Latest news with #spendingReview
Daily Mail
12-06-2025
- Business
- Daily Mail
IFS torches Rachel Reeves' spending plans warning NHS and defence will need topping up and cost-cutting drive is 'not serious' - leaving tax rises 'almost inevitable'
The IFS delivered a withering assessment of Rachel Reeves ' spending plans today warning that tax rises look 'almost inevitable'. The think-tank's director Paul Johnson said he would be 'very surprised indeed' if heath and defence funding did not need topping up before the next election. Despite Labour 's splurge, he also cautioned that schools spending looked extremely 'tight' as special needs provision demand grows. The IFS's post-mortem of yesterday's Spending Review also ridiculed the government's claim to have identified billions of pounds in 'efficiencies' during a 'zero-based' overhaul of costs. Mr Johnson pointed out that all departments had been pencilled in for exactly the same percentages of back-office cuts, suggesting it was not a 'serious' exercise. 'Ms Reeves is now going to have all her fingers and all her toes crossed, hoping that the OBR will not be downgrading their forecasts in the Autumn,' he said. 'With spending plans set, and 'ironclad' fiscal rules being met by gnat's whisker, any move in the wrong direction will almost certainly spark more tax rises.' Despite Labour 's splurge, the IFS cautioned that schools spending looked extremely 'tight' as special needs provision demand grows In the Spending Review yesterday, Ms Reeves set out plans to 'invest' a staggering £4trillion to fund 'the renewal of Britain'. She said the plans, which include another huge dollop of cash for the NHS, would end the 'destructive' austerity of the last government and boost economic growth. Labour strategists hope the costly gamble will pay off by cutting hospital waiting lists, improving the creaking infrastructure and pump-priming the economy. However, Ms Reeves' plans were immediately thrown into chaos today after figures showed the economy tumbling into the red. GDP was down 0.3 per cent in April, worse than analysts had expected, and raising more questions about the realism of the Chancellor's splurge on services. Although UK plc has still grown over the past three months, evidence has been mounting of a slowdown. Ms Reeves admitted the data - which coincide with the huge national insurance tax raid on businesses taking effect - were 'disappointing'. In a round of broadcast interviews, she pointed the finger at 'uncertainty' surrounding Donald Trump 's trade tariffs. But Ms Reeves again avoided ruling out more tax increases at the Autumn Budget, instead arguing that the plans she laid out yesterday - based on healthier economic forecasts - were 'fully funded'. 'The world is very uncertain at the moment so I am not going to write Budgets for the future,' she told Sky News. At the IFS briefing this morning, Mr Johnson said: 'Health spending nearly always gets topped up. Growth of 3 per cent a year is below the historic average. 'It may not even prove enough to fund the official workforce plan and it is at best marginal whether it will be enough to achieve the government's waiting list targets. 'Defence spending is rising to 2.5 per cent of national income by 2027, but no increase thereafter. 'Given external demands and government promises to get it to 3 per cent of GDP at an unspecified date in the next parliament there will be pressure to increase it further. And that's before any increase in the NATO spending target to more like 3.5 per cent, which this government would presumably feel under some obligation to move towards.' Turning to the education budget, Mr Johnson highlighted that outside of extra spending on free school meals it is 'essentially flat in real terms'. 'Falling pupil numbers should give some room for manoeuvre and result in a modest real increase in per pupil funding, but absent some serious cost-saving reforms, ever growing spending on special educational needs is likely to swallow much – or perhaps all – of that funding growth,' he said. The IFS also sounded alarm about the prospect for unions to force more bumper pay hikes out of Labour. 'With day-to-day budgets growing so slowly there is not going to be much room for further significant increases in public sector pay,' Mr Johnson said. 'Perhaps last year's increases followed by a period of rises broadly in line with inflation will be enough to keep peace with the unions, and to recruit and retain as necessary. If not there could be trouble ahead.' He also raised doubts about the Home Office's ability to end spending on asylum hotels, and said the Treasury's reserve has been 'pared right back'. That left 'little space to deal with unforeseen pressures'.
