Latest news with #austerity
The Guardian
9 hours ago
- Business
- The Guardian
Rachel Reeves must think big to fund Labour's ‘battle-ready' Britain. Tweaks and tinkering won't do
Who in their right mind would want to be Rachel Reeves right now? Her spending review out next week will feel like austerity all over again. Even if, in reality, it's not a cut but more spending, as the Institute for Fiscal Studies emphasises. After an uplift in everyday spending at the budget, here comes a much-needed capital slab of £113bn. Yet whatever the numbers say, painful cuts to most things will be the story and the feeling. If you want to try your hand, the IFS has just put its 'Be the Chancellor' gadget up on its site. Strap yourself into Reeves's fiscal straitjacket and attempt a Houdini-like escape, as you decide on levels of borrowing, taxing, spending and debt. One thing it illuminates is how much even mere slivers of growth improve your position immensely. How far can you go? The febrile market meltdown point is unknowable, but Liz Truss was a useful crash dummy testing squillions on tax cuts without raising revenue. Donald Trump, plunging into an unexplored fiscal wilderness, beat a retreat when his monster tariffs sent the markets charging back out at him. He seems to be having another try. One reason not to want to be chancellor is that Reeves inherited public services and the economy in their worst state in recent memory. The £22bn black hole was a fraction of the true deficit, as every minister soon revealed the bleeding stumps of their stricken department after years of cuts. How do you weigh up hungry children, inadequate home insulation, councils bankrupted by social care and special educational needs funding, meagre social housing, and stretched policing and courts? None will get enough, some will get cut. These choices are the breath of politics: no wonder Labour MPs look so drawn, Survation finding 65% of them think the government should change course on fiscal policy to fund public investment and spending. At the weekend Compass conference, Labour's soft left keened over vacillations and slow progress. At the same time, Starmer's commitment to be 'battle-ready' means huge defence spending. Monday's strategic defence review commits not just to defending Nato countries facing imminent danger from Vladimir Putin, but rebinding us to the Europe we walked out on. It means defending our own endangered undersea cables, vulnerable internet and critical facilities. It's 'a new era', Keir Starmer said. 'The world has changed.' Yes, indeed. And so must the government on tax and spending. More revenue must be raised, and the answer is not more tweaks. The whole tax and spending ship is an unseaworthy rustbucket encrusted with barnacles, in need not of a lick of paint but of stripping down and rebuilding. Adjustments seeking small sums deliver maximum political pain, and minimal financial gain. Tempting tax loopholes turned out to be strewn with political landmines: farmers sitting on undertaxed millions in land wealth, or well-off pensioners in no need of winter fuel allowances are explosive when set off. (It turns out the cost of poor pensioners rushing to claim pension credit for the first time is outweighing the £1.5bn savings: good news but not for the Treasury.) Assuaging the wrath of more than 100 rebellious Labour MPs will blunt the savings from disability cuts. These one-offs have not been worth the row. Helen Miller, incoming director of the IFS, suggests to me that tackling the big questions would be a better approach. She's right. Labour may as well grasp worthwhile reform, since the poison press and social media assaults them just as brutally over small things. Here's a truly difficult example: Miller would end VAT reliefs for food, books and children's clothes, which benefit the rich as they spend most. That brings in a stonking £100bn. After more than compensating those on lower incomes with universal credit and raising income tax thresholds for middle earners, that would buy a complete Sure Start programme and more. Start again on property tax: revaluing council tax so a Blackpool semi no longer pays more than Buckingham Palace, with a land value tax where there is no penalty for housebuilding and no escape from taxing ground value, no stamp duty to hinder movement. The other great question she raises is health costs. The Department of Health and Social Care takes around 40% of day-to-day spending, the majority of that on the NHS. It's dangerous to ask if we need every new drug and treatment. The NHS draws cash away from underfunded education, yet we never dare discuss this clash of interests. Older people use the NHS most: 32% of the spend is on those aged between 65 and 84 (16% of the population) with another 10% on over-85s (3% of the population), according to Full Fact. Yet the future depends on better early years, great schools, further education colleges, skills and apprenticeships. Investing in human capital brings longer-lasting national growth than bricks and mortar, as education and skills are passed for ever down the generations. But the Treasury green book says no. Wealth tax is not as difficult as claimed: Liam Byrne's book Inequality of Wealth shows the top 1% have multiplied their wealth by 31 times more than the other 99% since 2010. Arun Advani, director of the Centre for the Analysis of Taxation, says a tax on assets of 1% from those with more than £10m would yield £10bn, which would nicely eliminate the worst poverty: End Child Poverty this week reports one in three children in the UK are living in poverty. Making all forms of income pay the same tax, earned or capital gains, rents or self-employed, pays out £12bn, says the economist Prof Richard Murphy. If ever there were a time to uproot old habits, it's now. The defence review demands more contribution. If money isn't raised elsewhere, defence risks eating into everything. 