New headache for Rachel Reeves as OBR expected to lower productivity forecast
The Office for Budget Responsibility is expected to downgrade its key productivity forecast, the Guardian understands, setting Rachel Reeves on course to break her fiscal rules without significant action in the budget.The government’s independent watchdog has carried out a “stocktake” of its forecast models over the summer, and Treasury officials privately acknowledge the result will inevitably be a weaker growth outlook.One Treasury source said they expected the OBR to “kitchen sink it” – making a significant downward revision to productivity forecasts in one go rather than taking a more piecemeal approach.Reeves will respond by pointing to the long-term weakness of productivity in the UK economy and promising to tackle it with a programme of investment.The consultancy Oxford Economics, however, estimates that moving the OBR’s productivity forecast back in line with the less optimistic independent average projection would knock 1.
4% off GDP at the end of its five-year forecast period.That would force Reeves to increase taxes or cut spending by an eye-watering £20bn to meet her fiscal rules and maintain her slim £10bn of headroom, roughly the equivalent of raising the main and higher rates of income tax by 2p.Treasury ministers hope to convince the OBR to “score” government policies such as planning reforms, which it hopes will boost growth, but these are likely to be more than outweighed by the productivity downgrade.When it assesses the chancellor’s headroom against the fiscal rules, the OBR will also have to take into account the additional costs of recent political U-turns, including on the winter fuel allowance and botched welfare reforms.The widespread expectation that Reeves will have to raise taxes, combined with a late budget date of 26 November has paved the way for weeks of fevered speculation about how extra revenue might be raised.
Reeves is understood to have expressed frustration at the publication of a paper from the Institute For Public Policy Research that called for a windfall tax on banks and prompted a selloff of financial sector stocks earlier this month,Any plans for tax changes will have to pass a beefed-up “budget board”, whose makeup was announced last week and which is intended to avoid a repeat of the furious business backlash that followed last year’s budget,The CBI’s chief executive, Rain Newton-Smith, urged the chancellor last week to consider breaking Labour’s manifesto pledges not to increase national insurance, VAT or income tax, rather than look to businesses again to raise more revenue,A Treasury spokesperson said: “We are not going to speculate on the OBR’s forecast,We are committed to keeping taxes for working people as low as possible, which is why at the last budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of income tax, employee national insurance or VAT.
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Jaguar Land Rover extends production shutdown after cyber-attack
Jaguar Land Rover has extended its shutdown on car production, as Britain’s biggest carmaker grapples with the aftermath of a cyber-attack.JLR said on Tuesday it would freeze production until at least next Wednesday, 24 September, as it continues its investigations into the hack, which first emerged earlier this month.The manufacturer said: “We have taken this decision as our forensic investigation of the cyber incident continues, and as we consider the different stages of the controlled restart of our global operations, which will take time.“We are very sorry for the continued disruption this incident is causing and we will continue to update as the investigation progresses.”JLR, which is owned by India’s Tata group, stopped production at its sites after discovering hackers had infiltrated its systems a few weeks ago
‘Our plans could be derailed’: family firms say Labour tax rises will force fire sales
Unassuming wooden crates filled with brake pads and metal springs are piled high in the loading bay of the Broadbent factory close to Huddersfield city centre. Shipping them out to Nigeria and Ghana remains the day job for Simon Broadbent, but the manufacturer’s owner has a growing issue nagging at him – the fate of his 160-year-old business in the face of Labour’s tax overhaul.Broadbent has emerged as a reluctant challenger to plans by the chancellor, Rachel Reeves, to strip family firms of the ability to pass on their businesses tax free from next April. Campaigners, including the manufacturers association Make UK, say the tax overhaul threatens the backbone of the British industrial sector.Under the current system, business property relief allows families to pass on assets free of inheritance tax (IHT)
State pension on course for inflation-busting 4.7% rise under triple lock; JLR production shutdown extended again – as it happened
UK pensioners can look forward to a 4.7% increase in their state pensions next year, if the government sticks with the triple-lock.This morning’s labour market data shows that average wage growth (including bonuses) was 4.7% between May to July.That is the figure used in the triple lock formula which dictates that the state pension will increase in line with average wages, inflation or 2
Sky puts 900 roles at risk in shake-up to compete with US streaming services
Sky has put 900 roles at risk as the broadcaster continues to reshape its business in the streaming era.The company, which employs about 23,000 staff in the UK, expects the consultation process to result in about 600 roles being cut, with 300 redeployed.The latest round of cuts – the third in a little over 18 months – follows a series of product launches including the second iteration of the Sky Glass smart TV and budget-friendly Sky Glass Air.The Comcast-owned broadcaster is focused on improving existing services, and the cuts will hit Sky’s technology and product teams and related corporate functions.Sky has cut almost 3,500 roles since the beginning of last year as the broadcaster looks to move away from traditional satellite pay-TV to streaming-based services in the fight against US giants such as Netflix
How an engineering student turned red Solo cups into stylish sweaters: ‘A lot of trial and error’
Lauren Choi wanted to give plastic a second life. Her experiment turned into The New Norm, a sustainable textile startupIf you’ve been on a college campus in the last 30 years, you’ve likely come across red party cups. Made by brands like Solo and Hefty, the iconic cups are beloved by frats, crucial to drinking games like beer pong – and very difficult to recycle because of the type of plastic they’re made from.But Lauren Choi, an engineering student at Johns Hopkins University, saw an opportunity: she wanted to turn these problematic cups into fabric. In 2019, during her senior year, she led a team that built an extruder machine that could spin plastic waste into textile filaments
UK pay growth stays high – but Britons are feeling the pinch
Tuesday’s latest snapshot of the UK jobs market shows what is becoming a familiar pattern: a gradual slowdown in hiring, rising unemployment, yet with wage growth still uncomfortably high for policymakers.Whether because of Rachel Reeves’s £25bn national insurance increase, uncertainty over her upcoming budget, AI-related disruption or Donald Trump’s tariffs – or perhaps all four – companies seem to be cautious about taking on staff.In the July to August period, the number of vacancies in the economy was down by 119,000 on a year earlier.The unemployment data only runs to July – but it shows 2.3 unemployed people for each vacancy, up from 2
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