Telegraph
11-06-2025
- Business
- Telegraph
Spending review shows Reeves is terrified of Reform
You can tell a lot in politics by who someone chooses to laugh at. Humour is wielded like a weapon in the Commons chamber, so it is worth following jokes to their target. And during Rachel Reeves's spending review speech on Wednesday, one guffawing political figure kept on finding himself in the crosshairs: Nigel Farage. The clearest swipe came early on. 'Now, the member for Clacton may be playing the friend of the workers now,' the Chancellor said. 'But some of us are old enough to remember when he described the disastrous Liz Truss Budget as, and I quote, 'the best Conservative Budget since the 1980s'. Mr Speaker, after the damage is done he still nods along. They have learned nothing.' The barb was followed up with a nod to claims of a £80 billion black hole in Reform's tax cut plans, the Chancellor declaring: 'They are simply not serious.' There were more substantial policy attacks, too. Ms Reeves insisted it was she, not the 'metal trader' Mr Farage, who had saved British Steel from collapse. Indeed, there was a whole section of her speech about the defence of the steel industry, just days after the Reform leader vowed to reopen blast furnaces at Port Talbot. It was telling, suggesting that the Treasury sees danger in Mr Farage's tilt to the Left on economics and his embrace of nationalisation, however skin-deep it may be. Plot the locations singled out by the Chancellor as benefiting from her decisions on a map and many overlap with areas where Reform is surging, including in the North West and North East. There were also repeated mentions of what the Treasury is doing to reinvigorate the economy of Wales. Mr Farage is targeting first place in next year's Welsh parliamentary elections and spelled out what is, in effect, his manifesto for the campaign on Monday. It is unimaginable to imagine this speech being given last year. In Ms Reeves's October Budget it was the Tories and their profligacy that was the focal point of the political attacks, not Reform. The Conservatives were mentioned here too, but Mr Farage was more often the target of the punchlines on Wednesday than Kemi Badenoch, the Tory leader. During last summer's general election campaign, Labour rode the public fury at the Conservatives at every possible moment, referring to their 14 years in government constantly. Reform was an afterthought, at best, in its communications. It does not take Machiavelli to work out what is behind the change. Polls tell the tale of Labour's real opponent Two years ago, just 5 per cent of Britons were saying they would vote for Reform, according to the opinion poll averages – roughly the same as the Green Party. A year ago, that had jumped up to 11 per cent as Mr Farage shocked Westminster by retaking the Reform leadership after Rishi Sunak's snap election. Now? Reform is on 30 per cent, way ahead of every other political party. Labour is on 23 per cent, the Tories on 17 per cent. No wonder Ms Reeves wanted to throw some barbs. Ask Number 10 insiders who their major opponent is for the foreseeable future and the answer is Reform's band of outsiders, not Ms Badenoch's 121 Conservatives.
The Independent
11-06-2025
- Business
- The Independent
How Labour's spending review was shaped by Reform UK
Keir Starmer told his cabinet today that the spending review marked the start of a 'new phase' which delivers Labour's much-promised change. Which can be roughly translated as: we hope the public forget our mistakes in our first year and give us a fresh look. For some voters, that will prove a big ask. Despite Starmer's plea, Rachel Reeves's spending review felt more like one that would be made towards the end of a five-year parliament – not four years out from the next election. The chancellor insisted her choices were 'Labour choices.' But as I watched her deliver her statement, I couldn't help thinking that much of it was aimed at seeing off the rising threat to Labour from Reform UK. Political knockabout on big Commons occasions is nothing new – Reeves also directed her fire at the Conservatives – but her several attacks on a party with just five MPs showed who is really setting the political agenda. Reeves deployed Liz Truss's disastrous mini-Budget as not only an example of Tory 'chaos' but to recall that Farage praised it at the time, warning that Reform 'would do the same thing all over again' through its unfunded tax cuts and spending rises. Reform is 'simply not serious,' she declared. For good measure, she reminded us of Farage's interest in funding the NHS through an insurance-based system. Many of the chancellor's measures also had Reform in mind, notably a welcome change in Treasury value-for-money rules (the green book). This will allow the approval of more capital projects in the north and Midlands, where Reform is a threat to many Labour seats and where Labour strategists are convinced the next election will be won or lost. It's back to "levelling up" – even though Reeves banned the phrase after Boris Johnson's broken promise of it. The change means London and the South East will lose out, prompting a row between the government and the city's Labour mayor, Sadiq Khan. Reeves won't lose sleep over that, as it will amplify her message in the red wall. Indeed, some Labour MPs quip that Reeves, MP for Leeds West and Pudsey, wants to be seen as 'queen of the north.' But Andy Burnham, the mayor of Greater Manchester, is already seen as the region's king and has no intention of giving up his crown. Among Labour members, Burnham is the favoured successor to Keir Starmer, and Reeves is no longer at the