OBR Leak Upends Reeves Budget: Taxes, Headroom Rise (Full Transcript)

[00:00:00] Speaker 1: never get away with this. So I just think there's two ways of looking at this. Is it scrambling down the back of the sofa or are they doing what a sort of a government on the run would refuse to do, which is taking on some reforms which most people say might be bold, might be much bolder.

[00:00:16] Speaker 2: Helen, what are you looking for?

[00:00:18] Speaker 3: I think you're right, there's been lots trailed about the policy measures. I'd like to see what's in the office budget responsibilities forecast. The whole reason we've had this huge amount of speculation is because everyone's expecting them to downgrade the forecast. But we shouldn't forget that we don't know those numbers yet. They're hugely uncertain. They could go either way. It could be a bigger job than we expect. It could be a smaller job. And that, I think, frame everything that Rachel has had to do or chosen to do in this budget. So before looking at the exact response she's had, looking at what it was she was responding to.

[00:00:47] Speaker 2: Yeah, that's a good point, actually. And at that point, this is a good moment, isn't it? To actually explain to us the black hole. We hear so much about it. What makes up this black hole, as it were?

[00:00:58] Speaker 1: So this is essentially the gap against meeting her own self-imposed rules. The reason she has these rules is they're a proxy for the confidence the markets should have that they're going to keep the fiscal books in order. And so they set some rules. All chancellors do it. They're all slightly different. And so that is essentially the gap. And what happened, I think we've got a chart now showing what's happened over five, six, seven years in terms of the economy. We see that big dip from the pandemic shutdowns. And then we see sort of sluggish growth. And actually, if you extended that graph backwards, you would have had under par growth all the way back to the financial crisis, with some exceptions, to be honest. So the first thing to say is that we're going, I think we're going to have a separate document. Exciting, again, for this side of the sofa, that we get an extra document from the OBR that explains why they have chosen to downgrade that productivity assessment. So this is a backward looking assessment. They kept on saying we bounce back. And now they're thrown in the towel and said, we're not going to bounce back. That has had a knock on impact on growth in the medium term. I just think it's quite interesting to say, although there's been a lot of, it may be that we get some upgrades this year. I don't know what's going to happen next year. So there's a mixed picture there in terms of what's going to happen to the growth figures, I think. Important to remember that.

[00:02:17] Speaker 2: But overestimating that means that now, Rachel Reeves is going to have to fill that gap.

[00:02:21] Speaker 1: So growth was lower, therefore assumed tax revenues were lower. Some of that was mitigated by wages being stronger than expected, is what we understand. All of that will come out in a giant mix and we'll have a number. And that's the bridge she's trying to cross with the revenue rises.

[00:02:36] Speaker 2: But that's not the only part of the black hole, is it? Things like the welfare U-turns, does that add to all of this as well?

[00:02:41] Speaker 1: Yes, yes, there are many other elements. Yes, there is. That adds several billion. What she had hoped to save and bringing that kind of, bringing those things back in. But then, of course, we think that she's spent some of that as well on the two-child tax limit, lifting that. So we'll get confirmation on how that actually functions.

[00:03:00] Speaker 2: Yeah. And what is her task in terms of Labour backbenchers, do you think, Chris? You've mentioned there about the two-child benefit cap, which, just to explain, it's families on universal credit at the moment can only claim for two of their children. It looks like they're going to claim for all of them. Just going to alert viewers to what's happening in Downing Street. Here we go. This is her team. Rachel Reeves and her team coming out to stand in front of number 11 Downing Street. As Rachel Reeves prepares to go and deliver her second budget. I think last time she did it on her own. She's come out this time surrounded by her ministers, one of them, James Murray, there to her right, we will be speaking to later on in the programme about what is going to be announced. Torsten Bell, significantly, some would say, is there as well, who used to be on the other side of the fence, didn't he, Faisal? He did.

[00:03:50] Speaker 1: He did.

[00:03:51] Speaker 2: Now he's a minister.

[00:03:52] Speaker 1: And we learnt some amazing history from Jeremy Hunt, who said that one of his, I didn't even know this, one of his relatives used, was Chancellor, I didn't know this, back in the 19th century, and that the reason why she holds this box, why Chancellor holds this box, is to communicate to the public that they haven't forgotten their speech and left it in number 11. Amazing. Because that had happened. That did happen.

[00:04:12] Speaker 2: Someone arrived in the House of Commons and they'd forgotten it.

[00:04:16] Speaker 4: And realised that they were, they didn't have it. I mean, that's an anxiety dream for a Chancellor, isn't it? Imagine that.

[00:04:23] Speaker 2: Chris, just talk about the pressure that Rachel Reeves has been under throughout all of this, because if you think back to a year ago, she made, you know, that budget, Labour MPs cheered it to the rafters, didn't they? She'd announced a big national insurance rise for employers, that was the main part of it, and then promised she wouldn't be coming back to ask for more taxes, effectively. What's it been like for her, do you think?

[00:04:44] Speaker 4: I mean, really difficult, because so much of the framing of last year was about this kind of once-in-a-generation budget. And even if this one isn't on the scale of that one, the language that was used by the Chancellor and others, it implied a certain sense of, you get through that first budget, and the others are, if you like, more conventional, not as difficult for her to deliver.

[00:05:06] Speaker 2: And she was able to say it was a legacy from the Conservatives.

[00:05:08] Speaker 4: Yeah, yeah, and she was able to do that. And then a combination of some, you know, external factors, the tariffs from President Trump, for instance, as well as political decisions, like the about-turn-on-the-welfare changes, has made this whole thing trickier. I remember back in the summer, the Chancellor's team saying, look, when they had to make that about-turn-on-welfare, there will be a consequence of this, and you will feel it in the budget. And that plays into the tension that there's been between plenty in the Parliamentary Labour Party, Labour backbenchers, and the government, a frustration from some in government that they feel too many of their MPs are not willing to be cognisant of the trade-offs that come with governing. In other words, if you do X, you can't do Y, that kind of thing. You can only spend each pound once. But at the same time, the nervousness from Labour MPs because of the unpopularity of the government. And just to pick up on your earlier thought around the whole two-child benefit cap, I think what's interesting about that as a policy idea is that way back before the election, you know, when I was speaking to Keir Starmer as the then leader of the opposition, and he would say, oh, look, as he put it, there'll be good Labour things we won't be able to do. And I would say, well, give us an example. He would alight upon the two-child cap and say, look, that's a choice that we would love to be able to get rid of it, but we can't afford it. Clearly, that was a choice when he claimed he couldn't afford it. It is a choice to decide that you can afford it. But it's something that they think will go down well, not universally well, but well with most Labour MPs. The intriguing thing with that as a policy idea, as the Chancellor disappears into the sort of bowels of Parliament...

[00:06:42] Speaker 2: Yeah, she's almost there, and we know she's got the box with the speech, so she's arrived within the precincts of the Palace of Westminster.

[00:06:49] Speaker 4: Is that, yeah, the intriguing thing with the two-child cap is that whilst it is popular amongst plenty of Labour MPs and Labour activists, the polling evidence suggests it's not popular getting rid of it with the wider public. You'll recall back in 2017 when it was introduced by the Conservatives, they made an argument around fairness, that it was justified because it was fair. And broadly speaking, the weight of a public opinion is on that side of the argument.

[00:07:16] Speaker 2: Faisal, we're going to talk about something I know that you'll be very excited about, fiscal headroom. Oh, yes. We need to explain this. This is the reason that Rachel Rees might need to raise a little bit more tax than she might have to, because she wants to give herself more wriggle room, I guess, is one way of explaining it, isn't it? Just explain that to us.

[00:07:36] Speaker 1: So, as we were talking before about her attempt, her room for manoeuvre around her own borrowing rules, the fact is that last year, and at the spring statement, which was in March, there was £10 billion of that wriggle room or headroom, a buffer, if you like, against things changing around the world. I think we can show you a chart of how that compares historically over all the budgets. Obviously, most of those there are Conservative budgets. And you see that the levels, it kind of averages about £30 billion. So, it's quite thin and close to the wire under the kind of hunt budgets as well. £10 billion was quite tight. And there's an argument now at this point about what happened last October. Could you have anticipated the sorts of global frictions and instability from a possible, it was just before the American election, the budget, wasn't it, from a possible Trump administration? Should you have put in a higher room for manoeuvre? So, I think one of the key numbers, the markets and the economists will be looking for is £10 billion now. If they were really going for it, they could have trebled that up to £30 billion, the average. I think I'm expecting maybe 20, tight-eens, £20 billion. And that, they hope, I think, will be a strong marker for those markets. But these things all have, they have a double edge. They'll also be looking at, well, hang on, they're spending, are they spending more on welfare? Let's see what the other measures are in the round. Maybe they're not going to spend more on welfare overall, even as they do the two-child benefit. I have heard that there will be some spending cuts of a type, let's see exactly what the flavour of those are. Are they back-ended at the end of the spending review? You'd assume so. Or are a whole series of stories that Chris has been doing, frankly, on asylum and on the police and crime commissioners, on the size of our councils, are all these actually building up to a narrative that we can shrink the government in the way that a Labour government wants to do. And so, but these multiple audiences that Chris referred to, like, how do you square this with the markets, your backbenchers, the public, all at the same time, whilst both trying to raise revenue and also deal with the cost of living?

[00:09:40] Speaker 4: And trying to present a coherent argument in so doing.

[00:09:42] Speaker 2: That's why she's doing it. Helen, so we pretty much know that taxes are going to go up and one of the main ones she's going to do to raise quite a lot of money is freezing thresholds. Now, of course, the manifesto said that she wouldn't raise the rate of income tax, so this doesn't do that, but it will mean a lot of people paying more tax, won't it?

[00:10:04] Speaker 3: Absolutely. Basically, you freeze the point at which people start paying tax and the point at which they pay higher rates. It basically means you get more people paying any tax. Those who are paying are paying more and some of them are paying more higher rates. It's already been one of the big changes that has reshaped our system. We're having many more people who are paying any tax at all and I think we've got a chart showing how there are now many, many more people paying higher rates of income tax. So back around 2010, only something like 6% of people were paying a higher rate of income tax, so something like 40% or above. That's already increased substantially to something like 16%. If Rachel Reeves, as is expected, goes ahead and continues that freeze, we'll get something like 18%. So almost one in five people facing a higher rate. That would have only been something like one in 10 had no freezes happening. So yes, it's a stealth tax. Yes, most people don't notice it, but be in no doubt at all, this is reshaping the tax system and who pays which rates of tax.

[00:11:06] Speaker 1: I think that there's a real question, therefore, as to how open the Chancellor is about that being a tax rise. From memory, I think Rishi Sunak, when this all started in 2021, was quite upfront. I get it, this is a tax rise and sort of said it's the pandemic, we've got to pay, we've all got to pay.

[00:11:21] Speaker 2: It's important to say it started under the Conservative.

[00:11:23] Speaker 1: Yes, and what we've had from the Conservative decisions is, I think, 40 billion worth. It's one of the biggest tax rises ever, if you consider it as one tax rise. So that's an interesting backdrop to all of this. But yes, no, I do think that there is a history to this that's important, but that's a transformation of the tax system that has happened without it being announced fully as a policy.

[00:11:46] Speaker 2: And Chris, there will be lots of people who think that is a tax rise.

[00:11:48] Speaker 4: Yeah, because it is for lots of people. And that's the thing, isn't it? So it's where the word rate really matters when we're talking about the whole conversation that we've had over the last couple of weeks and that news conference that the Chancellor did at 10 past eight in the morning, which was laying the ground for one of the options that was on the table at the time, which was to change the rates, which would have smashed a coach and horses straight through the manifesto promise. And therefore they shied away from it. And then on top of that, it was talked about, isn't it, as the 50 year taboo around income tax rates. So it would have been a big thing to do even without the manifesto commitment. And so, yeah, they shied away from that. Labour MPs, quite a few were horrified. Others, by the way, didn't think they should have just grabbed the nettle and done it. But thresholds, frozen, means that people pass through those thresholds and therefore are paying more income tax. That's the simple truth of it.

[00:12:36] Speaker 2: Okay, let's get some reaction now from Darlington. And Jim Connolly is there for us and speaking to people about what they're expecting and maybe what they're fearing.

[00:12:50] Speaker 5: Yeah, absolutely. That definitely is a bit of a theme of it. Welcome along to Darlington. Darlington is a town that you would describe as fairly prosperous, especially in comparison with other similar sized towns in the area. Politically interesting too, because it went from Conservative to Labour at the last election. And that happened not because Labour increased its vote share very much at all. It was actually a falling away of the Conservative vote, dropping away and reform, and to a lesser extent, the Greens doing really well in this area. So it's an interesting place to get a bit of reaction today to the politics of it all, but also what people are feeling. How are they feeling financially? We're heading now into a cafe where we've got a couple of people, couple of local businesses set up to speak to us, and also just grab a couple of people having a cup of tea. So we're going to head in now and we're going to move through. We've got John and Clare. John and Clare, introduce yourselves to us.

[00:13:41] Speaker 6: My name's John Elliott. I'm the chairman of E-back Limited, a manufacturing company here in Darlington.

[00:13:46] Speaker 7: And Clare. Hi, I'm Clare Wise. I'm a fifth generation beef, sheep, and owl bull farmer, just local to this area.

[00:13:51] Speaker 5: Can I guess then, what is it that you're interested in? Is it inheritance tax when it comes to farming?

[00:13:56] Speaker 7: Absolutely. I mean, 12 months ago, the confidence was completely ripped out of our industry by a tax decision that it means that family farms like mine, not earning a lot, but yes, we have an asset base, will be forced to sell our farms to pay a very, very unfair tax. So today we are absolutely desperate for some sort of active farming tax to be put in place that makes sure that normal family farms like mine are driven out of business.

[00:14:19] Speaker 5: John, what is it that you're hoping for today?

[00:14:22] Speaker 6: Is there anything you want rather than fear? I want to see some direction towards solving our economic problem. This country's in a mess. We've got tremendous debt, 2.9 trillion, which is over £100,000 per household. We've got to see some movement towards bringing that down. And the only way to do it is by manufacturing more things in the UK for the UK.

[00:14:40] Speaker 5: We've had a budget that's felt like it's been a long time coming. There's been drip, drip, drip of speculation. How has that been as a business owner?

[00:14:47] Speaker 6: It's chaos. It's been chaos. And I think the good news is that probably we feel quite a bit of relief in a few hours' time when we find out what's coming.

[00:14:55] Speaker 5: Claire, what is it that you are fearing? Because that's the thing, isn't it? Because of this drip, drip, drip, the thing that I get from everyone I speak to today is this panic about what is coming because there's been so much speculation swirling around.

[00:15:07] Speaker 7: Yeah, I mean, our biggest fear is that we have a large proportion of farmers in our industry who are elderly and who are vulnerable. And that's the people that this tax doesn't give time to plan for. You know, inheritance tax, you need to live seven years. The absolute worst thing to come out of today would be that those people are in some way mitigated or protected again. So that's my biggest fear from today.

[00:15:26] Speaker 5: Is there anything that would give us a bit of a glimmer of hope here? What is it that you want from the government that could make things better for people like you, businesses in this local area?

