Tories accuse Reeves of covering up £10bn of borrowing
Mel Stride, the shadow chancellor, claimed Ms Reeves hid the figure in her June spending review, when more extra spending was announced for financial transactions.
The £9.6bn of extra spending includes 'loans and equity investments to support growth', the spending review said, with money going to the British Business Bank (BBB) and Great British Energy (GBE).
But because Ms Reeves rewrote the borrowing rules to target public sector net financial liabilities rather than net debt, these loans and shareholdings have little impact on the debt limit.
Public sector net financial liabilities is a more forgiving measure of debt because it subtracts financial assets such as loans and equity investments against the debt pile, making the debt appear lower on paper.
Including the loans and investments for BBB and GBE in the calculations artificially reduces the debt load, but the Government still has to borrow to fund the spending – and so will rack up a larger interest bill.
Mr Stride also accused the Chancellor of failing to seek the Office for Budget Responsibility's (OBR) assessment of the impact of the additional debt on the Government's interest bill.
'Rachel Reeves said her spending review included 'not a penny more' in new spending, but buried in the small print was an extra £10bn to be quietly added to the national debt,' said Mr Stride.
'The 'spend now, tax later' Chancellor is moving the goalposts to cover up the cost of her own decisions.
'Worse still, Rachel Reeves hasn't even asked the OBR what this means for taxpayers. More debt, no plan – that's Labour's answer to everything.'
In March, before this additional £9.6bn was disclosed, the OBR estimated the annual cost of debt interest would rise from £105.2bn last year to £131.6bn by the end of the decade.
In an answer to a written question from Mr Stride, Emma Reynolds, the Treasury minister, said the £9.6bn will go 'to good value-for-money investment opportunities identified through the spending review process, subject to the robust guardrails set out in the financial transaction control framework'.
'In its March forecast, the OBR confirmed that the Government is on track to meet its fiscal rules, thanks to decisive action taken by the government to put the public finances on a sustainable trajectory and grow the economy.
'The OBR will publish an updated forecast later this year in the usual way.'
The Labour Party had previously attacked the Conservatives for leaving the public finances in a dire state, and for failing to seek the OBR's view at the time of Liz Truss's mini-Budget in 2022.
'Unlike the Conservatives, Labour will never sideline the OBR for political convenience,' Labour's manifesto read last year.
'Instead, we will strengthen the role of the OBR. Every fiscal event making significant changes to taxation or spending will be subject to an independent OBR forecast.'
The OBR is expected to assess the spending review changes, as well as other increases to spending including the about-turn on benefits reforms, in its forecasts at the time of the autumn Budget.
In its Fiscal Risks and Sustainability Report this month, the OBR said the £9.6bn of transactions highlight the extent to which the new debt rule 'creates an additional incentive for the acquisition of loan and other financial assets by the public sector, relative to previous debt rules which have not counted these assets'.
It also noted that its own estimates of the value of the assets on the Government's balance sheet would affect debt on the Chancellor's chosen metric.
A Treasury spokesman said: 'This change to the fiscal rules was made almost a year ago. Our non-negotiable fiscal rules, for the first time ever will recognise financial assets held by government meaning all of these investments are consistent with them. They will also all be scored with the OBR at future fiscal events.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Independent
28 minutes ago
- The Independent
Starmer to urge Trump to end the mass starvation in Gaza
Sir Keir Starmer will plead with Donald Trump to bring about a ceasefire in Gaza and end the suffering of thousands of Palestinians when he meets with the US president in Scotland on Monday. The growing crisis in the Middle East will top the agenda when the two hold their bilateral meeting at President Trump's Turnberry golf course in Ayrshire, with the prime minister under immense political pressure to change the UK's policy on recognising Palestine as a state. It comes after the IDF announced a 'tactical pause' in fighting to allow aid to get in, with thousands of people trapped in Gaza facing mass starvation. On Sunday, Jordan and the UAE carried out the first airdrops of food and essential supplies. A Downing Street source said that the prime minister and the president have a 'shared desire to bring an end to the barbaric war'. The meeting comes after a Sunday bilateral between Mr Trump and European Commission president Ursula von der Leyen at Turnberry, where the two struck a trade deal to avoid a tariff war despite the US president having told reporters beforehand that he was 'not in a good mood'. It was put to Mr Trump that Sir Keir would ask him about a Middle East ceasefire, but he replied: 'We're meeting about a lot of things. We have our trade deal and it's been a great deal. 'It's good for us. It's good for them and good for us. I think the UK is very happy, they've been trying for 12 years to get it and they got it, and it's a great trade deal for both, works out very well. 