UK Politics

The influential Institute for Fiscal Studies (IFS) has warned Rachel Reeves that any more bad economic news will “almost certainly” spark fresh tax rises. Council tax will already have to rise at its fastest rate in a generation, the IFS said, as it added to concerns the chancellor has left herself with little room for manoeuvre a day after she unveiled her spending plans for the rest of the parliament. The warning came as the government was hit with the bad news that the economy had shrunk by 0.3 per cent, sparking fears of a potential recession.Ms Reeves came into office with a pledge to grow the economy, but it has been sluggish at best in her first year.Paul Johnson, the outgoing director of the IFS, said council tax is set to rise at its fastest rate for 20 years as local government tries to close its funding gaps with annual increases of up to 5 per cent. More councils could also reach a “tipping point” unless demands on their resources fall, the think tank warned. Rachel Reeves insisted she would not need to increase taxes on the same scale as in her first budget, but declined to rule out rises altogether More

Former defence secretary Ben Wallace has branded Labour’s claims that it has boosted military spending “a con” after concerns were raised over how the figures are being calculated.The row has exploded following Rachel Reeves’ spending review on Wednesday where she boasted that defence spending would be 2.6 per cent of GDP. But this included wrapping in security and intelligence spending for the first time.Earlier this year prime minister Sir Keir Starmer controversially slashed international aid to boost defence spending to 2.5 per cent of GDP by 2027, two years ahead of schedule. At the time he also promised it would rise to 3 per cent by 2034.Sir Ben Wallace (Stefan Rousseau/PA) More

The UK economy has shrunk by more than expected in a major blow to Rachel Reeves, just one day after she unveiled her spending review. The chancellor, who set out record investment in the Commons on Wednesday, acknowledged that the latest GDP figures, released on Thursday, were “clearly disappointing” but insisted her plan for the economy would help deliver growth.The Office for National Statistics (ONS) said gross domestic product (GDP) fell by 0.3 per cent in April, compared with growth of 0.2 per cent the previous month and marking the biggest contraction since October 2023. It was also worse than the 0.1 per cent contraction expected by most economists.Chancellor of the Exchequer Rachel Reeves delivering her Government’s spending review to MPs in the Commons (House of Commons/UK Parliament/PA) More

Even the UK’s leading economist was flummoxed.Minutes after Rachel Reeves had delivered her first spending review, Paul Johnson, the head of the influential Institute for Fiscal Studies, said he was not sure he had ever listened to a speech by a chancellor where it was “so hard to work out what is happening”. Her statement to the Commons had been “full of numbers, few of them useful”, he added. But one thing is sure – big problems are still to come down the line. The under-pressure chancellor had no choice but to come out fighting on Wednesday as she unveiled plans for government spending until the next election. She is facing criticism from all sides for a series of policy choices she has made since entering office, as well as poor economic growth. Just days before she unveiled her spending review, Labour’s first in a generation, she was forced to announce a massive U-turn on one of her earliest decisions in the Treasury – stripping the winter fuel allowance from millions of pensioners. Rachel Reeves is under growing pressure from her colleagues over her fiscal choices More

Rachel Reeves cheered beleaguered Labour backbenchers with record investment in her spending plans as she unveiled major boosts for the NHS, social housing and defence.In her long-awaited spending review, the chancellor also promised to save £1bn by closing all asylum hotels as she took aim at Nigel Farage and Reform.But experts warned that she will have to break her manifesto pledge not to raise taxes or increase borrowing much further to pay for her promises.Reeves set out her spending plans for the rest of this parliament More

The UK and the EU have agreed a post-Brexit deal to implement a “fluid” border between Gibraltar and Spain – which will not require checks on people crossing. The move marks a breakthrough in talks that have been ongoing since Britain left the European Union in 2020.Under the agreement, checks will not be required on those crossing the border between Spain and the British colony. More controversially, however, there will be “Eurostar-style” dual border control checks at Gibraltar airport, which will be carried out by both Gibraltar and Spanish officials.Operating in a similar way to the UK and French system for checking documents used at London’s St Pancras station, Britons arriving on the Rock will have to show their passports when they land.There will be dual border control checks for arrivals by air at Gibraltar airport More

Reeves delivers spending review key aimsTax rises are now “very likely” following a raft of spending announcements by Rachel Reeves, a former government economist has warned.In a speech to the Commons on Wednesday, the chancellor laid out the government’s updated spending plans across all government departments for the next four years.She said her proposal was focused on “Britain’s renewal”, as she announced big funding boosts to defence, nuclear energy projects, the NHS and transport in England’s city regions.Shadow chancellor Mel Stride branded the spending review as a “fantasy”, while financial experts have warned that it could prompt future tax raises.“Obviously things can and will change between now and October – but at present it looks very likely indeed that the spending totals today will mean that taxes need to go up in October so that the Chancellor can meet the fiscal rules,” former government and now Kings College London economist, Jonathan Portes, told The Independent.In last year’s Autumn Budget, taxes were raised including a hike in National Insurance payments paid by employers and capital gains tax. But speaking in the Commons on Wednesday, Ms Reeves said she would never “have to repeat a budget like that again”. Starmer set to be biggest cutter of overseas aid everThe Independent’s Political Correspondent Archie Mitchell reports:Sir Keir Starmer is on course to become the biggest cutter of overseas aid on record.The prime minister slashed the international development budget to fund his plans to hike defence spending.And now campaigners are warning it could land him with the damning legacy.Adrian Lovett, executive director of the ONE Campaign, said: “Not only is Keir Starmer the first Labour Prime Minister on record not to increase aid spending, but he is on course to deliver the most severe cut to aid investment in other countries in decades – going further than Thatcher, Major, Johnson or Sunak ever did.“These aren’t just numbers on a spreadsheet. This will lead to preventable deaths, diseases spreading faster and children going without vaccines. Some of the world’s most vulnerable people will pay the price for this decision, and it makes Britain less safe and strong, too.”( More

Rachel Reeves has pledged that the government will no longer house migrants in asylum hotels by 2029. Outlining her spending review plans to MPs on Wednesday, Ms Reeves said that ministers would end “the costly use of hotels to house asylum seekers in this parliament”. She said she was working with Home Secretary Yvette Cooper to end the costly scheme, which sees “billions of pounds of taxpayers’ money spent on housing asylum seekers in hotels, leaving people in limbo and shunting the cost of failure onto local communities”. Ms Reeves told MPs that plans to cut the asylum backlog, hear more asylum appeal cases, and return people to their home countries would save £1bn per year. Under spending plans published by the Treasury on Wednesday, officials estimated that they would still be spending £2.9bn on asylum costs in 2027-28 and £2.5bn in 2028-29. This year asylum costs are expected to be £3.9bn. In Labour’s manifesto, the party pledged to end the use of asylum hotels and it has been looking at medium-sized sites, such as student accommodation blocks and former care homes, as alternative sources of accommodation. The public spending watchdog recently predicted that the cost of asylum accommodation would triple to £15.3bn over 10 years. Original estimates on the cost totalled £4.5bn for 2019-2029, but the National Audit Office (NAO) revised this up to £15.3bn. The NAO said that around 110,000 people seeking asylum were housed by the Home Office in December 2024 – with some 38,000 of these living in hotels. The most senior civil servant in the Home Office said earlier this year that the department was aiming to get asylum hotel use down “to zero” by the end of this parliament. However, Sir Matthew Rycroft, who has now left the top job, predicted that “ups and downs” might affect that promise. Chancellor of the Exchequer Rachel Reeves delivers her government’s spending review to MPs in the House of Commons More