[00:15:34] Speaker 6: Recognising we've got a problem and starting to deal with it. It's not going to be easy, but the sooner we deal with it, the better. The longer we leave it, the worse it'll be.

[00:15:41] Speaker 5: So that's a bit of the view of business, but it's not just local businesses, farmers that are impacted here. We thought it would just be nice to just go and grab someone, having a cup of tea, just to get a sense of what they want and hope from it. So we've got Brenda over here, who's kindly agreed to interrupt a cup of tea and a bacon sandwich. Right, come on, tell us, what is it that you are looking to today?

[00:16:02] Speaker 8: Well, it's pensioners. I mean, we've worked all our life to get a pension, to get a better life. And then every time they do anything, they take everything away from us again. So we're still fighting all the way. Not just me, it's all of us. You know what I mean? We just want a decent life. So we can enjoy ourselves as well at our old age. You know what I mean?

[00:16:21] Speaker 5: I see you've got your paper with you. You've been having a good scour through it as I've been- That's enough to give you nightmares anyway. Is that part of the problem, that we've had so much speculation? I just mentioned it to the guys over there, that that makes you feel more nervous than just a clean, warm hit?

[00:16:38] Speaker 8: It's not just pensions, it's the electric, trying to keep warm through the- I come down for a cup of tea and some warmth rather than sit in my outfit's coat. Do you know what I mean? There's a lot of people who can't even afford to heat their houses. So to me, yes, they need a little bit more help. We lost our heating allowance last year and I'm getting it all this year, as far as we know. So, you know, that's another bonus that we used to have, but been taken off us.

[00:17:04] Speaker 5: Brenda, it's been great chatting to you this morning. It's been a real sense here of nervousness, a sense of anticipation, because as I keep saying, there's been so much speculation around the budget this time that people are left wondering what is coming, which of the taxes that we expect are gonna hit them and how is it gonna impact their lives. So we're gonna be sat here waiting this afternoon, watching the budget, just to see what people make of it when it all comes in finally.

[00:17:28] Speaker 2: Thank you very much, Jim. The wait is almost over. Helen, on that idea there, that it has felt a long time coming, the speculation, partly because it's a very late budget, isn't it? But how much of a factor do you think that's been?

[00:17:40] Speaker 3: Huge. I mean, I've watched many, many budgets over the years. I don't think I can think of anyone that has this much speculation. And it really is damaging. It's damaging for the reasons that people are setting out here, that people hold back from making decisions if they don't know what's coming. They worry about it. They worry about what could happen, what couldn't happen. And it's not just big speculation about a few tax measures. We've had almost every tax talked about. Taxes that usually are the preserve of people like me worry about them actually are now mainstream part of the debate. So I think it has been really damaging. And it's taken up a huge amount of bandwidth. I mean, why aren't we talking about how to drive up growth, how to deal with special educational needs or disability or whatever else we could be talking about? Instead, it is all this speculation. So I think your guests are right to highlight that it has been unusual and it is a problem.

[00:18:22] Speaker 4: Jim's big coat. That tells the story, doesn't it? In that here we are with winter sort of knocking on the door and this autumn budget happening with December just around the corner, which has then extended the window into which all of this conversation has gone on.

[00:18:36] Speaker 1: I think one of my tests of this is if this hamster wheel of constant speculation, which is both about individual measures, but in general, every time we get an ONS data point, I'm trying to assess whether it means tax rises, whether the buffers that they put in place and the confidence they put in place puts that argument to bed for the next year. Everyone will be relieved. It's a big test of the budget.

[00:18:57] Speaker 2: Okay, let's cross to the central lobby in the House of Commons where we're joined by two MPs. We're joined by Sarah Owen, who is the Labour Chair of the Women and Equalities Select Committee and by Conservative MP, David Reid. Sarah, you were a welfare rebel, as they became known. You didn't want to see those cuts to personal independence payments. And partly that £5 billion that would have been saved, the Chancellor's going to have to put up taxes now to make up for that, isn't she?

[00:19:26] Speaker 9: I think what we want to see today is a proper Labour budget. One where those with genuinely the broadest shoulders pay the biggest burden and those that have struggled at the sharp end of a broken economy for over a decade actually see some relief. And that's hopefully what we're going to see today.

[00:19:42] Speaker 2: The thing is, though, that some of the people who are paying for this are going to be workers. They're going to be people who maybe don't earn an awful lot of money, but they are going to have to pay more taxes. Is that what you mean by a Labour budget?

[00:19:55] Speaker 9: Absolutely not. I think what we're going to see here and what I'll be looking at when the budget comes out and all the details are discussed and picked over is the distribution analysis to see who is putting in and who is finally getting out. And what I expect to see here is some fairness in some very tough times.

[00:20:12] Speaker 2: David, what do you say to that fairness?

[00:20:15] Speaker 10: So look, what I want to start by saying is that I genuinely, I want the Chancellor to do well. I want Labour to do well because if they do well, the country does well and we should all be on Team UK. But there's been so much speculation and I've heard your previous guest saying that. And I think the underlying point is that there was no plan coming in. So they're having to test ideas of the public now to see how they flow. And I think the message that's coming out from all of the leaks is essentially, you don't need to work hard in this country and the state will provide. That's such a bad culture to create in the country. And I really hope that's not the case today when the Chancellor does unveil her budget.

[00:20:49] Speaker 9: I absolutely think that is completely wrong. If you take the increase for the living wage, for the minimum wage, people that are barely making ends meet, seeing that a genuine increase so people can actually afford what they need to live on when they're going out and we are rewarding hard work. And I think that that is a real key part that has been missing for a very long time.

[00:21:10] Speaker 10: Sarah, that's fine. So I think the biggest thing for me is that you can have all the employment rights you want, you can prioritise those who are working, but if you put the pressures on business, if you put the pressure on those who actually create the wealth, you can have all those rights, but you're not going to have any businesses to allow people to go into.

[00:21:28] Speaker 2: Sarah, just on that point, the fact is that the minimum wage going up, the living wage going up, it is businesses that have to pay for that, isn't it? This time last year, they were hit with a huge rise in national insurance, which they say has impacted them in a huge way. And actually we've seen in some sectors like hospitality has meant that actually many, many jobs have been lost.

[00:21:48] Speaker 9: I think the Chancellor really took those difficult decisions and she was very clear that they were tough decisions and that they did fall on those shoulders. But what we are clear about is that businesses do not feel comfortable paying staff a wage that is below what they can live off. And what we need to see is fairness in the economy. And we know that when low paid people and workers are paid a little bit extra, where do they spend it? They spend it in their local economy, they spend it in small businesses, and that's where we want to see the growth.

[00:22:17] Speaker 2: David, would your party have given young people a pay rise?

[00:22:20] Speaker 10: Look, so I think the Resolution Foundation, a foundation which one of the senior treasury ministers now worked on for a long period of time, has come out and said that those plans do not work. It goes back to that central point, you can have all those employment rights that you want, you can have those wage increases, but if you attack the businesses that create the jobs, you're not going to have any businesses that are there.

[00:22:40] Speaker 9: And if people don't have money in their pockets, they won't have money to spend in those businesses. And we know that every time we increase the lowest incomes, we see small businesses and local economies benefit.

[00:22:52] Speaker 10: It's terrifying. This is Labour Economics Now 101, is that I look across the front benches and you see lots of people that have worked for the trade unions, lots of people that have worked in the civil service. Now, they're very important jobs, but they're not coming from business backgrounds or entrepreneurship backgrounds. They haven't taken their own capital and started businesses. I think the view at the moment is that there's some magic money tree and that the state can just pay out.

[00:23:14] Speaker 9: I think that's a hugely patronising thing to say about the very experienced front bench that we have, considering, I mean, did Liz Truss have a business background before she crashed the economy? Were you speaking out against that disastrous Conservative budget? I didn't hear you saying that. So I think let's hear what the Chancellor has to say. And I think we're all hopeful that what we're going to see is a fair budget for really tough times.

[00:23:37] Speaker 10: Sarah, and I hope you're right. And it goes back to that fundamental point that we should all be on Team UK. I want Labour to do well, but the fact that so many leaks have come out already, I just don't think that's going to be the case.

[00:23:47] Speaker 2: OK, I thought we were going to end on people agreeing there, but maybe not quite. Sarah Owen and David Reid, thank you very much indeed. Let's have a look inside the Commons Chamber. But before the Chancellor gets up at 12.30, of course, we have the weekly Primers' Questions. It's probably the one time of the year where it really does take a bit of a back seat. But Keir Starmer will be taking questions from Kemi Badenoch for around half an hour between 12.00 and 12.30. We'll bring you all of that live, followed by full coverage of the budget. Faisal, let's talk about tax and let's talk about the tax burden, because this is what we've been talking about, isn't it? That she is deciding, really, to fill that black hole, mainly with tax rises. How does our country compare to other countries when it comes to the tax burden?

[00:24:41] Speaker 1: So, there's two ways to look at this, historically and internationally. And this tells a really interesting story about the country. Let's have a look at the historical chart. Got another chart, always many charts for you today. And this is what happened in history. And you'll see the UK tax burden was the highest, you know, in the... Sorry, it was high in the 50s, and we're sort of getting up to those levels. So, that's one of the headlines we expect, that the highs that we reported in the past couple of budget events will get even higher. That's a natural consequence of some of the things we've already talked about. But it kind of goes up and down. The pattern is quite interesting in the recent 10 to 15 years, where you see sort of after the Thatcher major years, it starts to creep up, but it stabilises sort of in the sort of 31, 32% zone under Tony Blair and under the coalition. What changes? The pandemic, it starts to go up and it goes, and it settles around 35%. And then what we've seen it heading up to about 37% in the forecast under the previous Labour plans. You would think that that's going to hit 38%, if what we're hearing is right. Let's see where that number goes. The OBR will be quite clear. Let's see though. So, that is the historic high. That's a headline we'll get in the press tomorrow. But let's have a look at how this looks in terms of historical, sorry, international comparison. That is roughly where we are now. As I said, is that 35% going to move up to 38%? That wouldn't change our position, but we're in the middle of the pack. This is not kind of extreme in terms of our international comparisons, but we might end up very close to German levels now. Now, of course, that would be for 2030, whereas that's the level now. You'd expect those other things to change over that time as they face the same pressures of ageing societies and the like. But what's the story here? We've moved. At one point, we were getting quite close to the Americans in our sort of transatlantic role, but now we're moving close to more European levels of taxation. This is something that started under the previous government. A great irony, if you think about Brexit, that we had assumed that part of the vibe behind that was to move towards an Atlantic model. But actually, after that, we have moved more towards a European model, and they could have with the change in productivity. And I'm not saying the economy is smaller than we thought it was. They have not changed the tax levels to accommodate that. They've left taxes high, and as a result, that number's going up.

[00:26:54] Speaker 2: And I was going to say, so in terms of if there were to be an alternative, which presumably the Conservatives say that there is, what would it be? Are we going to hear anything about spending cuts, for example, because that would be one alternative?

[00:27:05] Speaker 3: Yeah, absolutely. So the alternative is spending cuts. I suspect we won't see very many of them. And it's also worth saying, even if we did see them, it wouldn't be so big that it would change the picture that Faisal just laid out, I don't think. I mean, I think you'd have to now do quite a lot of spending cuts to get back to where we were for that 32%. I mean, panning out to put the international and the historic together, kind of the broad sort of history here is that in the 1960s, the UK was a relatively high tax country, and then not much happened to our tax burden, whereas other countries, especially European countries, were pushing up their tax burdens. Now, in recent years, we started pushing up our tax burden. So we've moved from a bit below the OECD average, we're moving to above the OECD average. So in part, we're kind of catching up with what other countries have been doing recently, partly reflecting the big pressures on the size of the state. I mean, there are big pressures on ageing and all those things. So could we have a smaller state? Absolutely. But it wouldn't be a simple, a few billion cut. You'd have to do something substantial to get this pattern reversed.

[00:28:01] Speaker 1: I just have to break in, because on all of this, there's quite interesting things coming out of the Reuters news agency. You seem to be flashing very specific numbers from the OBR document, which would be unusual, I'm going to put it like that, but there is a suggestion the OBR book has been published now.

[00:28:15] Speaker 2: It's been published online by accident, we're hearing.

[00:28:18] Speaker 1: Oh, right. Well, that is unfortunate. That is unfortunate. But, well, I need to go and get that book. It's the first thing, but let me give you a couple of the numbers that the borrowing is projected to fall from 4.5% of GDP to 1.9% in 2030. This is extraordinary that this happened. Freezes to personal tax thresholds are expected to raise 8.3 billion in 2029-30, which is what I suggested was expected. Total growth in nominal GDP over the forecast is only around 1% point lower than in March and is more tax rich.

[00:28:47] Speaker 2: Okay, and the 10-year bond yield, we think, has dropped in response to this.

[00:28:51] Speaker 1: Yes, which is the market response, but that this has come out beforehand is pretty extraordinary. You've given the explanation, I did not know that it's been...

[00:28:59] Speaker 2: So the leak in itself is...

[00:29:00] Speaker 1: I mean, there's leaks, and then there's something like this.

[00:29:02] Speaker 2: Yeah, okay, right. We'll come back to that in a second, but we have been talking about Rachel Reeves and the pressure that she's been under. Let's have a look back at her year since the last time she stood in the Commons and delivered a budget.

[00:29:11] Speaker 1: Hello.

[00:29:12] Speaker 11: Thank you very much. No, it was amazing to do the first budget, first woman to deliver a budget, and then to set out our plans. I'm not coming back with more borrowing or more taxes.

[00:29:34] Speaker 5: And the budget has spooked business.

[00:29:37] Speaker 12: At six, the tractors roll into Westminster as around 10,000 farmers turn out to protest against the government's inheritance tax plans.

[00:29:48] Speaker 5: How bad could this be for farmers, Jeremy?

[00:29:50] Speaker 10: The end. If you actually stop and pay attention, it's the end. Save the Winterfjords.

[00:29:55] Speaker 4: Save the Winterfjords.

[00:30:02] Speaker 11: From this winter, nine million pensioners will now receive winter fuel payment.

[00:30:08] Speaker 9: When will we feel better off, Chancellor?

[00:30:12] Speaker 11: We are renewing Britain. The priorities of this spending review are the priorities of working people. I've made my choices. I will happily defend my choices.

[00:30:24] Speaker 13: When they say cut back, we say cut back.

[00:30:34] Speaker 12: Tonight at 10, a massive climb down from the Prime Minister over the government's plans for changes to the benefits system.

[00:30:41] Speaker 14: Three U-turns in a month. A promise made and a promise delivered. We're only getting started. The Chancellor's led on all these issues, and we're grateful to her for it. Yeah.

[00:30:49] Speaker 13: You're missing my bricklayer, Grant. You're judging bricklayers.

[00:30:54] Speaker 11: It's up to me to decide what is in the budget. And people who seem to know what is in the budget before we have made those decisions are just wrong. If we are to build the future of Britain together, we will all have to contribute to that effort. It would, of course, be possible to stick with the manifesto commitments, but that would require things like deep cuts in capital spending.

[00:31:21] Speaker 15: Good afternoon. The BBC has confirmed that the government will not raise income tax rates in this month's budget.