'Change' was why Labour got elected, but voters don't see or feel it, and nor do hang-dog Labour MPs. The fiscal straitjacket has come to be a signal to voters, indicating 'no change'. Yet the Institute for Government points out the rules permit Reeves to suspend them 'in the event of a 'significant negative shock',' while noting 'it is at the Treasury's discretion to define what constitutes such a shock'. Her own spending review will show how Trump, tariffs and emergency defence spending cause a deeply 'negative shock' to everything else. Labour has suffered the biggest dip in popularity within its first 10 months of any newly elected UK government in 40 years. Yet look at its opportunity for change, with four full years of government ahead and a majority it may never see again (nor should, with electoral reform). In all these things, the Labour cabinet and Labour MPs have nothing to lose but their nerve. Polly Toynbee is a Guardian columnist
Reuters
16 hours ago
- Business
- Reuters
Planned Romanian spending cuts unlikely to prevent tax hikes, potential premier says
BUCHAREST, June 2 (Reuters) - Plans to cut state spending in Romania once a new government is appointed are unlikely to avert the need for tax hikes to rein in a hefty budget deficit and prevent a ratings downgrade, the leading candidate to become prime minister said on Monday. Having gone through a divisive presidential vote last month that closed a long and turbulent election cycle, Romania must now tackle the widest budget deficit in the European Union. The new centrist president, Nicusor Dan, faces the daunting task of nominating a prime minister to put together a majority government from four pro-European parties in parliament - which will then need to enforce austerity measures. The 2025 budget assumes economic growth of 2.5% in targeting a deficit of 7% of GDP - which analysts, ratings agencies and the European Commission say is virtually unattainable without tax hikes. The four parties are now discussing how to cut government spending before deciding on a package of tax hikes that is certain to be unpopular. "This package (of cuts) is very unlikely to avert tax hikes," Liberal Party leader Ilie Bolojan, Dan's first choice for prime minister, told reporters. The parties have yet to agree on cabinet appointments but Dan said he expected a line-up to be ready within two weeks. Romania's growth has steadily slowed since a post-pandemic bounce in 2021, and Brussels forecasts a budget deficit of 8.6% this year and 8.4% next, well above the 7% target for 2025 outlined in a seven-year plan approved by the Commission. A London source with knowledge of talks between Romania, the Commission and ratings agencies said Brussels wanted to see the yearly deficit-to-GDP ratio cut by three percentage points, with 2.5% coming from higher tax revenue and 0.5% from spending cuts. Romania is currently clinging to the lowest investment-grade rating from S&P, Fitch and Moody's, with a "negative" outlook. Election-induced market turmoil may have likely exacerbated the measures required as large capital outflows and central bank intervention to stem a slide in the leu currency have driven a surge in borrowing costs. Foreign currency reserves fell by 6.75 billion euros in May after what central bank governor Mugur Isarescu said were some of the largest capital outflows in Romania's history.
The Independent
3 days ago
- Business
- The Independent
Angela Rayner and Rachel Reeves clash over spending plans
A Treasury deadline for agreeing on departmental spending plans has passed, revealing a clash between Chancellor Rachel Reeves and Deputy Prime Minister Angela Rayner over political direction. Rayner's Ministry of Housing, Communities and Local Government (MHCLG) is among departments yet to settle budget plans with the Treasury, resisting cuts and advocating for a more progressive, higher-tax approach. Reeves is reportedly pushing for significant efficiency savings across departments, except for defense and health, leading to accusations of " austerity 2.0" from within the Labour party. Rayner proposed alternative wealth taxes and benefit limitations in a leaked memo to Reeves, highlighting disagreements over fiscal strategy and priorities. The stand-off occurs amid broader concerns among Labour MPs about potential austerity measures and pressure on Reeves due to strict borrowing rules and election promises.