races. Angela Rayner, who is in second place, would also aspire to be the northern queen. While voters in the red wall will welcome the chancellor's £15.6bn investment in local transport schemes outside London and the South East, these will take years to come to fruition. Her long list of announcements gave the misleading impression of a 'spend, spend, spend' chancellor when her review will mean an immediate squeeze on day-to-day spending outside health and defence. That will feel like austerity to voters – and will not be welcomed in the red wall – even if, on paper, it is not as severe as the cuts begun by George Osborne in 2010. Will Labour's full-frontal attack on Farage work? I think Labour has a lot more work to do to combat 'the Farage factor.' According to More in Common, the public now trusts Reform as much as Labour to provide support for vulnerable people, and on the economy. Reform has a narrow leader over the Tories on tax: 19 per cent trust Reform most to keep taxes low, compared to 18 per cent for the Tories. However, 46 per cent of people say Reform would be a risk to the economy, while 29 per cent disagree. Interestingly, comparing Farage's recent policy announcements to the Truss mini-Budget erodes net support for his policies by 20 points. That is why Reeves deployed this ammunition and why we will hear it thousands of times before the next election. The bad news for Starmer: the public has so lost faith in mainstream parties that they feel they have nothing to lose by taking a punt on Farage. Luke Tryl, UK director of More in Common, said: 'It's clear that Reform's gains are driven by a declining trust in other parties' economic competence and a willingness to 'roll the dice' rather than a widespread trust in Reform.' So Labour, and the Tories, could damage Reform by regaining economic trust. It won't be easy for either of them. Starmer won't win a second term solely by attacking Farage. A winning coalition will be recreated only if Labour improves living standards and public services. Despite Reeves's big-sounding numbers – and her claim of a £300bn spending boost – the plans she announced today will not guarantee such progress unless she also boosts economic growth.
The Guardian
11-06-2025
- Business
- The Guardian
Rachel Reeves says use of hotels for asylum seekers to end ‘in this parliament'
Rachel Reeves said the new Border Security Command will receive up to £280m more a year by the end of the spending review period. She also promised that all spending on hotels for asylum seekers waiting for their cases to be heard will stop by the end of this parliament
Telegraph
11-06-2025
- Business
- Telegraph
Major lenders raise mortgage rates ahead of Reeves's spending review
Two major lenders have raised mortgage rates amid fears Rachel Reeves's spending spree will slow down interest rate cuts. Barclays has announced rate rises of around 0.1 and 0.15 percentage points across a range of fixed-rate deals right after HSBC announced similar increases. It comes as the Chancellor prepares to publish her £300bn spending review today, having already set out an £87bn increase in public spending over the next two years. Experts said it could spell pain ahead for mortgage borrowers, as economists warn Reeves had reduced the chances of a rate cut this year. Barclays increased the rate on its five-year fixed-rate deal for those remortgaging with a 60pc loan-to-value ratio from 3.86pc to 4.03pc, leading some brokers to declare the end of sub-4 pc deals. Five-year swaps are currently at 3.71pc up from around 3.6pc a few weeks ago due to a number of factors including uncertainty around US trade policy. The Bank of England cut rates from 4.5pc to 4.25pc in May, but a rate cut in June looks unlikely after data revealed higher-than-expected inflation. Adrian Anderson, of broker Anderson Harris, said: 'I'm not surprised some lenders have increased rates because the cost of borrowing has increased slightly. 'Markets will be looking closely at the spending review. Rachel Reeves needs to strike a delicate balance between not upsetting the bond market while also not upsetting voters. If it looks like she is going to have to borrow more, that will impact swap rates.' Nicholas Mendes, of broker John Charcol, said: 'Looking further afield, mortgage rate cuts are likely to slow. Much of the expected base rate movement from the Bank of England has already been priced in, so unless we see a sharp shift in swap rates or economic data, there's limited room for significant reductions. 'If anything, we could be in for a period of relative stability – a bit of sideways movement rather than any dramatic repricing.' Harry Goodliffe, of broker HTG Mortgages, said: ' We're definitely seeing the sub-4pc deals slip away, and fast. Barclays and HSBC hiking rates feels like a mix of reacting to rising funding costs and not wanting to be overwhelmed with demand. No lender wants to be too competitive in a market this uncertain.' However, other lenders have moved in the opposite direction, with NatWest cutting rates by up to 0.23 percentage points. Aaron Strutt, of broker Trinity Financial said: 'Some borrowers still believe we are in a rate-cutting environment where mortgages are getting cheaper, but this is generally not the case.' He added: 'While the cost of funding does seem to have stabilised, it would not be a surprise to see more lenders pushing up their prices over the coming days.' According to financial data provider Moneyfacts, the average rate on a two-year fix fell 0.06pc to 5.12pc last month, compared to a 0.14pc drop a month prior, in a sign that the mortgage price war we saw earlier this year is cooling off.