[00:31:28] Speaker 11: On Wednesday 26th November, the priorities of that budget will be to tackle the cost of living, to get NHS waiting lists down, and to reduce the national debt. Those are the priorities of the British people, and they'll be my priorities as I go into the budget next week.

[00:31:44] Speaker 2: Well, that was a summary of Rachel Reeves' difficult year. Things have just got a little bit more difficult for her because, if you can see my panel here, they are furiously reading online... Is this your OBRs? Basically, the OBR.

[00:31:57] Speaker 4: So, someone somewhere has managed to hit the publish button a little bit earlier than they ought to have done. And this document is out there, and here we are digesting, or attempting to digest, 203...

[00:32:10] Speaker 2: And what does it... I mean, what does it... This document in itself tells you a lot of the things that... Everything. Everything.

[00:32:15] Speaker 1: It tells you all the big stats that we were just speculating over. So, for example, the tax-to-GDP ratio goes to 38.3%, right? Which is an all-time high. OK, that's going to be the headlines. And, obviously, what drives that is the policy, which is the threshold policy, which it costs at £8.3 billion.

[00:32:31] Speaker 2: So, it's £8.3 billion which is going to be higher taxes on people?

[00:32:36] Speaker 1: Yeah, so that's the freezing thresholds, not tax rates. But, yeah, that seems to be the main moving part. There's all the productivity downgrades that were the motivation behind some of the tax rises. I've... Suffice to say, we've never seen anything like this before. And it is unfortunate.

[00:32:52] Speaker 3: Helen? This is wild. The fact that we're sitting here reading the budget before the budget has been announced is utterly extraordinary. Let's just bring it forward. I mean, look, there's lots to digest here, but one thing it looks like is that... I spoke earlier about the forecast being really important. I'm sort of trying to read that in lifetime. It looks like here there was some good news for Rachel Reeves, that before she did anything, revenues were higher than she expected. So, there was the productivity downgrade that we were looking for. But there's something interesting happening in the forecast here about revenues being higher, and there's a kind of get-out-of-jail clause here in some sense. So, need to dig into what's happening there. But it looks like Rachel Reeves had less of a job on her hands than was expected, based on what I'm reading in lifetime. OK, interesting.

[00:33:32] Speaker 4: Yeah, here we are on page 70. This is talking about the freezing of thresholds. I'm just literally reading this paragraph as I read it to you. This budget has extended the allowances and threshold freezes in income tax and national insurance contributions to the end of the forecast period. It means the majority would have been frozen for most of the 2020s. And then, as we were discussing earlier, freezing thresholds rather than raising them in line with inflation increases tax receipts as rising wages tip an ever greater number of workers into the tax system, onto those higher rates, which is known as fiscal drag. But here we are. We were saying a few minutes ago, weren't we, we'll wait to see how the Chancellor kind of, the language that she uses to justify this. And here we are at five to 12, 35 minutes before she gets to her feet. And we're reading it out.

[00:34:15] Speaker 2: And also, worth saying that the Prime Minister is about to go into the House of Commons chamber in order to answer questions. Kemi Bajanok's about to ask him questions. And she's got this as well. She will also be doing exactly that, presumably, in the little room behind the Speaker's chair. I mean, it is extraordinary.

[00:34:30] Speaker 1: And there's been a market reaction, which is exactly why you want to contain the timing of something like this. Remember, this document normally gets published after the end of the speech. OK, so it's gone after. The Chancellor controls the delivery of it, is the point. It's gone two hours early, which is quite something. And indeed, the market reaction often takes in what the Chancellor has said and then waits to assess the detail. So, you know, wow. So there's been a notable market reaction. And that has gone in the direction of the Chancellor and the government in the sense that the yield, the effective interest rate the market would charge for government debt, went down quite sharply, what we call six or seven basis points. You know, not a huge move, but, like, notable thumbs up. So that's a positive, you say? Yeah, because of some of the reasons Helen was reflecting. But, like, it takes quite a lot of time to digest. I mean, we've only just speed read about four pages of this. But buried in this document is everything, basically, the whole budget.

[00:35:21] Speaker 4: Here we are. What are we on now? Page 66. Removal of the two-child limit.

[00:35:24] Speaker 3: £26 billion of tax rises coming. £26 billion of tax rises.

[00:35:28] Speaker 1: OK, so that's smaller than last year.

[00:35:30] Speaker 3: Yeah, but not much. Last year, it was £32 billion. Everyone thinks it's 40. It wasn't. It was 32. That's not shy of last year.

[00:35:35] Speaker 4: For the two-child limit, the government has removed the two-child limit within Universal Credit from April 2026.

[00:35:41] Speaker 2: So from next April, families who are entitled to Universal Credit will get a claim for not just their first two children, but for all of their children. And we think that is about a cost of about over £3.5 billion.

[00:35:52] Speaker 4: I can read you the paragraph, if you like. Go on, then. The limit... We've got 203 pages of this to read. The limit restricted the UC child element, which is currently £3,500 per year for second and subsequent children, to two children per family apart from children born prior to 6th April 2017.

[00:36:11] Speaker 2: And that is something, just on the politics of this, this is something Labour MPs desperately wanted. They say it is the best and quickest way to take children out of poverty.

[00:36:19] Speaker 4: Yeah, and there is independent evidence to suggest that as a single measure to take a lot of children out of poverty in one full swoop, that this is a way of doing that. It comes with a bill. In fact, I can tell you the bill, according to the Office of Budget Responsibility. Its removal costs £2.3 billion in 2026-27 and £3 billion in 2029-30. And then there's an additional paragraph that delves into a bit more detail.

[00:36:48] Speaker 2: So the flip side of that, it does give the Conservatives something to attack the government over, doesn't it? Because they say this isn't fair to other taxpayers.

[00:36:56] Speaker 4: Yeah, and they say that this in and of itself, and let's see what else we dredge through as we're reading this document, obviously puts up the welfare bill. The government had struggled and did that about turn in the summer about reducing the rate of welfare spending increases. And I think the argument we'll hear from Cammy Boothnock, in fact, we might hear it in just a moment, given that she's got this document as well, is that the government's failure to deal with the rising benefits bill is why the tax rises have to be as extensive as they do, rather than trying to find a way of either reducing the growth of that bill or, as some would argue, trying to get it down.

[00:37:33] Speaker 2: And we do think, Rachel Rees has said about there will have to be, they call it reform, don't they, to the welfare system further down the track. Yes. But of course, Labour MPs haven't shown they have much appetite for in any way shrinking that welfare bill, have they?

[00:37:46] Speaker 4: Quite, and I speak to people in government and they are exasperated that the idea of taking on welfare they regard as essential, but plenty of Labour MPs are not keen on. And what the government fears, of course, is that Labour MPs have got a taste for being able to make an argument and change the government's mind. That's happened on welfare. It happened beyond the Labour Party around the whole question of the winter fuel payment. And so, against a backdrop of noise, how resilient are the Prime Minister and the Chancellor in holding the line on the various things that they- Faisal, what markets?

[00:38:18] Speaker 2: Anything?

[00:38:18] Speaker 1: Yeah, as I said, there was initial significant drop in the 10-year yield, that's the benchmark, about seven basis points, so just under 0.1% in terms of interest rate. We tend to say that if it goes double digit, that that is a marked move in what is normally quite stable. But some of that's come back again now.

[00:38:35] Speaker 2: We are going to cross to the Commons for Prime Minister's questions, but it is worth saying we've had a pretty extraordinary leak of the budget. So we will bring you any more details that we glean from that. But for now, let's go and listen to Keir Starmer.

[00:38:47] Speaker 14: He's been an incredible servant and a good friend of the United Kingdom, and we wish him well in everything he does in the future. Mr. Speaker, today's budget will be a Labour budget with Labour values to deliver for the British people's priorities. Mr. Speaker, I know what it feels like to sit around the kitchen table worried about bills that can't be paid. That's why this budget is for families that I know today are equally worried about the cost of living. That's why we're rolling out free breakfast clubs, free childcare, and free school meals. And today we'll be going further to deliver the change we're elected to bring about, cutting NHS waiting lists, cutting the national debt, and cutting the cost of living. Mr. Speaker, this morning I had meetings with ministerial colleagues and others. In addition to my duties in this House, I shall have further such meetings later today. Rachel Watkins.

[00:39:42] Speaker 16: Thank you, Mr. Speaker. For years and years, railfares have gone up and up, but this is set to change next year. Can the Prime Minister confirm that commuters in my constituency will see around £400 saving on their annual season ticket as a result of this government freezing railfares? And can he confirm this is only possible because we have a Labour government?

[00:40:09] Speaker 14: Well, I can confirm next year we're freezing railfares for the first time in 30 years, saving millions of commuters hundreds of pounds. And yes, that's only possible because we have a Labour government investing in Great British Railways and putting more money in the pockets of passengers. Contrast our approach with the leader of the opposition who says the minimum wage is a burden, she thinks, and she wants to means-test the state pension.

[00:40:34] Speaker 15: We now come to the leader of the opposition, Kerri Baird.

[00:40:40] Speaker 17: Thank you, Mr. Speaker. And can I first pay tribute to the many farmers who have come to Westminster today to protest the shameful attack on them in last year's budget? I want them to know the Conservatives stand with them. Mr. Speaker... Yeah. Hear, hear.

[00:40:58] Speaker 18: They're wrestling, we stand with them.

[00:41:03] Speaker 17: LAUGHTER Mr. Speaker, this has been the most chaotic lead-up to a budget in living memory, with resignations, hostile briefings and...

[00:41:15] Speaker 19: Can I just say to a couple of you, if you don't want the budget, make your mind up now.

[00:41:20] Speaker 17: LAUGHTER Nobody wants this budget, Mr. Speaker. CHEERING With resignations, hostile briefings and leaks galore, even just in the last 10 minutes, an unprecedented leak of the OBR analysis. Unbelievable. Mr. Speaker, these leaks have been so serious that even the former chief economist of the Bank of England has said, and I quote, that Labour's fiscal fandango is the single biggest reason why growth has flatlined. Does the Prime Minister agree with Andy Haldane and does he have an explanation for this complete shambles?

[00:41:58] Speaker 14: CHEERING We all know the biggest shambles in living history, the Liz Truss budget. CHEERING And what did she say? Did she say, I don't agree, this must be wrong? No, she said, I think Liz Truss is 100% right. 100%. Not much room for flexibility. Not one thing was wrong with it, in her view. So we won't be taking lectures from her. Matters for the OBR are for the OBR. The Chancellor will set out the budget in just a few minutes' time. CHEERING Mr.

[00:42:29] Speaker 17: Speaker, we're talking about the leaks. The Prime Minister doesn't seem to appreciate the impact of these budget leaks on the UK economy. Even the chief secretary to the Prime Minister has said this morning that the leaks were unacceptable. So will the Prime Minister launch an investigation into the budget leaks and punish those responsible?

[00:42:49] Speaker 13: CHEERING Mr.

[00:42:50] Speaker 14: Speaker, it's literally about 25 minutes before the budget will be set out in Orleys, where we'll take further decisions. The Chancellor will set it out, but thanks to the decisions she's already taken, we've got 5 million extra NHS appointments. Waiting lists are coming down. Mortgages are cheaper. We've expanded free school meals. That's 100,000 children lifted out of poverty, a moral mission for this government. Compare that to the record opposite any day of the week.

[00:43:16] Speaker 13: CHEERING Mr.

[00:43:20] Speaker 17: Speaker, he talks about the decisions she's already taken. If they were that great, we wouldn't have all those farmers outside protesting. CHEERING He doesn't want to talk about leaks, but we can see that the chaos in Number 10 is having real-world consequences. Instead of focusing on the economy, they've been fighting like rats. Several journalists reported that Number 10 sources had briefed against the health secretary and other senior cabinet ministers. The Prime Minister then told us that these briefings did not come from Number 10. Will he repeat on the floor of the House the claim that none of his advisers has briefed against members of the Cabinet?

[00:43:59] Speaker 14: Prime Minister. Mr. Speaker, I've been really clear about this. No-one in Number 10 has briefed against Cabinet ministers. And the health secretary is doing a fantastic job. CHEERING He stood before the electorate just before the last election. He said we'd deliver two million extra appointments for the NHS in the first year of a Labour government. There he is. What did he do? Not two, not three, not four, but five million extra appointments for the NHS. They don't understand this language, Mr. Speaker, because they left everything absolutely broken. CHEERING Mr.

[00:44:38] Speaker 17: Speaker, the Prime Minister expects us to believe him. No-one does. We all know that he did not have a serious leak inquiry. What he did, Mr. Speaker, was he asked Morgan McSweeney to investigate Morgan McSweeney, and then Morgan McSweeney discovered that Morgan McSweeney was innocent. All of this calls into question the Prime Minister's judgment. All of this calls into question the Prime Minister's judgment. We read this weekend that he wants the former Deputy Prime Minister back in his Cabinet. He must have forgotten that she had to resign only a few months ago for tax evasion. When did the Prime Minister decide that lawbreakers can be lawmakers? CHEERING Mr.

[00:45:24] Speaker 14: Speaker, while she's scrawling through Twitter, we've delivered railfares are frozen, prescription charges frozen, the minimum wage boosted. We're focusing on the cost of living, the single most important thing for this country. She's focusing on tittle-tattle.

[00:45:40] Speaker 17: CHEERING It's not tittle-tattle, Mr. Speaker. We all know that he's only talking about welcoming the Deputy Prime Minister back because he is desperate to shore up his crumbling leadership. But if he were to welcome her back, will he set a condition that she must pay back the £40,000 of property taxes she avoided, the same property taxes they're very happy to put on everyone else, and will she also return her £17,000 of severance pay?

[00:46:10] Speaker 14: CHEERING Prime Minister. Mr. Speaker, the former Deputy Prime Minister is the biggest social mobility story this country has ever told. CHEERING She started from humble beginnings and fought her way to the very top. I'm very proud of what she's achieved in politics. I'm very proud of everything she's done for this Labour government. CHEERING Go, Bear Knot.

[00:46:30] Speaker 17: That sounds like a no, Mr. Speaker. I've never heard the Prime Minister speak so highly of people avoiding their taxes. CHEERING But in summary, this just looks like a government that is a slow-motion car crash. CHEERING His Cabinet are briefing against each other, his MPs are planning for life after him, and the most chaotic run-up to a budget in recent memory is happening on his watch. Even the Chief Whip is telling MPs that he wants out. The truth... The truth is simple, Mr. Speaker. His MPs don't trust him, the markets don't trust him, and the public certainly don't trust him. When will he finally accept that the chaos starts and ends with him?

[00:47:24] Speaker 14: CHEERING The most chaotic budget was the Liz Truss budget. It did huge damage to our country. We're still suffering from that damage. And what did she say about Liz Truss? She still... She obviously does still think it. When asked, was Liz Truss right, 100% right, she said. The most chaotic, damaging budget there's ever been. And she sticks by it. I'm very interested to see her response to this budget if she thinks Liz Truss got it right. Mr. Speaker, what we're doing is focusing on cutting waiting lists, cutting the national debt, cutting the cost of living, renewing our country, a Labour budget with Labour values, delivering for the British people.

[00:47:50] Speaker 7: CHEERING Thank you, Mr. Speaker. At the moment, everyone...

