Reeves’s plan to ditch income tax rise prompts government bond sell-off
UK bond markets took fright on Friday after it emerged that Rachel Reeves had ditched plans for a manifesto-busting increase in income tax at this month’s autumn budget,On a day of choppy trading in the City, the cost of UK government borrowing rose by the most in a single day since early July, when a tearful appearance by Reeves in parliament spooked investors,The yield – in effect the interest rate – on 10-year government bonds, which are known as gilts, jumped by more than 0,13 percentage points to trade at about 4,575%, the highest level in a month.
The pound also sold off against the US dollar on the foreign exchange markets, dropping by about 0.3% to trade at $1.3155, reflecting mounting investor unease over the chancellor’s make-or-break budget in less than two weeks’ time.Amid a sell-off in financial markets around the world driven by fears in the US economy, the FTSE 100 closed down more than 1% at 9,698.City investors had grown increasingly comfortable ahead of Reeves’s tax and spending set-piece after the chancellor indicated that she was willing to breach Labour’s manifesto commitments to plug a potential shortfall in the government finances of up to £30bn.
However, it emerged late on Thursday that Reeves was set to abandon plans for an increase in income tax.First reported by the Financial Times, it came amid bitter infighting within Labour ranks and the threat that manifesto-busting measures could provoke a backbench rebellion.Earlier this week allies of Keir Starmer warned he would fight any leadership challenge, with some pointing to the health secretary, Wes Streeting, as a potential challenger – which he publicly denied.“The [income tax] U-turn demonstrates a lack of political competence which has probably led investors to increase the probability they attach to a change in the leadership of the Labour party and government,” said Andrew Wishart, a senior UK economist at Berenberg bank.“The risk is that the Labour party replaces Keir Starmer and Rachel Reeves with a duo positioned further to the left on the economic policy spectrum and less committed to fiscal sustainability.
”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 promotionCity investors had been looking for the chancellor to break with the commitments to rebuild at least £20bn of headroom against her self-imposed fiscal rules, which require day-to-day spending to be matched by receipts in the fifth year of forecasts from the Office for Budget Responsibility (OBR),It comes amid the exchange of forecasts between the Treasury and its tax and spending watchdog before the 26 November budget, which includes the chancellor updating the OBR on the measures she is likely to announce,Ruth Curtice, the chief executive of the Resolution Foundation and a former Treasury tax and spending official, said it was normal for the OBR’s forecasts to change in the run-up to the budget,However, she said “excessive levels of kite flying” were fuelling market volatility,“It is not normal for so much of that to be laid bare in public,” she said.
“The market moves this morning and in recent weeks suggest a serious look should be taken at the approach to market-sensitive forecast information,”
Trump’s targeting of alleged drug vessels strains UK-US intelligence ties
It is an intelligence relationship that predates even the Five Eyes: the UKUSA alliance that began, naturally enough, in secret in 1946. But this week the strain of trying to be the closest security ally to a freewheeling White House has begun to show.Britain, it emerged, had quietly suspended intelligence cooperation with the US in the Caribbean because London does not consider the deadly US military campaign against ships accused of drug trafficking to be in line with international law.That amounts to an extraordinary open fissure in a close working relationship at a time when the US is increasing its military buildup, expanding its controversial campaign in the region with an attempt to threaten Venezuela.“I’m not sure if there is a previous example of this happening in the public domain
Britons living abroad: tell us your views on UK politics today
The last decade in British politics has been marked by instability and fragmentation, with six prime ministers in ten years, and Nigel Farage’s Reform party now leading in the polls.A study this month from King’s College London and Ipsos found that 84 percent of people now say the UK feels divided, up from 74 percent in 2020.Polling on voter intention shows a fracturing of the political landscape as people abandon two-party politics – with Reform now averaging 31 percent, Labour 18 percent, the Conservatives 16 percent, Green Party 14 percent and Liberal Democrats 12 percent.We want to hear from Brits living abroad. How do you think UK politics has changed since you left the country? Does anything surprise you about events in the UK? How does living abroad shape your views on UK politics? Do you have concerns?You can tell us about viewing UK politics from abroad herePlease include as much detail as possible
Your Party receives ‘small portion’ of withheld supporters’ donations
The leftwing Your Party, set up by Jeremy Corbyn and Zarah Sultana, is embroiled in another public row over donations to the party.A statement from Corbyn along with Shockat Adam MP, Adnan Hussain MP, Ayoub Khan MP and Iqbal Mohamed MP states that hundreds of thousands of pounds were donated to the party “by supporters in good faith, but have since remained beyond its reach”, which they describe as being “extremely frustrating and disheartening”.It added a “small portion” of the funds was transferred to the party on Thursday which they said was “insufficient” and they will continue to pursue the immediate transfer of all the money donated.The statement posted on X by the independent alliance of MPs was not signed by Sultana and comes days after the Guardian reported on the former Labour MP and Corbyn’s quarrel over hundreds of thousands of pounds in donations.Sultana offered to transfer £600,000 from a company the party’s founders set up earlier this year, only to be rebuffed by allies of the former Labour leader who accused her of playing “political games” with supporters’ money
Starmer stands by McSweeney and says he has been ‘assured no briefings against ministers done from No 10’ – as it happened
Keir Starmer has said he “of course” retains full confidence in his chief of staff, Morgan McSweeney, PA Media reports.I will post the full quote shortly.At PMQs yesterday Starmer dodged a question about whether he had full confidence in McSweeney, although No 10 subsequently said he did.Some ministers and MPs want to see McSweeney sacked.We’re closing this blog now, here’s a summary of the day’s main developments:The prime minister has attempted to draw a line under the briefing row, saying he has “been assured that no briefing against ministers was done from No 10” and that he has “full confidence” in his chief of staff, Morgan McSweeneyWes Streeting, the health secretary, has said that he doesn’t know and doesn’t care whether Starmer is trying to identify the No 10 figure briefing against him
Starmer defies calls to sack chief of staff, claiming briefing didn’t come from No 10
Keir Starmer has attempted to draw a line under extraordinary briefings by his allies that No 10 feared Wes Streeting could launch a leadership coup, insisting he had been reassured it “didn’t come from Downing Street”.The prime minister gathered his senior staff to stress that briefings against cabinet ministers were “unacceptable” after apologising to Streeting for what had happened on Wednesday.However, his spokesperson said Starmer also accepted assurances that No 10 staff had not briefed against Streeting and that he stood by his chief of staff, Morgan McSweeney.Since the furore over No 10’s fears about a leadership challenge from Streeting, first revealed by the Guardian on Tuesday, there had been calls from Labour MPs for McSweeney’s resignation.One senior Labour source described McSweeney as “the great survivor” after the Downing Street gathering
Labour must accept that the two-party age is over and embrace PR | Letters
Andy Beckett suggests the case for proportional representation may become irresistible (Britain’s two-party politics is fragmenting: what unintended consequences await?, 6 November). The strength of the case is not in doubt; the issue is lack of political will to legislate. Perhaps there is more will now than ever, with results from the 2024 general election and wide-ranging Electoral Calculus forecasts pushing parties currently against proportional representation to reconsider.Labour’s position is clearly crucial. Based on the forecasts, PR offers Labour a hedge against a doomsday scenario of losing up to 90% of its seats
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