring order’, says Cooper – as it happened
The home secretary has said the government’s action to tackle the number of asylum seekers coming to the UK had been an important step to “restoring order”.Responding to new immigration statistics, Yvette Cooper said Labour had overseen increased numbers of returns of asylum seekers not granted asylum and pointed to the reduced spending on asylum.According to the PA news agency, Cooper said:We inherited a broken immigration and asylum system that the previous government left in chaos. Since coming to office we have strengthened Britain’s visa and immigration controls, cut asylum costs and sharply increased enforcement and returns, as today’s figures show.The action we have taken in the last 12 months – increasing returns of failed asylum seekers by over 30%, cutting asylum costs by 11%, reducing the backlog by 18% and our forthcoming plans to overhaul the failing asylum appeal system – are crucial steps to restoring order and putting an end to the chaotic use of asylum hotels that we inherited from the previous government
Stella Creasy and Richard Tice call for scrutiny over which EU laws UK ditches
Stella Creasy and Richard Tice are pushing for Labour to allow a Brexit scrutiny committee to be formed in parliament, after the Guardian revealed environmental protections had been eroded since the UK left the EU.The Labour and Reform UK MPs argue that there is no scrutiny or accountability over how Brexit is being implemented. Creasy, the MP for Walthamstow and chair of the Labour Movement for Europe, said the UK needed a “salvage operation” to clear up the environmental and regulatory havoc caused by Brexit.The analysis by the Guardian and the Institute for European Environmental Policy (IEEP) has found that since Brexit the EU has brought forward 28 new, revised or upgraded pieces of environmental legislation that the UK has not adopted, and the UK has actively chosen to regress by changing four different pieces of legislation including on protected habitats, pesticides and fisheries.Creasy said the prime minister, Keir Starmer, needed to move more quickly to repair relations with the EU and realign on environmental law
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Serena Williams built her legacy on defiance. Why lend it to Ozempic culture? | Bryan Armen Graham