[00:47:57] Speaker 2: We are going to move away from Prime Minister's questions for now, and that is because ahead of Rachel Reeves's budget statement, which is due to start just after 12.30, there's actually been a pretty unprecedented... ..published early, the budget published early. We think, by mistake, we don't know the details of how this has happened. Normally, you would expect all those details to come out after the Chancellor has finished speaking, after she has explained to MPs and to the country why she's doing these measures, but, in fact, it has been published early by mistake. So, here in the studio, my expert panel have been... Well, they've been going through it, they've been looking at it. Helen, first of all, you know, what on earth has happened here, do you think? And also, what have you gleaned from what you've read?

[00:48:43] Speaker 3: Yes, this is utterly extraordinary. That we are sitting here reading the OBR's forecast before Rachel Reeves has delivered her budget is unimaginable, in some sense. So, yeah, just emphasising how extraordinary it absolutely is. Look, what we've gleaned, I think, so far is that the big news here, in my mind, is that everyone's been talking about the OBR handing Rachel Reeves a fiscal repair job. Doesn't look like they did, actually. It looks like, before any measures were taken, she would still have had a surplus, she would actually still have had some headroom to play with. She wasn't given a big task to do. She obviously had something to do, but it wasn't the big fiscal repair job everyone was expecting. The two other big numbers everyone was looking for, the tax rises, looks like £26 billion of tax rises, but there's also an increase in taxes in the forecast. So, revenues have gone up because wage growth has been higher, inflation has been higher, fiscal drag is in full force. So, higher taxes, revenues and higher taxes on top, leaving us with a headroom of £22 billion. So, higher headroom, higher taxes, but lots more to dig into in the actual details here.

[00:49:46] Speaker 4: It's worth underlining, isn't it, just... ..and you acknowledged it there, the sheer absurdity of this moment, that here we are 15 minutes before the budget starts and we're reading out its contents, courtesy of this ending up online a couple of hours early. So, just to bring you another nugget dug out from page 77 here, this is about what some have called the mansion tax. So, owners of properties valued at over £2 million will pay a recurring annual charge on top of their council tax bill from April 2028. Expected to raise £0.4 billion in 2029-30. And those revenues will go to the government and not to local government, as is standard with council tax. Even as I'm reading that out, the sheer absurdity of reading out something that the Chancellor has not yet announced in the House of Commons is mind-blowing.

[00:50:37] Speaker 2: I mean, it's a terrible sort of end to all the speculation, if you like, that we've been going through and the build-up... I think I need a Red Fox.

[00:50:43] Speaker 1: I can deliver the budget now in the studio. In terms of the main measures, right? OK, so the threshold freeze raises £8 billion, and that is both for income tax and national insurance for three years from 2028-29. They're going to charge national insurance on salary, sacrifice, pensions contributions, which raises nearly £5 billion. That's a significant extra tax rise that is going to hit high-earner pensions, I assume. I don't have the detail of that policy.

[00:51:11] Speaker 2: Is that employers as well? I don't know.

[00:51:13] Speaker 1: I think this is pretty good information to start. OK, go on. Don't get greedy now, Vicky. Come on, Rachel. So, in the next announcement of this budget, which should be made by the Chancellor, they're going to increase tax rates on dividends, property and savings income... That's not expected. ..by two percentage points, raising £2 billion. They're going to a reduction in the writing-down allowance on corporation tax, which raises £1.5 billion. That's a hit on business. The new mileage-based charge on electric vehicles from April 2028 raises £1.4 billion. Taxation on gambling raises £1.1 billion. It's worth just doing this, because this is the news that she should be announcing. Capital gains tax relief, as released, raises just under £1 billion. As he mentioned, the mansion tax on properties over £2 million raises £400 million. That's a relatively small amount for a big policy. And I'm just going to finish this. Tax administration, compliance and debt collection raises £2.3 billion. People will argue whether that's going to really happen. And these are offset by a freeze to fuel duty for a further five months, followed by staged increases by 2026. That's news. That's news. Costing £2.4 billion. And then something on size we'll see about the levy, which raises £4.4 billion, which I... So that's a range of other tax measures. I've just delivered the main headlines of the budget. And therefore you need to say, and I commend this statement to the House, that's the only thing that's missing.

[00:52:37] Speaker 4: A couple of other things. You may have brushed by these, but if not, we might as well just announce them again. Charging national insurance on salary sacrifice pensions, raising £4.7 billion. And did I spot something else? Oh, yeah, we talked about the removal of the two-child benefits limit, costing £3 billion by 2930.

[00:52:57] Speaker 2: I mean, this is very strange, because, as you say, we're almost reacting to the budget before it's been delivered. We are in uncharted territory in that sense. Is it possible, Chris, this is probably a bit unfair, is it possible to work out what the attack is going to be on the government from the opposition parties, do you think? I mean, as you say, there is more going on on the welfare bill.

[00:53:17] Speaker 4: So, I mean, I think they will garnish their critique about the sort of, as they see it, the shambolic nature of the build-up to this budget, because the icing on that cake, if you like, has just been layered on in the thickest veneer you can imagine in the last 25 minutes or so. Well, I think the Conservative leader actually went relatively easy on this early publication with the Prime Minister, because she could have chosen to do what we've just been doing, which is to say, who needs a Chancellor? I'll just read out the budget right now, which would have been utterly humiliating for Rachel Reeves. Where will the critique come from the opposition parties? I think you'll have the Conservatives and Reform suggesting that this is anti-entrepreneurial, that there's been too much of a focus on benefits and not enough willingness to reform the benefits system, and that's why taxes have had to go up. The Liberal Democrats have even made an argument around that minimum wage increase, saying that as laudable as that might be, as they see it, if you are announcing something like that in an economy that isn't growing hugely, to what extent does it price people out of work? So I think that's where, if you like, the political critique of the economic choices the Chancellor has taken will land. But I think you'll see an absolute garnishing of this sort of sense of a shambles, because this is extraordinary.

[00:54:36] Speaker 1: So just in terms of the general flavour of what we achieve, and probably let's bring in Helen in a second, but it's £30 billion in 2030-31 of direct tax measures. That's a £30 billion tax rise, offset by spending measures of £12 billion. So the net impact, the size of the budget, is about £18 billion. Give some context to that in terms of what that feels like in terms of the size of the budget.

[00:55:01] Speaker 3: Yeah, so we're still digesting this in live time, which is absolutely absurd. But it looks like here you've got a fairly chunky tax rise, albeit with some bits around fuel duty, partly paying at the end of the period for higher headroom, partly paying for increases in spending. So partly this looks like, to at least some degree, a kind of a classic tax and spend budget, actually. The Chancellor has raised higher taxes in order to spend more, as well as raising higher taxes in order to build herself a bigger buffer.

[00:55:30] Speaker 2: And just to remind people, because we did talk about the buffer, the wriggle room, the fiscal headroom that we talked about before, how much is that going to be?

[00:55:38] Speaker 3: £22 billion is the number coming out of here.

[00:55:40] Speaker 2: So that's more than double what she left off. More than double. So this is the aim, so she doesn't have to come back in another year and put up taxes again. That is the idea behind it.

[00:55:48] Speaker 3: Basically, she wants to be raising more in revenue than she's spending so that she meets her room with a bit more insurance. So £22 billion is more than double what she had at the last fiscal event. Still lower than the historical average. Doesn't guarantee she won't be back in this territory again. But that is, in some sense, one of the bolder moves of this budget, it looks like. Finding the extra tax increases to have that bigger wiggle room.

[00:56:06] Speaker 2: I just want to say to viewers who might be tuning in for Primus's questions that the reason we're not following that at this moment is that the Office for Budget Responsibilities report into the budget has been published online by mistake, ahead of the Chancellor herself getting up in the House of Commons at 12.30. We'll, of course, still bring you Rachel Reeves' speech, but the details have been published by mistake. So we are chewing over those before we hear from the Chancellor, which I understand and realise is quite strange.

[00:56:36] Speaker 4: The entire thing is out in the wild. That's the reality.

[00:56:39] Speaker 1: So, Vicky, in terms of the shape of the spending over time, this is really important, it's important for the markets. Overall, what we have is what we call a fiscal tightening, a little bit, tiny bit. So it's a budget attempting to show to the markets that they're consolidating borrowing. It happens by a very thin margin, £2 billion, 0.04%.

[00:56:59] Speaker 2: She borrows a little bit less.

[00:57:02] Speaker 1: Well, it is designed to tighten rather than to give away. A small takeaway. It's basically zero, it's basically neutral. But that is achieved by a relatively large loosening this year and next, which is spending, some of the things we've heard about, some of the things that the Labour backbenchers want. And then the tightening comes at the end of the Parliament.

[00:57:25] Speaker 2: Which is strange, because that's as we get towards the general election.

[00:57:28] Speaker 1: Well, as we get to the general election, there will be questions about how realistic that is, because it involves some spending cuts that are pencilled in the future. Is this really going to happen? Are they, in fact, waiting for growth to overperform on the downgrades we've heard from the OBR? That shape does matter, how plausible this is politically. What the implication of spending squeezes, and I haven't got to that page yet, at the end will be for unprotected departments. Helen will come out with some blood-curdling graphs about what this means to all departments.

[00:58:03] Speaker 2: There's already been a bit of people being slightly credulous about the spending plans that she outlined for departments, that actually these aren't very realistic, especially as you head into a general election, where you might want to be spending a bit more. So that is interesting, isn't it, in terms of how much is going to be spent for government departments.

[00:58:22] Speaker 3: Yeah, I mean, the picture, before we had any of this craziness, the picture was that spending was going to keep increasing over the Parliament, but by less at the end of the Parliament. At the same time, that spending pressure was going to keep going, ageing, disability, special educational needs. And that already looked tight in an election year, where governments don't tend to like to be tightening their belts in an election year. It looks like the Chancellor has left herself a lot of work to do at the end of the Parliament here, with the big tax rises not picking in until the election year. People will be questioning whether that's deliverable. Maybe people won't notice if it's stealthy and it freezes, but it's a very back-loaded profile of tax rises, looking like maybe there's some pairing back of spending at the end as well. So in some sense, big news about the Headroom, if she can deliver it, and delivering it means doing some tough stuff in election year. I think that's a big question for the Budget.

[00:59:08] Speaker 2: Yeah, because that has to be their ultimate aim, isn't it? It's to win the next election. Yeah. And so if some of these new taxes are going to come in, that's just not what governments normally do, is it?

[00:59:20] Speaker 4: No. And therefore there's the question about whether it is plausible. But then there is the classic sort of human nature defence that it's a fair old way away, and who knows what happens between now and then. And it's not the first time you've seen this sort of thing, of stuff being kicked sufficiently far down into the future, that there is an expectation or a hope that things might look a little rosier since. I think as far as next year's Budget is concerned, if it's Rachel Rees delivering it, she'll just be glad if she can stand up and no-one's seen the entire contents of it in advance.

[00:59:48] Speaker 2: And in terms of... We've talked, haven't we, about manifesto pledges and their pledges on promises on not putting up tax. So it appears, of course, they haven't broken the pledge that they're not going to raise the rate of income tax.

[01:00:02] Speaker 1: Yeah.

[01:00:03] Speaker 2: There are some question marks over National Assurance, I think, aren't there, in all of this? Because they didn't talk about the rate there, they just talked about not putting up National Assurance.

[01:00:10] Speaker 4: Precisely that. There's definitely a question around that. And then we should take a step back from the specific wording on page 21 of the Labour manifesto, which did refer to income tax rates, to underline the point we were making 40 minutes ago, but before we'd seen the actual document, that this freezing of the thresholds means, assuming there isn't any unfreezing between now and the point at which the freeze kicks in, or is extended, that people will be paying, some people will be paying more income tax than they were. So you can have an argument, and there's an important political argument about the difference between rates and thresholds, given that it was rates in the manifesto, but the reality in terms of an income tax bill.

[01:00:48] Speaker 2: People know if they're paying more tax.

[01:00:50] Speaker 4: Well, exactly that, exactly that. And crucially, and this point will absolutely be put to Rachel Reeves later, now we know that this is happening, she tried to make a political virtue a year ago about unfreezing those thresholds, arguing that that would be advantageous, as she put it, to working people, which is how that paragraph in the manifesto begins. So in leaning into what she saw as the positives of doing the opposite of what she is doing now, there is a quote from her a year ago that is guaranteed to be thrown back to her, either in the Commons in the coming hours, or indeed in a news conference that we're anticipating later on this afternoon.

[01:01:28] Speaker 2: Yeah, she presumably must be ready for that. Faisal, have you gleaned anything else? What are the markets doing now?

[01:01:34] Speaker 1: Well, I'm also trying to update our readers on the live page website at the same time, so you caught me out there. Sorry, sorry. But the markets that I said had reacted positively to the sort of macro headlines are now sort of digesting some of the things we just talked about, and they're sort of back at par. Listen, we've got the main headlines, there is still a lot of detail and the overall narrative that we're waiting for from the Chancellor. It's an important moment for her. Obviously, any attempt at doing a kind of white rabbit is out there. Sorry, yes, I do have something, actually, which I forgot, which is that some sort of energy help is coming. That was probably going to be the white help, the white rabbit.

[01:02:13] Speaker 2: We can just, sorry, we've half-forgotten a graph here showing what happened to Bonyield. Oh, yeah. There we go. Yes, so they're sort of, it seems to be where they were at the beginning of the day, roughly. Just before 12. It was about 10 to 12.

[01:02:25] Speaker 1: Yeah. So this doesn't help with the stability point, but I think by the end, not wanting to play down this, this is a very serious issue, but by the end of the day, things will wash out and we'll probably get to where we were. I'm not wanting to downplay this at all, but I think, and we should listen to her speech in the sense that... We will, don't worry. No, but in the sense that that story matters hugely, how convincing it is, whether it is coherent, whether she's got explanations. So there's one explanation for the backloaded element that we talked about, which is that some of these measures are quite novel. They're quite bold to do things on council, not council tax, but on high-value properties, to do things on electric vehicles. You can't do this overnight. It's going to take a couple of years to set up these systems, so that is why some of them are backloaded, but we can anticipate a key question being asked by the markets and why we're seeing a bit of a rollercoaster.

[01:03:19] Speaker 4: And to just bring you this, a statement from the Office for Budget Responsibility apologising, and they say they're launching an investigation after its Economic and Fiscal Outlook, the very document that we are trawling through right now, was published early, describing it as a, quote, technical error.

[01:03:34] Speaker 1: Yeah. So, listen, let me give some explanation here. So these documents are prepared in advance. Yeah. They'll be printed. They'll be printed and they're waiting for the time someone presses... Upload. Upload or something like that, and what appears to have happened is that someone has pressed the button earlier, or it's, you know, there's a more technical explanation of how these things are done. Is there? I mean, surely it's just... Well, no, I mean, because they go into some sort of... Because things like this have happened before, and they go into some sort of Bermuda Triangle kind of drop zone.

[01:04:06] Speaker 4: Oh, so it's on the internet, but the link... So it comes on and then it becomes liable. I don't know that.

[01:04:11] Speaker 1: I'm just telling you what would go behind this and why I accept the idea that this was probably entirely accidental. But someone's having a really bad day. Yeah. Someone's having a bad day.