Telegraph
6 days ago
- Business
- Telegraph
Not enough police for London after population boom, Met chief warns
Scotland Yard does not have enough officers to meet the rising demand from crime after a population boom in the past 15 years, the Metropolitan Police Commissioner has said. Setting out his pitch ahead of the Government's spending review on June 11, Sir Mark Rowley estimated that the Met would need the 'best part of' £1 billion extra funding to match the number of officers it had relative to London's population in 2010. It follows an increase of one million in the capital's population, partly fuelled by immigration, to 9.1 million in the past 15 years. That has seen the number of officers fall from 402 per 100,000 head of population to 362, according to a Telegraph analysis of official data. Net international migration into London over the past decade is estimated at about 975,000, including both those coming from overseas and Britons returning home. 'We're carrying the scar tissue of years of austerity cuts, and the effects of that,' said Sir Mark. 'Forces are much smaller when you compare the population they are policing than they were a decade or 15 years ago. 'Our numbers [of officers] are falling rapidly. London is over a million people bigger since then. Demand is going up 5 per cent a year, every year across the country. Five per cent more people are calling 999 looking for help from police. That's a massive number, and that compounds year on year. 'If I was to have the resources today to match the population that we had 12 to 15 years ago, we would have the best part of £1 billion more. New York is the same size city, but they've got massively more police officers and police staff to deal with it. 'We're under capacity on international measures. We're under capacity if you look across Europe in terms of police officers per capita compared to the UK.' The number of police officers in the Met in 2010 stood at 32,503 before dropping to under 30,000 in 2019 after spending cuts by successive Tory chancellors. Boris Johnson's drive to increase police officers by 20,000 saw Met officer numbers hit a peak of 34,503 in 2023. They have since fallen to 33,013, but are projected to drop by another 1,500 unless Rachel Reeves, the Chancellor, plugs an estimated £260 million hole in the force's budget for the coming year. Nationally, the 43 police forces estimate they have a £1.3 billion funding gap over the next two years. Under cost-cutting plans to save the £260 million, the Royal Parks police and officers stationed in schools face being scrapped. The Met is also proposing a 25 per cent cut to mounted police, a 7 per cent reduction to dog teams, possibly stripping the Flying Squad of firearms and restricting front-counter opening times. The budget cuts would have been £450 million without extra cash announced earlier this year from the Home Office and Sir Sadiq Khan, the Mayor of London. Sir Mark said police chiefs backed 'radical reform' to make forces more efficient, but the Government's triple pledge to halve knife crime and violence against women and girls, and recruit 13,000 extra officers, would not be achieved without significant extra funding. 'We want radical reform in policing as well. We think there should be fewer police organisations across the country that can be more efficient, more capable. We need a proper National Police Agency that helps coordinate things,' he said. 'So we're up for change. We're up for doing things differently. We're up for being radically reforming. But it also needs more money, because policing is a people game.' The Home Office announced a £1.1 billion increase in police funding for 2025-26 to take total funding in England and Wales to £19.6 billion, although forces said this was not enough to prevent them having to make cuts to officer numbers. However, police chiefs say they still face the £1.3 billion shortfall. The Home Office is yet to settle in its negotiations with Ms Reeves over its spending plans for the next three years, 2026 to 2029, when the next general election will be held. It is understood that the Home Office is facing some of the biggest cuts and is seeking to squeeze at least £2 billion more out of the Treasury.
Telegraph
6 days ago
- Business
- Telegraph
Immigration is the reason our police seem more incompetent than ever
There are all sorts of downsides to an ageing society, but one of the upsides is supposed to be that it is a safer, quieter, more orderly society. But modern Britain doesn't really feel that way, does it? Yes, many forms of crime are down – although there is surely some ambiguity there. If you live in the jurisdiction of one of the many police forces which solves zero burglaries a year, how long before you no longer bother reporting such things? What about lower-level crime, such as shoplifting? So what happened? Mark Rowley, the Met Police Commissioner, has part of the answer: 'We're carrying the scar tissue of austerity cuts, and the effects of that. Forces are much smaller when you compare the population they're policing than they were a decade or 15 years ago.' Credit where credit is due: it's too rare for figures of authority to acknowledge when a problem is rooted (as so many are) in the Conservative party's last period in office. Rowley is quite correct that we'll be feeling the impact of short-sighted policing cuts under the Coalition for a long time. Too often, such comments are seized on by the Left as somehow conceding that any form of austerity was a bad idea. It wasn't, at least if you don't think that public spending can just increase forever. But George Osborne's strategy – avoid making any decisions and salami-slice every budget – was a disaster for the justice system. Not only did he cut thousands of police officers, but the Treasury also paid off thousands of our most experienced prison officers to retire early, with entirely predictable consequences. Rowley is, however, only acknowledging half the problem. The police-to-population ratio depends on two numbers, and officer strength is just one. The other reason that per-capita police numbers are so much lower than they were twenty years ago is the Conservatives' continual failure to get a grip on mass immigration. Actually, that sentence flatters the Tories a bit, because it implies they tried to grip it. Yet their record tells a different story. David Cameron fought two elections talking tough about bringing net immigration down to the 'tens of thousands', but in office was happy to let his home secretaries talk tough whilst the departments of Business, Education, and the Treasury continually bid up the numbers. As for Boris Johnson and Priti Patel, well, surely nothing need be said that googling the term 'Boriswave' doesn't cover. The impact of this is two-fold. A lower ratio of police to residents obviously has an impact on law enforcement (compounded by the courts backlog and prisons crisis). But a more atomised society with a high proportion of new arrivals – an 'island of strangers', as Sir Keir Starmer put it – also simply needs more police, as 'hard' policing has to compensate for the dilution of social norms which play a larger role in a more homogenous, higher-trust society. Sadly, it doesn't look as if the Government has learned any lessons. Rachel Reeves is reportedly locked in battle with colleagues over more police cuts, even as chiefs warn that it will make it impossible to hit Labour's vaunted crime targets. Just how hollowed out do forces need to get before ministers will accept the need to cut entitlement spending? I really don't want to find out the hard way.