'We'll be discussing that. I think we're going to be discussing a lot about Israel. They're very much involved in terms of wanting something to happen. [Starmer] is doing a very good job, by the way.' The mini-summit at Turnberry was intended primarily to focus on the continuing problem of steel tariffs imposed by President Trump, and other aspects of the trade deal the two signed last month. Sir Keir also wants to press the president on providing a backstop for the 'coalition of the willing' he is establishing with French president Emmanuel Macron to provide a guarantee of peace in Ukraine once the war with Russia comes to an end. But with harrowing pictures emerging over the past week of malnourished children in Gaza, alongside reports of the impact of starvation in the territory, the Middle East crisis has risen to the top of the agenda. Sir Keir is hoping that the strong personal relationship he has developed with the US president will help him in persuading Mr Trump to move on a number of these issues. The two will continue to talk when they travel together to Aberdeen for a further private dinner at Mr Trump's other Scottish golf course, which is dedicated to his mother. The president is looking for support to host an Open championship. Downing Street has insisted that 'the strength of the UK-US relationship will be on display again' as the prime minister meets President Trump for what it described as 'wide-ranging talks'. But the meeting is likely to be overshadowed by pressure on Sir Keir to join Mr Macron in officially recognising a Palestinian state. There was some speculation on Friday that the prime minister was close to doing so, after 221 MPs signed a cross-party letter supporting the move. Labour's biggest donors, the trade unions, have also collectively demanded action on recognising Palestine. Sir Keir used his strongest language yet on Friday when he described Israel's actions in Gaza as 'unspeakable and indefensible', adding that Palestinians have an 'inalienable right' to their own state. Pressure was further added by Mr Macron's announcement that France was preparing to recognise Palestine as a state, just ahead of an E3 phone call on Friday with Sir Keir and the German chancellor Friedrich Merz. But Sir Keir has held off taking similar action, with some suggesting that he wanted to see what President Trump would have to say about the crisis at their meeting at Turnberry before making a final decision. The problems kicked off further on Sunday, when Live Aid founder and former pop star Sir Bob Geldof clashed with Tory leader Kemi Badenoch on the topic of Israel and Gaza. The two appeared on Sir Trevor Phillips's Sunday morning show on Sky News. When asked about Israeli government claims that there are hundreds of trucks full of aid waiting to get into Gaza that are being held up by United Nations incompetence and Hamas, Sir Bob hit out at Benjamin Netanyahu and his government. 'The Israeli authorities are lying,' he claimed. 'They're lying. Netanyahu is a liar. The IDF are lying.' The comments enraged the Israeli government, which has denied being at fault after reports emerged that more than 110 people have died of hunger during the conflict. Israel has blamed Hamas for 'stealing aid and prolonging the war'. Israel's deputy foreign minister, Sharren Haskel, told The Independent: 'Bob Geldof says that 'we are way beyond' the attack by Hamas on Israel on 7 October 2023. This is complete rubbish. Hamas still holds 50 hostages in their dungeons of torture. They have been held for 660 days. I don't hear Bob Geldof calling for their release?' When Sir Bob's remarks were put to her by Sir Trevor, Ms Badenoch said he was wrong. She said: 'I disagree with that. What I'm seeing is Israel allowing humanitarian aid to go in. This has been an unbelievably difficult situation. It's been heartbreaking seeing some of the pictures, hearing those stories, and what we all want to see is this awful war coming to an end, and that will happen when those hostages are released. We need a ceasefire.' Polling by More in Common has shown that the British public side with Palestinians more than with Israel, by 29 per cent to 15 per cent.
The Independent
28 minutes ago
- The Independent
Prime Minister to meet Donald Trump to discuss ceasefire in Gaza
Prime Minister Sir Keir Starmer is expected to meet US President Donald Trump to discuss a ceasefire in Gaza and an end to the war in Ukraine. On Monday, Sir Keir will travel to Scotland to meet the president on his golf course at Trump Turnberry, Girvan, Aryshire, where he has been playing golf since Saturday morning, and where he met European Commission president Ursula von der Leyen on Sunday afternoon. After a meeting, the world leaders will travel on together for a further private engagement in Aberdeen. Mr Trump will visit the UK again in September for his second state visit. On Monday, the leaders are expected to discuss progress on implementing the UK-US trade deal, hopes for a ceasefire in the Middle East and applying pressure on Vladimir Putin to end the war in Ukraine. They are also expected to talk one-on-one about advancing implementation of the landmark Economic Prosperity Deal so that citizens of both countries can benefit from boosted trade links between their two countries. The Prime Minister is also expected to welcome the president's administration working with Qatar and Egypt to bring about a ceasefire in Gaza. A spokesperson for Number 10 said it was expected they will discuss 'what more can be done to secure the ceasefire urgently, bring an end to the unspeakable suffering and starvation in Gaza and free the hostages who have been held so cruelly for so long'. The war in Ukraine will also be up for discussion with both politicians 'set to talk about their shared desire to bring an end to the barbaric war' according to Number 10, and expected to 'reflect on progress in their 50-day drive to arm Ukraine and force Putin to the negotiating table'. A spokesperson for the UK Government said: 'The UK and the US have one of the closest, most productive alliances the world has ever seen, working together to cooperate on defence, intelligence, technology and trade. 'The UK was the first country to agree a deal with the US that lowered tariffs on key sectors and has received one of the lowest reciprocal tariff rates in the world. 'Businesses in aerospace and autos are already benefiting from the strong relationship the UK has with the US and the deal agreed on May 8. 'The Government is working at pace with the US to go further to deliver benefits to working people on both sides of the Atlantic and to give UK industry the security it needs, protect vital jobs, and put more money in people's pockets through the Plan for Change.'