[01:04:20] Speaker 2: Hannah, I just want to go back, there'll be people joining us all the time because it's coming up to the point where Rachel Reeves is going to stand up. In terms of the picture of the health of the economy, if you like, from what you've read in that OBR document, what does that tell you about the shape of the economy and how it's been doing compared to maybe what we thought it was doing?

[01:04:43] Speaker 3: Yeah. So here's what I think I've gleaned in trying to do this. It looks like... So we all went into this thinking that what was happening was that the office budget responsibility was downgrading its assessment of productivity and that was going to be the big news. They have done that, but two other things have been happening. It looks like there's been some spending pressures, so spending on things like disability and special educational needs have been running faster than we expect. That's more bad news for Rachel Reeves. But the good news is that revenues, before she did any tax increases, were also substantially higher. It looks like higher inflation has meant fiscal drag is doing even more for her. There looks to have been some change in the composition of revenues, more towards earnings, earnings are taxed at higher rates than profits. So before she did anything, Rachel Reeves actually didn't have a big fiscal repair job on her hands, it looks like, a much smaller one that we were all talking about. In response to that, she has chosen to increase taxes substantially. It looks like partly to build herself more insurance and partly to increase spending.

[01:05:44] Speaker 1: Now, I do have some new news now. I've got to page 64 of 203. I need to catch up. And there is a big energy package. Not the VAT cut on energy. I did this story when I interviewed the Chancellor a month ago in America. It is a shifting of the social levies to the taxpayer. So just explain what that is.

[01:06:05] Speaker 2: So on your bill, when you get your household bill, there are various things on that that you are paying. Some of them are social levies to help households who struggle.

[01:06:14] Speaker 1: Renewables obligation is the biggest one, I think.

[01:06:16] Speaker 2: Green taxes, as they're called.

[01:06:18] Speaker 1: Green taxes and some other social levies. I don't have the precise detail of that, but that's the strategy. Now, here's what's interesting. The OBR has scored this as a material impact on inflation, bringing it down in 2026-27 by a whopping 0.45 percentage points if you include the rail fares freeze and the energy bills package and the fuel duty freeze extension. And they are really leaning into this idea and explains the curious nature of this, that a budget can affect inflation. So this will help the actual CPI number next fiscal year be lower than otherwise would be the case.

[01:06:54] Speaker 2: So because she's bringing down household bills on energy. Yes. We don't know by how much.

[01:06:58] Speaker 1: No, we don't normally get this from... The inflation target is for the Bank of England. Now, intriguingly, in the following couple of years, this washes out and mildly, by 0.1%, increases the inflation rate. But they've used some of their fiscal firepower, some of their power in regulation, to help literally bring down the inflation rate.

[01:07:18] Speaker 2: So by keeping down rail fares, keeping down household energy bills, that keeps down inflation.

[01:07:22] Speaker 1: Yes, this is a big thing, right? Normally we'd look at the OBR impact on growth, on borrowing, maybe on employment, but the fact that they are making an argument that we have helped cut inflation. She said this and I was like, OK, this is an interesting argument. They've really gone for it. And as I say, not 0.4%, but that means a notable package where she will claim lower energy bills as a result of her budget. That was, I'm going to guess, that was going to be the white rabbit. But I don't have the number, I'm going to find it, of how many hundreds of pounds that helps.

[01:07:50] Speaker 4: And meanwhile, just to bring you this from our colleague Joe Pike, in terms of what's been going on in the Commons whilst we've been chewing over all of this, which is the splashes of mild panic, no doubt. Treasury Minister Torsten Bell, who is sitting behind Rachel Reeves, was passing his mobile phone to the Chancellor, presumably to let her know the bad news, that there'd definitely be no rabbits in the budget. It's a mass escape. Yeah, there's a mass escape of the whole... It's more to sit down. It is. And let's be honest, there was quite a few on College Green and Westminster Parliament as well.

[01:08:21] Speaker 2: Here we go, let's cross to the Commons for the Chancellor.

[01:08:23] Speaker 15: Point of order, Madam Deputy Speaker. This morning, we have seen an unprecedented leak of the OBR's Economic and Fiscal Outlook report before the Budget. This report contains market-sensitive information. It is utterly outrageous that this has happened. And this leak may indeed constitute a criminal act. In Prime Minister's questions, the Leader of the Opposition asked the Prime Minister about this leak, but he refused to answer her question. So, Madam Deputy Speaker, please can you advise this House what steps are at its disposal to force a leak inquiry into this matter? And would it be possible to ask the Table Office to distribute copies of the report given to the House, given that everybody outside of this House has already had the opportunity to read it?

[01:09:23] Speaker 20: Order. This is not a point of order for the Chair. The Chancellor is about to make her Budget statement and I expect Members and their constituents wish to hear from the Chancellor directly. However, before I call the Chancellor to speak, I nonetheless wish to make a short statement. For a number of weeks, and yet again yesterday, there have been extensive briefings of the media on the Government's fiscal policy and public finances. This disappointing trend in relation to Budget briefings has been growing for a number of years under successive Governments, but appears to have reached an unprecedented high. Weeks ago, we told the Chancellor, delivering a speech in Downing Street, setting the scene for the Budget, as well as specific policy announcements being briefed out to the media in advance of today's financial statement. And just... I don't need any help. And just a moment ago, it seems the OBR analysis has also appeared online. This all falls short of standards that the House expects. The premature disclosure of the contents of the Budget has always been regarded as a supreme discourtesy to this House and to all the democratically elected Members, not to mention to Mr Speaker and to myself, the Chairman of Ways and Means. The Government's own ministerial code cannot be clearer. As set out in paragraph 9.1, when Parliament is in session, the most important announcements of Government policy should be made in the first instance to Parliament. Mr Speaker has always upheld the rights of this House and its Members to be treated with respect and to be the first to hear major Government policy announcements on behalf of their constituents. As Chairman of Ways and Means, I have responsibility to oversee the House's consideration of the Budget statement and the ensuing resolutions which are described in Ursula May, paragraph 36.33, as the most important business of Ways and Means in this House. I want honourable Members on all sides of the House to have adequate opportunity to hold the Chancellor to account, rather than to hear and read about new policies on a daily basis in the media. And, like many, I also expected better. Before I call the Chancellor of the Exchequer, I remind honourable Members that copies of the Budget resolutions will be available to them from the Vote Office in Members' Lobby at the end of the Chancellor's statement and online.

[01:12:04] Speaker 1: Shhh.

[01:12:05] Speaker 20: I also remind honourable Members that interventions are not taken during the Chancellor's statement, nor during replies to the Leader of the Opposition or the Leader of the Liberal Democrats. I call the Chancellor of the Exchequer. Hear, hear.

[01:12:17] Speaker 11: Madam Deputy Speaker— Order.

[01:12:34] Speaker 20: Chancellor.

[01:12:35] Speaker 11: Madam Deputy Speaker, it is my understanding that the Office of Budget Responsibility's Economic and Financial Outlook was released on their website before this statement. This is deeply disappointing and a serious error on their part. The Office of Budget Responsibility have already made a statement taking full responsibility for their breach. Madam Deputy Speaker, we are rebuilding our economy. Over the last 16 months, we have overhauled our planning system to get Britain building, forged new trade deals with the United States, India and the European Union, reformed our visa system to bring the brightest and the best to Britain, we changed our fiscal rules that we inherited from the Conservatives and raised public investment to its highest level in four decades. And in last year's Budget, I raised taxes on business and the wealthiest to close the £22 billion black hole in the public finances left by the party opposites. And we used that money to fund the biggest ever settlement for our National Health Service. They were the fair and necessary choices. And we faced opposition to them, from opponents to planning reform, who will always demand that the future is built somewhere else, not in their backyard. Opponents to trade, who want to take us down the path of isolation and division. Opponents to investment, who believe that the only good thing a government can do is get out of the way. Opponents who insist that the only way to balance the books is to cut public spending. And opponents who say that we don't need to balance the books at all. But we made these choices for a reason. Because after 14 years of Conservative government, working people demanded and deserved change. Investment, not cuts to our public services. Stability for our public finances, the single most important factor in getting the cost of living down. And economic growth, the best means to improve wages, create jobs and support public services. That is what our plan, that is what this government and our Prime Minister are all about. Today's budget builds on the choices that we have made since July last year. To cut NHS waiting lists. To cut the cost of living. And to cut debt and borrowing. No doubt we will face opposition again, but I have yet to see a credible or a fairer alternative plan for working people. These are my choices, the right choices, for a fairer, a stronger and more secure Britain. Order.

[01:15:54] Speaker 20: Far too much noise. And I expect it so much better from you, Dr Luke Evans. You're meant to be a leader in your community. Simmer, simmer down, Chancellor.

[01:16:06] Speaker 11: I'm happy for them to shout as much as they like, Madam Deputy Speaker, as long as they do it from the Opposition benches where they can't cause any more damage. I said there would be no return to austerity, and I meant it. This budget will maintain investment in our economy and in our National Health Service. I said I would cut the cost of living, and I meant it. This budget will bring down inflation and provide immediate relief for families. I said I would cut debt and borrowing, and I meant it. Because of this budget, borrowing will fall as a share of GDP in every year of this forecast. Our net financial debt will be lower at the end of the forecast than it is today, and I will more than double the headroom against our stability rule for £21.7 billion, meeting our stability rule and meeting it a year early. These are my choices, not austerity, not borrowing, not turning a blind eye to unfairness. My choices are a budget for fair taxes, strong public services and a stable economy. That is the Labour choice. Growth is the engine that carries every one of our ambitions forward, through stability, investment and reform. The platform from which British ambition can finally get moving again. Because growth doesn't just appear out of thin air. It is built patiently and stubbornly by people who take risks. By founders who bet their savings on an idea. By firms breaking into new markets, developing new technologies and creating new jobs and new opportunities. By the men and the women who work hard every day in all parts of our country. Our job is not to watch from the sidelines, but to partner with them, backing them every step of the way to match private enterprise with public ambition. I would like to thank my team of officials at the Treasury for their hard work in preparing this budget. In the spring, the Office for Budget Responsibility forecast that our economy would grow by 1% this year. I said then that Britain would defy the forecasts, and defy them we have. The OBR have upgraded Britain's growth for this year from 1% to 1.5%. Reaching the same conclusions as the IMF, the OECD and the Bank of England who have already upgraded their forecasts. Today, the OBR have published the result of their review of the supply side of the economy. They are clear that this is not about the last 14 months. It is about the previous 14 years. The legacy of Brexit and the pandemic. And the damaging decisions by the party opposites. Cutting public spending. Leaving communities and entire regions behind. Starving our economy of investment and weakening our public services. As a result of their review, the OBR are reducing their expectations for productivity growth by 0.3 percentage points to 1% by the end of the forecast. They say today, and I quote, Real GDP is forecast to grow by 1.5% on average over the forecast due to lower underlying productivity growth. There is an impact on our public finances too. The OBR say that their productivity forecast will mean £16 billion less in tax receipts by 2030. These forecasts are the Tories' legacy, not Britain's destiny.

[01:20:38] Speaker 20: Order. It is very hard to hear the Chancellor over all the shouting. And Mr Holmes, you promised me yesterday you were going to be on top behaviour in the first few minutes.

[01:20:50] Speaker 11: Chancellor. We beat the forecasts this year and we will beat them again. By boosting trade, not blocking it. By increasing investment, not cutting it. By championing innovation, not stifling it. By backing working people, not making them poorer. Brick by brick, we've been building our economy. Building roads, building homes, getting spades in the ground and cranes in the sky. Growth begins with the spark of an entrepreneur. Half of new jobs in Britain are created by scale-up businesses. And we want those jobs created here, not somewhere else. Our job is to make Britain the best place in the world to start up, to scale up and to stay. So we're widening eligibility for our enterprise incentives. So scale-ups can attract the talent and the capital that they need. Expanding the enterprise management incentive so more companies can offer tax-relieved share options. Re-engineering our enterprise investment and venture capital trust schemes. So they don't just back early stage ideas, but stay with companies as they grow. Introducing UK listings relief. A three-year exemption from stamp duty reserve tax for companies who choose to list here in Britain. And to continue this work, I am launching a call for evidence on how our tax system can better back entrepreneurs. And a targeted review with founders and investors at the heart. To make the UK an even more attractive place to grow your business. We are sending a simple message to the world. If you build here, Britain will back you. And our retail investment system should do the same. The UK has some of the lowest levels of retail investment in the G7. And that is not only bad for business, who need that investment to grow. It's bad for savers too. Someone who has invested £1,000 a year in an average stocks and shares ISA every year since 1999 would be £50,000 better off today if they'd put that same money into a cash ISA. And so from April 2027, I will reform our ISA system. Keeping the full £20,000 allowance while designating £8,000 of it exclusively for investment. With over 65s retaining the full cash allowance. And thanks to our changes to financial advice and guidance, banks will be able to guide savers to better choices for their hard-earned money. Over 50% of the ISA market, including Hargreaves Lansdowne, HSBC, Lloyds, Vanguard and Barclays have signed up to launch new online hubs to help people invest here in Britain. At this Budget, consistent with the commitments in our corporate tax roadmap, I will retain our competitive corporation tax rate, the lowest in the G7. And retain our generous full expensing offer for business investments. I will also introduce a new 40% first-year allowance so that businesses can write off more of the cost of their investment up front while reducing main rates writing down allowances in line with fiscal constraints. Private investment is the lifeblood of economic growth. But growth needs public investment too. When faced with challenges, previous chancellors have chosen to decrease, delay or cancel capital spending. But low investment is the cause of our productivity problem, not the solution. So my choice is not cuts, not stagnation, but to maintain the additional £120 billion of investment that I provided at the spending review. In transport, to link our towns and our cities. Energy infrastructure to power our businesses. And housing, so people can live near good jobs paying decent wages and growing businesses. That is the Labour choice. I'm grateful to the Financial Secretary to the Treasury for his work in driving our growth agenda forward. As we allocate investment for the infrastructure that is the backbone of economic growth across our country, today I will commit investment for the Lower Thames crossing. And we're continuing to drive investment in city region transport, in the Midlands rail hub and the TransPennine route upgrade, along with our commitments to the Northern Growth Corridor, including Northern Powerhouse Rail. It is this Labour government that has overhauled our planning system, and I will today provide further funding to increase planning capacity through a new skills offer. As called for by the British Chamber of Commerce and the Confederation of British Industry. It is this Labour government that has invested in nuclear power, in Syswell C and in Cullom. We are taking forward our commitment to slash electricity prices for thousands of manufacturing businesses, as Make UK and many others have called for. And today I'm pleased to welcome John Finkelton's report, an ambitious plan to cut the red tape that has tied our nuclear industry in knots for decades. And within three months we will set out our plan for delivering his recommendations. We are proud of our industrial heritage, and we are determined to build the industry of the future, so that we buy, make and sell more here in Britain. That's why, as we increase defence spending, we are investing in Portsmouth, in Barrow and in Plymouth. And I'm pleased to be supporting Team Derby, an initiative to drive growth in one of our defence industry hubs. It's why we stepped in to save British steel in Scunthorpe, and invested in Sheffield Forgemasters. And it's why we've changed government procurement, so we can buy British when it is crucial to our national security. For steel, for ship building and today for AI, driving innovation and building that great industry here in Britain. But it's not just what we invest that matters, it's how we invest. Putting money and power back in the hands of local and regional leaders. Today we are devolving £13 billion of flexible funding for seven mayors to invest in skills, business support and infrastructure. I'm extending the business rates retention pilots in the west of England, Liverpool city region and Cornwall until 2029. I'm providing £30 million for the Kernow Industrial Growth Fund for sectors like critical minerals and marine innovation. I'm establishing the Leeds City Fund, a long-term agreement to retain business rates to fund local regeneration projects like the development of Leeds South Bank. And I'm allocating £20 million for the new Peterborough sports quarter and £16 million for a science centre in Darlington from the Growth Mission Fund. The benefits of investment and growth must be built and felt in every part of our United Kingdom. So we are providing an additional £370 million for the Northern Ireland Executive. £505 million for the Welsh Government and £820 million for the Scottish Government over the spending review period through the Barnett formula. And I am making—sorry, I didn't quite catch that from the SNP. Perhaps, Madam Deputy Speaker, they didn't hear. £820 million for the Scottish Government over the spending review period because Anas Sarwar asked us to. And I'm making targeted investments in our industrial strategy sectors across the UK. In Northern Ireland, I am providing £17 million to support businesses and strengthen the UK internal market. I'm backing advanced manufacturing through the Northern Ireland Enhanced Investment Zone. Wales will be the host for two AI growth zones, creating more than 8,000 jobs, supported by a £10 million investment in the semiconductors critical for that industry. And we are building the UK's first small modular nuclear reactors with Rolls-Royce at Wilfre in Anglesey. Two Labour Governments working together in Wales to deliver for the people of Wales. And in Scotland, I'm committing over £14 million for low-carbon technologies in Grangemouth, £20 million to renew infrastructure at Inchgreen in Inverclyde, and £20 million to redevelop Kirkcaldy town centre and seafront, with construction starting next year. And that's on top of the UK's biggest ever warship export deal with the Norwegian Government to build frigates in Glasgow. Supporting 4,000 jobs, investment opposed by the SNP, jobs opposed by the SNP, defence opposed by the SNP, but secured by this Labour Government. A growing economy needs strong foundations of economic stability, with borrowing, inflation down and investment up. That is good for business, and it is good for working people, so they have more money in their pockets. Economic stability, safeguarded by ironclad fiscal rules, is our best defence against rising prices and the best way to improve living standards. We've all seen the alternative. Three years ago, in their clamour to cut taxes for the richest, the Tories under Liz Truss crashed the economy and sent mortgage rates spiralling, and brought pensions to the brink. They've been so loud, Madam Deputy Speaker, and yet I can't even hear them now. Now, I know that the leader of the Green Party is a keen hypnotherapist, and he believes that he can achieve remarkable things using only the power of his mind. Unfortunately, the only things getting bigger under his approach would be the deficit and the rate of inflation. And for all the damage that the Conservative cuts did to our schools and our hospitals, they also doubled the national debt. Our net financial debt this year will be £2.6 trillion, 83% of GDP, meaning that today, one in every £10 that government spends is on debt interest. Not on paying down that debt, but just on paying the interest on the debt that we inherited from the Conservatives. My fiscal rules will get borrowing down while supporting investment. The stability rule, that day-to-day expenditure must be met through tax receipts. And the investment rule, which allows me to increase investment whilst getting debt on a downward path. Those fiscal rules are non-negotiable. I met them at the Budget last year, I met them in the spring, and I have met them today. While the current budget balance is in deficit by £28.8 billion in 2026-27 and £4.6 billion in 2027-28, it moves into a surplus of £3.9 billion in 2028-29, £21.7 billion in 2029-30, and £24.6 billion in 2030-31. More than doubling our headroom against the stability rule, and meeting that rule a year early too. And our next financial debt is 83.3% in 2026-27, 83.6% in 2027-28, 83.7% in 2028-29, falling to 83.0% in 2029-30, and 82.2% in 2030-31. Madam Deputy Speaker, I said we would cut the debt, and we are. We're debt down by the end of the forecast. And going forward, to support our commitment to a single fiscal event and further strengthen our economic stability, I will follow the recommendations of the International Monetary Fund by assessing the fiscal rules just once a year at the Budget. Despite the challenges we face on productivity, the path of our deficit reduction remains broadly the same as in spring. Public sector net borrowing is due to be £112.1 billion, or 3.5% of GDP in 2026-27, 3% in 2027-28, 2.6% in 2028-29, 1.9% in 2029-30, and 1.9% in 2030-31, ending at £67.2 billion, translating into an increase in the net cash requirement next year of £4.2 billion, taking the total to £133.3 billion. According to the IMF, we are due to reduce borrowing more over the rest of this Parliament than any other G7 economy. The Conservatives crashed the economy. We are protecting it. The Conservatives lost control of debt. We are getting debt down. The Conservatives let inflation and interest rates go through the roof, but since Labour took office, the Bank of England has cut interest rates five times. I've made my choices. Not reckless borrowing, not dangerous cuts, but stability for our economy, security for our public finances, and security for family finances too. Those are the Labour choices. Tory austerity left classrooms crumbling and waiting lists sky-high, weakened our productivity and choked our economic growth. And now they propose a further £47 billion of cuts to our public services. Well, that is equivalent to cutting every police officer in our country twice over. And then there is reform, who promise more than £100 billion of cuts, with no details of where those cuts will come from or who will pay for them. A recipe for devastating damage to our public services. People voted for Labour because they wanted roads that aren't full of potholes. They want police on our streets and they want an NHS that is there when they need it. And we're delivering that. Waiting lists down by 230,000. And not just the 2 million additional appointments we promised, but an additional 5.2 million appointments already delivered since the general election. I joined the Labour Party almost 30 years ago because I could see that the Conservative government that I grew up under didn't care much about schools like mine. Textbooks were rationed.

[01:37:38] Speaker 20: I know that many of you are at schools like mine. There is far too much noise, far too much excitement. People need to calm down a little. Chancellor.

[01:37:50] Speaker 11: They don't want to hear what the Tories did to schools like mine, but I will tell them. Textbooks rationed. Libraries closed. Kids herded into porter cabins in the playground. And I came into politics to change that. The money that I allocated at the spending review will fix the crumbling classrooms that the Conservatives left behind and build the schools that they promised but never delivered. And today, thanks to representations from my Honourable Friends, the Members for Wolverhampton North East and Leeds South West and Morley, I will provide £5 million for libraries in secondary schools, building on the £10 million commitment to ensure that every primary school has a school library within this Parliament. And thanks to representations from my Honourable Friends, the Members for Bournemouth East and from Luton North, I am providing £18 million to improve and upgrade playgrounds across England. Madam Deputy Speaker, let there be no doubt that this is a Government that is on the side of our kids and who will back their potential. I will not allow the legacies of Conservative neglect to stain our society. Last year, I made changes to the Mine Workers' Pension Scheme to ensure that its members receive the fair pensions that they are owed. This year, with thanks to the Minister for Pensions for all his work in this subject, I can go further. I have heard representations from Labour Coalfield MPs, including my Honourable Friends, the Members for Bassetlaw, Blyth and Ashington, Barnsley South, Mansfield and Llanelli. And today I can announce that I will transfer the Investment Reserve Fund of the British Coal Staff Superannuation Scheme to its members. So that the men and the women who worked in our coal industry get a fair deal in their retirement soon. And more. Having heard representations from my Honourable Friends, the Members for Banbury and the Member for Edinburgh South West, I will index for inflation on pensions accrued before 1997 in the Pension Protection Fund and the Financial Assurance Scheme, so that people whose pension schemes became insolvent, no fault of their own, no longer lose out of the result of inflation. Last year, I also provided funding to compensate the victims of the infected blood scandal, after the previous Government failed to budget for the costs of compensation. This year, I have listened to representations from my Honourable Friend, the Member for Eltham and Chislehurst and my Honourable Friend, the Member for Edinburgh South West. I would like to thank the Minister for Employment for her representations over many years on this subject. As a result, I will exempt all payments from the infected blood scheme from inheritance tax, regardless of the circumstances in which those payments are passed down. Madam Deputy Speaker, that is how we should be spending taxpayers' money. On dealing with injustices and building strong public services, not on waste and inefficiency. At the spending review, I set an ambitious target of £14 billion of efficiencies per year by 2029, and I am grateful to the Chief Secretary to the Treasury for driving that work forward, realising savings through AI and automation, and by scrapping NHS England and reducing back-office staff by 18,000. At this Budget, I will find a further £4.9 billion of efficiencies by 2031. Getting rid of police and crime commissioners, cutting the cost of politics and local government, and selling government assets that we no longer have any use for. These savings will be required across government, but for our National Health Service, I will reinvest all of these savings back into the care that people rely on. More nurses, more GPs, more appointments. Restoring the services that faltered under years of Conservative decline, and investing in the future of our National Health Service. And today I am announcing £300 million of investment in technology to improve patient service, and 250 new neighbourhood health centres. Expanding more services into communities, so that people can receive treatment outside of hospitals and get better, faster care where they live. Over 100 of these will be delivered by 2030, including in Birmingham, Truro and Southall. The Labour Party founded our National Health Service, and we will renew our National Health Service. I will take the same approach for defence spending that I take to NHS spending. Reinvesting savings back into our national security. In our age of insecurity, Britain will continue to stand with our allies, working in collaboration to secure a sustainable ceasefire for Ukraine, and maintaining our commitment to NATO, with the UK set to spend 2.6% of GDP on defence by April 2027. Madam Deputy Speaker, the public rightly expects that we stamp out fraud, error and waste, and put that money to good use in our schools, hospitals and other frontline services. My Right Honourable Friend the Home Secretary has already announced that she will claw back excess profits from the use of hotels to house asylum seekers, as we phase out the use of those hotels entirely. And we will consult on reforms to indefinite leave to remain, and access to taxpayer funded benefits. The introduction of digital ID will break the link between illegal migration and illegal working. And the HMRC and the Fair Work Agency will crack down on illicit businesses that blight our high streets and undercut illegitimate firms. Enforcing the minimum wage, investigating dodgy businesses, and increasing scrutiny of the gig economy, as well as tracking down fraudulent business owners who vanish without paying their taxes. And I'd like to thank my Honourable Friends, the Members for Great Grimsby and Cleethorpes, Leigh and Atherton, and Kensington and Bayswater for their representations on this subject. And I'll take further steps to prevent and track down unpaid tax, which will together, these reforms, will raise nearly £10 billion a year by 2030. Including through new powers for HMRC to pursue the promoters of tax avoidance schemes. I am building on our successful use of targeted checks on welfare claims to root out fraud and error and prevent public money being paid to people who are not entitled to it. And I would like to thank Tom Hayhoe, the Covid Corruption Commissioner, for his work in helping to chase down nearly £400 million from dodgy pandemic spending and contracts. Tory contracts handed out by Tory Ministers to Tory peers and Tory friends.

[01:45:39] Speaker 20: Well that money belongs in our schools and in our hospitals. It is so noisy in here we can barely hear the Chancellor. Everybody needs to calm down. Chancellor.

[01:45:58] Speaker 11: Well I wouldn't want any Honourable Member to miss this. So we are chasing down that money and we've got almost £400 million back from dodgy pandemic spending and contracts. Tory contracts handed out by Tory Ministers to Tory peers and Tory donors. Well that money belongs in our schools and in our hospitals and we are getting that money back. And finally, Madam Deputy Speaker, we are ramping up sanctions on Russia. And we are freezing known Russian assets. But let me be clear, I don't actually mean the Honourable Member for Clacton. Under the Conservative.

[01:46:54] Speaker 20: You don't need commentary from the back benches and Mr Dewhurst you are so loud. It's remarkable how far your voice carries. Chancellor.

[01:47:05] Speaker 11: Under the Conservatives the cost of our welfare system increased by nearly one percentage point of GDP. Equivalent to £88 billion in just five years. The broken welfare system that we inherited wrote off millions of people as too sick to work. And we will reform that system. So that it is a system that does not count the cost of failure but one that protects people who cannot work and empowers those who can. We have brought back face-to-face assessments for disability benefits. Those are the face-to-face assessments that the Shadow Chancellor got rid of when he was Work and Pensions Secretary. And our changes to universal credit will get 15,000 people back into work, a figure confirmed today. The former Health Secretary Alan Milburn will review the causes of rising youth inactivity. And we are already taking action. I'm grateful to the Federation of Small Businesses and Small Business Britain for their representations on apprenticeships. And today I am announcing funding to make the training for under-25 apprenticeships completely free for small and medium-sized enterprises. And funding our new youth guarantee, providing £820 million over the next three years to give young people who are let down by the Conservatives the support and the opportunity that they deserve. Guaranteeing every young person a place in college, an apprenticeship or personalised job support. And after 18 months, 18 to 21-year-olds will be offered paid work, not benefits. The Motability scheme was set up to protect the most vulnerable, not to subsidise the lease on a Mercedes-Benz. And so I am making reforms that will reduce generous taxpayer subsidies, and Motability have confirmed that they will remove luxury vehicles from their scheme. Getting the scheme back to its original purpose of offering cost-effective leases to disabled people. And taxpayers' money should not be spent on pensions for people abroad, who only lived here for a couple of years and may never even have paid a penny in tax. The Conservatives allowed thousands of people living abroad to buy their way into the state pension for as little as £3.50 a week, debasing the purpose of our pension system. And so I will abolish access to Class 2 voluntary national insurance contributions for people living abroad. Increasing the time that someone has to live or work in Britain to 10 years and increasing the contributions that they must pay. These reforms improve our welfare system, they support our young people, protect those who need it most and put an end to Conservative waste and unfairness. Madam Deputy Speaker, to break the cycle of austerity, we need a fair and a sustainable tax system. One that generates revenues to fund the public services that we all use, and supports investment to grow our economy. That does mean that today I am asking everyone to make a contribution. The previous Conservative government froze personal tax thresholds from 2021 to 2028. And today I will maintain all income tax and equivalent national insurance thresholds at their current level for a further three years from 2028. While ensuring that people...

[01:51:06] Speaker 20: Order. The noise is far too high. Chancellor.