Reuters
28 minutes ago
- Reuters
US and EU strike deal with 15% tariff to avert trade war
TURNBERRY, Scotland, July 27 (Reuters) - The United States struck a framework trade agreement with the European Union on Sunday, imposing a 15% import tariff on most EU goods, half the threatened rate, and averting a bigger trade war between two allies that account for almost a third of global trade. U.S. President Donald Trump and European Commission President Ursula von der Leyen announced the deal at Trump's luxury golf course in western Scotland after an hour-long meeting that pushed the hard-fought deal over the line. "I think this is the biggest deal ever made," Trump told reporters, lauding EU plans to invest some $600 billion in the United States and dramatically increase its purchases of U.S. energy and military equipment. Trump said the deal, which tops a $550 billion deal signed with Japan last week, would expand ties between the trans-Atlantic powers after years of what he called unfair treatment of U.S. exporters. Von der Leyen, describing Trump as a tough negotiator, said the 15% tariff applied "across the board", later telling reporters it was "the best we could get." "We have a trade deal between the two largest economies in the world, and it's a big deal. It's a huge deal. It will bring stability. It will bring predictability," she said. The deal, which Trump said calls for $750 billion of EU purchases of U.S. energy in coming years and "hundreds of billions of dollars" of arms purchases, likely spells good news for a host of EU companies, including Airbus, Mercedes-Benz and Novo Nordisk, if all the details hold. The baseline 15% tariff will still be seen by many in Europe as too high, compared with Europe's initial hopes to secure a zero-for-zero tariff deal, though it is better than the threatened 30% rate. German Chancellor Friedrich Merz welcomed the deal, saying it averted a trade conflict that would have hit Germany's export-driven economy and its large auto sector hard. German carmakers, VW, Mercedes and BMW were some of the hardest hit by the 27.5% U.S. tariff on car and parts imports now in place. But Bernd Lange, the German Social Democrat who heads the European Parliament's trade committee, said the tariffs were imbalanced and the hefty EU investment earmarked for the U.S. would likely come at the bloc's own expense. The euro rose around 0.2% against the dollar, sterling and yen within an hour of the deal's being announced. The deal mirrors key parts of the framework accord reached by the U.S. with Japan last week, but like that deal, it leaves many questions open, including tariff rates on spirits, a highly charged topic for many on both sides of the Atlantic. Carsten Nickel, deputy director of research at Teneo, said it was "merely a high-level, political agreement" that could not replace a carefully hammered out trade deal: "This, in turn, creates the risk of different interpretations along the way, as seen immediately after the conclusion of the U.S.-Japan deal." "We are agreeing that the tariff ... for automobiles and everything else will be a straight-across tariff of 15%," Trump said, but he quickly added that a 50% U.S. tariff on steel and aluminum will remain in place. Von der Leyen said that tariff would be cut and replaced with a quota system. Von der Leyen said the rate also applied to semiconductors and pharmaceuticals, and there would be no tariffs from either side on aircraft and aircraft parts, certain chemicals, certain generic drugs, semiconductor equipment, some agricultural products, natural resources and critical raw materials. Trump appeared to suggest pharmaceuticals would not be covered, leaving some question about that aspect of the deal. No fact sheet was immediately issued by the White House. "We will keep working to add more products to this list," von der Leyen said, adding that spirits were still under discussion. Eric Winograd, chief economist at AllianceBernstein in New York, noted the similarity with Japan's U.S. deal. "We will need to see how long the sides stick to the deal. From a market perspective, it is reassuring in the sense that having a deal is better than not having a deal," he said. The deal will be sold as a triumph for Trump, who is seeking to reorder the global economy and reduce decades-old U.S. trade deficits, and has already reached similar framework accords with Britain, Japan, Indonesia and Vietnam, although his administration has not hit its goal of "90 deals in 90 days." He has periodically railed against the European Union, saying it was "formed to screw the United States" on trade. Arriving in Scotland, Trump said the EU wanted "to make a deal very badly" and said, as he met von der Leyen, that Europe had been "very unfair to the United States". Trump has fumed for years about the U.S. merchandise trade deficit with the EU, which in 2024 reached $235 billion, according to U.S. Census Bureau data. The EU points to the U.S. surplus in services, which it says partially redresses the balance. Now he argues, his tariffs are bringing in "hundreds of billions of dollars" of revenues for the U.S., while dismissing warnings from economists about the risk of inflation. On July 12, Trump threatened to apply a 30% tariff on imports from the EU starting on August 1, after weeks of negotiations with the major U.S. trading partners failed to reach a comprehensive trade deal. The EU had prepared countertariffs on 93 billion euros ($109 billion) of U.S. goods in the event there was no deal, and Trump made good his 30% tariff threat. Some member states had also pushed for the bloc to use its most powerful trade weapon, the anti-coercion instrument, to target U.S. services in the event of a no-deal.