[01:51:17] Speaker 11: The Right Honourable Lady supported these freezes when her party made them. She might want to forget about it, but the British people never will. At the same time, we are ensuring that people only in receipt of the basic or new state pension do not have to pay small amounts of tax through simple assessment from April 2027. I will also keep the Plan 2 student loan repayments threshold at its 2026-27 level for three years. Madam Deputy Speaker, I know that maintaining these thresholds is a decision that will affect working people. I said that last year and I won't pretend otherwise now. Madam Deputy Speaker, I am asking everyone to make a contribution. But I can keep that contribution as low as possible because I will make further reforms to our tax system today to make it fairer and to ensure that the wealthiest contribute the most. The Conservatives knew that our tax system didn't work. Time and time again, they ducked the necessary reforms, leaving a system unfit for a changing economy with unfairness that they refused to address. Currently, a landlord with an income of £25,000 will pay nearly £1,200 less in tax than their tenant with the same salary because no national insurance is charged on property, dividend or savings income. It's not fair that the tax system treats different types of income so differently. And so I will increase the basic and higher rate of tax on property, savings and dividend income by two percentage points and the additional rate of tax on property and savings income by two percentage points. Even after these reforms, 90% of taxpayers will still pay no tax at all on their savings. As well as narrowing the gap between the tax on income from assets and income from work, I also believe that a fair society is one where the wealthiest pay their fair share. The reforms I made last year will raise an additional £8 billion a year by 2020, 30 from wealth. I increased taxes last year on private equity, private schools and private jets. I abolished the non-dom tax regime. And this year, I will make two changes to cap trust charges and prevent avoidance. I reformed inheritance tax on agricultural and business assets. And this year, I am aligning those reforms with wider inheritance tax rules by allowing the transfer of the 100% relief allowance between spouses, balancing the taxation of these valuable assets with the realities of family life. In this budget, I will take further steps to deal with a long-standing source of wealth inequality in our country. A band D home in Darlington or Blackpool pays just under £2,400 in council tax, nearly £300 more than a £10 million mansion in Mayfair. And so, from 2028, I am introducing the high-value council tax surcharge in England, an annual £2,500 charge for properties worth more than £2 million, rising to £7,500 for properties worth more than £5 million. This will be collected alongside council tax, levied on owners, and we will consult on options for support or deferral. This new surcharge will raise over £400 million by 2031 and will be charged on less than the top 1% of properties. Madam Deputy Speaker, reliefs in our tax system cost the taxpayer billions of pounds a year, but many of them no longer serve their original purpose. The Government rightly provide generous tax relief for people paying into a pension, relieving income tax on all contributions and on the investment itself, as well as national insurance relief on employer contributions, at a cost of over £70 billion a year to the exchequer. This Budget makes no changes to those reliefs or to the tax-free lump sum. But salary sacrifice for pensions, which was intended to be a small part of our pension system, is forecast to almost treble in cost to other taxpayers from £2.8 billion in 2017 to £8 billion by 2030, with the greatest benefit going to the highest earners or to those in the financial services sector putting their bonuses into pensions tax-free, while those on the minimum wage or those whose employers don't offer salary sacrifice don't benefit at all. That is not sustainable for our public finances, putting pressure on the tax that everyone else pays. And so I am introducing a £2,000 cap on salary sacrifice into a pension, with contributions above that taxed in the same way as other employee pension contributions. That is a pragmatic step so that people, especially on low and middle incomes, can continue to use salary sacrifice for their pension without paying any more in tax than they do now. And to give individuals and employers time to adjust to these new arrangements, these changes will come into effect in 2029. The coalition government introduced 100% relief from capital gains tax on business sales made to employee ownership trusts, creating a route for gains to go completely untaxed when businesses are sold. I will reduce that relief to 50%, retaining a strong incentive for employee-owned companies. And as we work towards doubling the size of the co-operative economy, the Department for Business and Trade will launch a call for evidence on how we can better support co-ops to grow. Because of the changes that I have made to capital gains tax this year and last year, receipts are forecast to increase from £14 billion this year to £30 billion by 2030. To support our high streets, I am announcing a package of regulatory changes, as called for by UK Hospitality and the British Retail Consortium. And I will support the Great British Pub through our new national licensing framework, encouraging councils to back our pubs and to back late-night venues with greater freedoms. For business rates, I will introduce permanently lower tax rates for over 750,000 retail, hospitality and leisure properties—the lowest rates since 1991—paid for through higher rates on properties worth more than £500,000, like the warehouses used by online giants. Alongside this, I will introduce a package of support worth over £4.3 billion over the next three years for a property of any size, seeing a large increase in their bill. And to support a level playing field in retail, I will stop online firms from undercutting our high street businesses by ensuring customs duty applies on parcels of any value. I will reform our motoring taxes, exempting search and rescue vehicles from vehicle excise duty, as called for by my hon. Friend the Member for the Western Isles and for Whitehaven and Workington. And because all cars contribute to the wear and tear on our roads, I will ensure that drivers are taxed according to how much they drive, and not just by the type of car they own, by introducing the electric vehicle excise duty on electric cars. This will be payable each year, alongside vehicle excise duty, at 3p per mile for electric cars and 1.5p for plug-in hybrids, helping us to double road maintenance funding in England over the course of this Parliament. And alongside this, I am providing support to boost our British car industry, increasing the threshold for the inexpensive car supplement on electric vehicles to £50,000, saving over a million motorists £440 a year, providing £1.3 billion additional funding for the electric car grant, extending it to 2030 and taking total funding to £2 billion, as well as delaying changes to the employee car ownership scheme. In addition, we are investing a further £200 million to accelerate the roll-out of EV charging, as well as 100% business rates relief for EV charge points for the next decade, with thanks to my hon. Friend the Member for Camberwell and Redruth for his representations on this policy. And I will improve competition in our taxi industry by ending ride-hailing companies' use of a discount scheme intended for coach tours, as called for by Steve McNamara, the General Secretary of the Licensed Taxi Drivers Association, legislating to restrict access so that everyone pays fairly and protecting £700 million of tax revenue each year. I am responding to our consultation on landfill tax and listening to representations, particularly from our house-building industry. I will not converge towards a single rate, but I will prevent the gap between the two rates from widening to balance the need to address tax avoidance in the current structure. I will today publish Ray McCann's report into the loan charge, along with the Government's response, setting out a new settlement opportunity that will finally allow people to finalise their position and draw a line under this long-standing issue. And I'd like to thank my hon. Friend the Member for Milton Keynes Central for her representations on this subject. I will continue with the planned uprating for tobacco duties that I set out last year and uprate alcohol duties by inflation, along with our plans to introduce a vaping products duty in 2026 and changes to the soft drinks industry levy announced by my right hon. Friend the Health Secretary yesterday. And I'd like to thank the Exchequer Secretary to the Treasury for his work on all the tax measures in this Budget. I will also reform gambling taxes in response to the rise in online gambling. Remote gaming is associated with the highest levels of harm, and so I am increasing remote gaming duty from 21% to 40%, with duty on online betting increasing from 15% to 25%. I am making no change to the taxes on in-person gambling or on horse racing, and I am abolishing bingo duty entirely from April next year. Taken together, my reforms to gambling tax will raise over £1 billion per year by 2031. As a result of the tax reforms I have made today, I can confirm that I will not be increasing national insurance, the basic higher or additional rates of income tax, or VAT. And I have kept everyone's contribution as low as possible through reforms to make our tax system stronger, closing loopholes, ensuring that the wealthiest pay their share, and building a tax system that is fairer for the future as our economy changes. On the day I became Chancellor, I said that I would judge my time in office a success if I knew that ordinary children from working-class backgrounds were living more fulfilling lives. Their horizons expanded, their potential realised. I joined the Labour Party, I came into politics, because I believe that every child has equal worth and deserves an equal chance to achieve their goals. The biggest barrier to equal opportunity is child poverty, because for every child that grows up in poverty, our society pays a triple cost. The first and the heaviest is to the child. Going to school hungry, waking up in a cold home, or in another B&B. While other children enjoy the advantages of parents with time to help with homework, the quiet space at home to work in, too many go without. And there is also the cost of supporting a family in poverty, which ends up in the lap of overstretched councils, who can do no more than shunt them into temporary accommodation at huge cost to local taxpayers. Then there is the future cost, to our economy and to our society, of wasted talent and a welfare system that bears the cost of failure for decades to come. Young people with so much to contribute, but whose potential is suffocated early by limited life chances and missed opportunities, struggling to make their way in a society that did not look out for them. I don't intend to preside over a status quo that punishes children for the circumstances of their birth and demands that we all pay full-time school reference. Since last July, we've rolled out free breakfast clubs in schools. We're expanding free school meals to half a million more kids, lifting 100,000 children out of poverty as we do it. We've passed the Renters' Rights Act, and we've extended the childcare offer. And I'm proud of all of that. But it's not enough. Because there is one policy that pushes kids into poverty more than any other. It was introduced by the party opposite. They said it would save money and that it would bring about behavioural change, disincentivising poorer families from having more children. Well, even on its own terms, it failed. The Welfare Bill has continued to rise, and there's been no difference in the size of families. But what it has done is to push hundreds of thousands of children into poverty since it was introduced. They said they were punishing parents' choices, but it's the kids who have paid the price. They've paid the price for the policies of a party which opted for cynical gimmicks over real savings in our welfare system. I understand that many families are finding times hard, and that many kids have had to make difficult choices when it comes to having kids. And there are many reasons why people choose to have children and then find themselves in difficult times. The death of a partner, separation, ill health, a lost job. I don't believe that children should have to bear the brunt of that. And neither can I, in good conscience, leave in place the vile policy known as the rape clause, requiring women to prove if their child has been conceived non-consensually to receive support. I'm proud to be Britain's first female Chancellor of the Exchequer. I take the responsibilities that come with that seriously. I will not tolerate the grotesque indignity of women of the rape clause any longer. It is dehumanising, it is cruel, and I will remove it from the statute book. And so because I am tackling fraud and error in our welfare system, because I am cracking down on tax avoidance, because I am reforming gambling taxation, I can announce today, fully costed and fully funded, the removal of the two-child limit in full from April. It's amazing what people get so angry about, and we've seen their true colours today.

[02:09:10] Speaker 20: The thing they get angry about is lifting children out of poverty.

[02:09:13] Speaker 11: I think our constituents have heard all they need to from the party opposites today. We on this side of the House do not believe that the solution to a broken welfare system is to punish the most vulnerable. We are lifting 450,000 children out of poverty with the end of the two-child limit. And, Madam Deputy Speaker, combined with other actions we are taking, this Labour Government is achieving the biggest reduction in child poverty over a Parliament since records began.

[02:09:48] Speaker 13: That is the difference that this Labour Government is making.

[02:09:52] Speaker 11: Madam Deputy Speaker, I know how worried families are about the cost of everything. Worried that their money won't stretch to the end of the month. Worried that price—I think if you've got a house that's worth £5 million a year, you can probably afford it, but you get more exercise about reducing child poverty than you do about the richest paying more. Under this Government, wages have risen by more since we were elected than in 10 years under the last Government, with lower interest rates already saving families £1,200 a year off a typical new mortgage, compared to that of when Liz Truss was Prime Minister. But I know, I know that people still face pressure on their budget stay today and week to week. And where there is more to do where we can provide relief, we are doing it. Extending the bus fare cap. Cracking down on rip-off price hikes. Freezing prescription charges. And freezing rail fares for the first time in 30 years. I am increasing the basic and new state pension by 4.8%, an increase of £440 per year for the basic state pension, and an increase of £575 per year for the new state pension, in line with our commitment to the triple lock. At the election, we promised a genuine living wage, and we are delivering it. At the Budget last year, I increased the national minimum wage and the national living wage, and I am doing the same this year too. Accepting the recommendations of the Low Pay Commission in full, and increasing the minimum wage for 18 to 20 year olds from £10 to £10.85 an hour, and increasing the living wage from £12.21 to £12.71 an hour. Under current plans, the temporary 5p cuts of fuel duty that was introduced during the pandemic will come to an end in April, and fuel duty will be uprated in line with inflation. But I know that the cost of travelling to and from work is still too expensive. And so I am extending the 5p cut until September 2026. And because I know that changes in wholesale prices are not always passed on to motorists, I am bringing in new rules to mandate petrol forecourts to share real-time price rises through a new fuel finder, empowering drivers to find the cheapest fuel, calling out rip-offs and strengthening competition, saving the average household £40 a year. Madam Deputy Speaker, one of the greatest drivers of the rising cost of living is the cost of energy prices. The cause of high energy bills must be tackled at source, and so we are investing in energy security, in nuclear and renewable energy, and in insulation through our warm homes plan. But that's not enough when people are struggling with energy bills today. The Conservatives' Eco scheme was presented as a plan to tackle fuel poverty. It costs households £1.7 billion a year on their bills. And for 97% of families in fuel poverty, the scheme has cost them more than it's saved. It is a failed scheme, and so I am scrapping it, along with taking other legacy costs off bills. And as a result, I can tell you today that for every family, we are keeping our promise to get energy bills down and cut the cost of living. With £150 cut from the average household bill from April next year. Money off bills and in the pockets of working people. That is my choice. Not to neglect Britain's energy security like the Tories did. Not to leave working families to bear the brunt of high prices like the Tories did. But to get energy costs down now and in the future. That is the Labour choice. And Madam Deputy Speaker, one more thing. Because of our action on bills and on prices, as a direct result of this Budget, the Office for Budget Responsibility confirmed today that inflation is coming down faster and will be a full 0.4 percentage points lower next year. That's the benefit of a Labour government cutting the cost of living. Madam Deputy Speaker, this Labour government is changing our country. In the face of challenges on our productivity, I will grow our economy through stability, investment and reform. I have met my fiscal rules and built our economic resilience for the future. I have asked everyone to contribute, yes, for the security of our country and the brightness of its future. But I have kept that contribution as low as possible by reforming our tax system, making it fairer and stronger for the future. I have protected our NHS, maintaining public investment and driving efficiency in government spending. I have taken action on our broken welfare system, rooting out waste and lifting children out of poverty. And I have cut the cost of living, with money off bills and prices frozen, all while keeping every single one of our manifesto commitments. Those are my choices.

[02:16:08] Speaker 1: First Order.

[02:16:09] Speaker 20: Mr Rankin, Ms Moulton, your voice carries right across the chamber, right across the chamber. Try and take a breath every so often. Chancellor.

[02:16:25] Speaker 11: Those are my choices. Not austerity, not reckless borrowing, but cutting the debt, cutting waiting lists and cutting the cost of living. Those are Labour choices, promised and delivered by this budget, promised and delivered by this Labour government. And Madam Deputy Speaker, I commend this statement to the House.

[02:16:54] Speaker 2: The Chancellor of the Exchequer giving her second budget. You can see the reaction there from Labour MPs waving their order papers. They are very happy about what they heard, particularly, of course, that announcement about lifting the cap on two-child benefit. Let's get some reactions straight away. Helen, let's start with you. What's your big takeaway from what you've heard this afternoon?

[02:17:17] Speaker 3: I think one big piece of news is that it looks like, actually, things weren't as bad for Rachel Reeves as everyone expected. The downgrade that the OBR gave her wasn't as big as it was expected. She had less work to do. But in the face of that, we got what we expected, which was a really rather large increase in taxes. The biggest single measure there, looking like the freeze to the personal tax thresholds, that will mean a big tax increase for most people, more people bringing into tax, people paying higher tax when they're paying it.

[02:17:43] Speaker 1: Faisal? Well, I think in terms of the strategy behind this, what you see, the result of all that is the critical number that we mentioned on Headroom has gone up from £9.9 to £22 billion. This is her wriggle room, if you like. This is her wriggle room. And on top of that, a nerdy but important point that this process of the OBR analysing, marking the homework of the government, is now going to only happen once a year. Remember that six months ago, this welfare U-turn was entirely caused by trying a mid-year course correction. So if you like, that hamster wheel of constant uncertainty that has destabilised confidence in the economy amongst consumers and businesses, that should stop now. There's a whole load of controversies about how they got there, but I think in terms of their strategy, you can see pretty clearly what they're trying to communicate to the markets, to the public.

[02:18:28] Speaker 2: Chris, the politics of this. Where does this leave her, do you think?

[02:18:31] Speaker 4: So, two things. Firstly, it was clear that the Chancellor was absolutely boiling, I mean, apoplectic about being scooped on her own budget by the publication of the Office for Budget Responsibility document before she had the chance to stand up. In terms of what she said...

[02:18:45] Speaker 2: Chris, I'm going to have to interrupt you. Kevi, they do not believe you're the Conservatives.

[02:18:48] Speaker 17: And may I congratulate the Right Honourable Lady on delivering her second budget. I hope she enjoyed it, because it really should be her last. What a total humiliation. A total humiliation.

[02:19:05] Speaker 20: Last... Can colleagues who are exiting the chamber do so swiftly, so we can focus on the Leader of the Opposition? Swiftly, exit, quietly. Right. Leader of the Opposition.

[02:19:21] Speaker 17: It's a total humiliation, Madam Deputy Speaker. Last year, she put up taxes by £40 billion, the biggest tax rate in British history. She promised that she wouldn't be back for more. She swore it was a one-off. She told everyone that from now on, it would be stability and she would pay for everything with growth. Today, she has broken every single one of those promises. If she had any decency, she would resign. At the last budget, she said she was proud to be the country's first-ever female Chancellor. After this budget, she will go down as the country's worst-ever Chancellor.

[02:20:02] Speaker 13: Order.

[02:20:14] Speaker 20: Order. Order. And the Chief Whip in particular knows that we don't allow clapping in the chamber. Leader of the Opposition.

[02:20:28] Speaker 17: Today, she has announced a new tax rate of £26 billion. They're all cheering. Household income is down. Spending policies in this budget increase borrowing in every year. That smorgasbord of misery we just heard from her can be summed up in one sentence. Labour are hiking taxes to pay for welfare. This is a budget for Benefit Street paid for by working people. This budget increases benefits for 560,000 families by an average of £5,000. They are hiking taxes on workers, pensioners and savers to pay for handouts to keep their backbenchers quiet. These are the same backbenchers who cheered last year when she taxed jobs and left more than 100,000 people without an income. They cheered because they didn't understand the consequences of what they were doing and they still don't. Madam Deputy Speaker, it's not been an easy time for the Chancellor. No one liked seeing her sitting on those benches as it dawned on her that her own backbenchers were going to do to her political career what she's done to our economy. But she could have chosen today to bring down welfare spending and get more people into work. Instead she has chosen to put up tax after tax after tax. Taxes on workers, taxes on savers, taxes on pensioners, taxes on investors, taxes on homes, holidays, cars, I think even milkshakes. Taxes on anyone doing the right thing. She and this government have lost what little credibility they had left and no one will ever trust her again. What's amazing Madam Deputy Speaker is that she has the nerve to come to this House and claim this is all someone else's fault. This is a laundry list of excuses. Madam Deputy Speaker, they blame the Conservatives as if we've been sneaking into the Treasury under the cover of darkness to give pay rises to the unions. She inherited an economy with inflation at 2% and record high employment. She has tanked it in just over a year. Endless excuses. She blames Brexit. She blames Donald Trump. She needs to blame herself. And I've got some news for her. The Chancellor didn't seem to understand what the OBR was saying. Inflation is up not down and that inflation was stoked by her tax and spend decisions. The Economic Fiscal Outlook says that they expect inflation to stay higher for longer. Everybody else has read it. She still hasn't read the OBR analysis. She blames higher than expected borrowing costs. Where does she think they came from? Those borrowing costs are driven by her lack of grip. She is paying more, you're saying us, she's paying more to borrow than Greece. She is paying more to borrow than at any point under the 14 years of Conservative government. Perhaps if Labour MPs read a book sometimes they would know something. That includes an energy crisis, Madam Deputy Speaker. Under us we had an energy crisis sparked by a war in Ukraine and a global pandemic. What is her excuse? What is her excuse? She is taking the public for fools but they are under no illusions whose fault this is. The fact is the bad choices she is making today, choices to break promises, choices to put up taxes, choices to spend more of other people's money are because of the bad choices she made at the last disastrous budget. If you want growth you need to start with knowing what kind of country you want to be and make a plan to get there. Create certainty for the people and businesses who will drive growth. There is no growth and no plan because Labour focused on settling scores and scratching the itches they had in opposition. She promised stability, she delivered chaos. Just look at the circus around this budget. First the leaks, then more leaks to try to undo the damage. Calling panicky press conferences, U-turning on her U-turns, rolling the pitch one day only to plough through it the next. She had the cheek to talk about stability, Madam Deputy Speaker. She has become the first Chancellor in history to release the whole budget ahead of time. This is extraordinary. It tells you everything you need to know about her grip on the Treasury. She is making the UK a shambolic laughing stock to international investors and if she does not resign for breaking her promises she should sure as hell go for this. But Madam Deputy Speaker, what have we got for all this chaos and disorder? There are a million more people claiming universal credit than there were at the time of the last budget. Government spending? Up. Welfare spending? Up. Universal credit claimants? Up. Unemployment? Up. Debt interest? Up. Inflation? Up. And what about the things you want to go up? Growth? Down. Investment? Down. Business confidence? Down. The credibility of the Chancellor? Down. And not just down, through the floor. These figures are shocking. Does she really think that anyone will be confused by the sleight of hand that she had in her speech? Her speech today was an exercise in self-delusion. Today she had an opportunity to apologise and show some humility. Instead we've been fed puff pieces in the Times and the FT showing a woman wallowing in self-pity, whining about mansplaining and misogyny. Madam Deputy Speaker, let me explain to the Chancellor.

[02:26:38] Speaker 20: Order. Colleagues need to simmer down most definitely and just breathe a little and allow the opposition to be heard.

[02:26:49] Speaker 17: All we've had is wallowing in self-pity and whining about misogyny and mansplaining. So, Madam Deputy Speaker, let me explain to the Chancellor woman to woman. People out there aren't complaining because she's female, they're complaining because she is utterly incompetent. Real equality means being held to the same standard as everyone else. It means being judged on results. Take her bright idea, the Office for Value for Money. It's been closed down because it didn't save a penny. In fact, it cost the taxpayer £1.6 million. You couldn't make this stuff up. Madam Deputy Speaker, I've identified a way to save taxpayers huge amounts of money by sacking just one person, the woman sitting opposite. The ex-Chief Economist of the Bank of England was not mansplaining. He wasn't mansplaining when he said the uncertainty around today's budget is the single biggest reason growth has flatlined. What did the Chancellor think would happen when she went on breakfast telly to do an emergency public service announcement? I interrupt your Cheerios to bring you this frightening message about income tax. And then, unbelievably, she changed her mind three days later. No wonder people are in despair. She says she wants people to respect her.

[02:28:21] Speaker 20: Order. Order. Conservative colleagues are drowning out the Leader of the Opposition's speech, so just be mindful nobody may have to hear her at home. Leader of the Opposition.

[02:28:39] Speaker 17: Madam Deputy Speaker, she says she wants people to respect her. Respect is earned. She apparently told Labour MPs this week, she told Labour MPs this week, I'll show the media, I'll show the Tories, I will not let them beat me. Show us what? Making stuff up at the dispatch box, incompetence, chaos and the highest tax burden in history. She said to them, she said to them, Madam Deputy Speaker, I'll be there on Wednesday, I'll be there next year and I'll be back the year after that. God help us. She is spineless, shameless and completely aimless. Talk to any business, talk to any business, talk to someone looking for a job. Unemployment is up every single month since Labour have been in office. They don't want to hear it, but it's true. They're shouting and complaining they cannot create jobs. It is the worst year for graduate recruitment on record. Are they proud of this? Companies like Merck and Ineos slashing investment plans.

[02:29:44] Speaker 20: Order. If you're on the front bench, I can obviously see you Mr Kyle. And there's no need for you to be chuntering this loud, they can see and hear you as well.

[02:29:57] Speaker 17: Thank you Madam Deputy Speaker. They don't want to hear the truth, but I'm speaking for all of those people out there who are sick of this government. Companies like Merck and Ineos are slashing investment plans. The construction sector has shrunk. How is that house building target going by the way? I'll tell you Madam Deputy Speaker, they are miles behind and won't even come close to what we achieved. Business confidence is at record lows. No wonder today future growth has been revised down in every year of the scorecard. The papers are reporting that one in eight business leaders is planning to leave Britain. Even one of Labour's biggest ever donors, Lakshmi Mittal, has fled the country. What we have in front of us is a budget littered with broken promises. She stood on a manifesto which promised better returns for UK savers. Today she's putting up taxes on savings, on e-salary sacrifice even. She promised to give pensioners the security and retirement they deserve. Today she slapped higher taxes on people saving for their pensions. She promised to make Britain the best place in the world to invest and do business. Today she has raised the dividend tax rates. She and the Prime Minister had already broken their promise to freeze council tax, but today she's decided to go even further. Introducing a new property tax clobbering family homes that will only raise small amounts. This, this is Labour's Britain. This is Labour's Britain. People who work hard, Madam Deputy Speaker, people who work hard and save hard to buy their homes get taxed more, while those who don't work, who in some cases refuse to work, get their accommodation paid for by taxpayers. And then to top it all off, because taxing your home, your car, your savings and your pension wasn't enough, she has, by her own admission, broken her manifesto promise on income tax. Because in the last budget she said, and I quote, I am keeping every single promise on tax that I made in our manifesto so there will be no extension of the freeze in income tax thresholds. She said in that budget that extending the threshold freeze would hurt working people and take money out of their payslips. But today she has done exactly that. Why should anyone believe anything she's promised in this budget? And so where is the money going? These are distractions while she steals your wallet. The real story here, Madam Deputy Speaker, the real story is that Labour have lost control of welfare spending. Not only will working people have their tax thresholds frozen while benefits go up in line with inflation, not only have Labour abandoned reforms that would have saved the taxpayer £5 billion after pressure from these backbenchers, today they have added another £3 billion to the bill by scrapping the two-child benefit cap. We introduced that cap, Madam Deputy Speaker, because it means people on benefits have to make the same decisions about having children as everyone else. Even Labour voters know that it strikes the right balance between supporting people who are struggling and protecting taxpayers who are struggling themselves. Just this summer, the Chancellor admitted that lifting the two-child benefit cap was not affordable. But that was before the Prime Minister accidentally fired the starting gun on the race to replace him. So now he and the Chancellor are buying the votes of their own MPs with taxpayers' money. If she wants to reduce child poverty, she should stop taxing their parents and stop destroying their jobs. She congratulated herself on a new tax on landlords. Let me tell her this. Hiking tax on landlords will only push up rents. It will push landlords out of the market. The people who will suffer are the tenants. And then she talks about taxes on electric vehicles. These changes will hit rural drivers the hardest, but we know that Labour don't care about rural people. All this budget delivers is higher taxes and out-of-control spending. Nobody voted for this. The Chancellor must take responsibility. She chose to impose the jobs tax, driving unemployment higher month after month. She chose to abandon welfare reform, meaning the benefits bill is spiralling. She chose to spend more and more money she didn't have, leaving taxpayers to foot the bill. She is out of money, out of ideas, out of her depth, and she has run out of road. The country simply cannot afford a Chancellor who can't keep her own promises. Her position is untenable, and she knows it. She's talking to the Chancellor. Is he mansplaining to you, by the way? Is he mansplaining? Do you want some help? Would you like some help? What the Prime Minister should do is grow a backbone and sack her. But he won't, because he knows if she goes down, he goes down with her. So we're stuck with them both, Laurel and foolhardy. Does she have any sympathy for the people facing Christmas without a salary because of her jobs tax? For the retailers who are suffering sleepless nights because of their plummeting Christmas sales? People out there are crying. Last year, we had the horrors of the Halloween budget. This year is the nightmare before Christmas. And as for her, she's the unwelcome Christmas guest. Ten minutes through the door, and she's eaten all the Quality Street, Madam Deputy Speaker. But let me tell the Chancellor something she has forgotten. Behind every line in today's Red Book is a family, a home, a lifetime of work and sacrifice. People are frightened, and they have every reason to be. The Chancellor has spent the last year terrifying them. Every decision that she and the Prime Minister make puts more pressure on the people who keep this country going. If Labour are the party of working people, why is it that every day under them, thousands more people are signing off work and onto benefits? If Conservatives were the party of work, the Labour Party should be renamed the Welfare Party. And they are making a mistake. The British public don't want higher welfare spending. They want people in work providing for themselves. They want to live in a country where hard work pays, where what you put in reflects what you get out. And we agree with them. There is an alternative. We Conservatives have set it out. This Budget could have saved £47 billion, including £23 billion from welfare. She could have applied our golden economic rule, allocating half of those savings to cutting the deficit and using the rest to cut taxes. Oh, they're all pretending they're not listening. It's the shame of the mess they've made.

[02:37:22] Speaker 20: It's the shame of the mess they've made. Order. Order. Mr Vince. Mr Thompson, you're so enthusiastic, I was worried you were going to knock Mr Waugh off his chair a moment ago. So we need to calm down and ensure that we can hear the Leader of the Opposition. Can he be heard now?

[02:37:42] Speaker 17: Even the dog is laughing at the Chancellor, Madam Deputy Speaker. She could have applied our golden economic rule, allocating half of those savings to cutting the deficit, using the rest to cut taxes. She could have abolished stamp duty on homes to get the housing market moving, abolished business rates on shops to breathe life into our streets. She could have introduced our cheap power plant, it saves a lot more money than what she announced, would bring down energy costs for homes and businesses. That's what she should have done. She should be on the side of people who get up and go to work. People who take a risk to start a company. People working all hours to keep their business afloat. She should be on the side of the farmer trying to hand something over to the next generation. The investor deciding whether to spend their money in the UK or elsewhere. She should be on the side of the young person looking for their first job. The saver doing the right thing and putting money away for a rainy day. The pensioner trying to enjoy a decent retirement. This country works when you make the country work for them. Only the Conservatives are on their side, Madam Deputy Speaker, and our plan for them is simple. Bring down energy costs, cut spending, cut tax, back business and get Britain working again.

[02:39:05] Speaker 2: That was Kemi Badenoch, the leader of the Conservative Party, doing the response to the budget. That's how it works on these days. The Chancellor gives the budget, but it is the leader of the opposition who responds, and she got a pretty positive response from the MPs sitting behind her. Now, let's have a recap of the main measures that have been announced in the budget. The OBR is predicting that inflation will be 3.5% this year, higher than predicted in March. Income tax and national insurance thresholds will be frozen until 2031. The two-child benefit limit will be lifted next April, which allows families who qualify for universal credit to claim for more than two children. The cash ISA allowance will be reduced to £12,000 a year for the under-65s. An annual mansion tax, so-called, of at least £2,500, will apply to homes worth more than £2 million. It will be higher on more expensive homes. Fuel duty will be frozen until next September before gradually increasing. A 3p per mile charge for electric vehicles will be introduced in April 2028. And an annual £2,000 cap on pension salary sacrifice schemes will come into effect in 2029, which will have the effect of many people paying more tax and national insurance. I'll pay credit to Chris Mason, and others are with us. First of all, Chris, to you. Labour MPs waving their order papers at the end of Rachel Reeves's speech. It's worth saying they did do that last year, and then things did unravel a little bit. What do you think Rachel Reeves has achieved here?

[02:40:48] Speaker 4: Well, she will hope that, metaphorically, that moment of the waving of the order papers continues in the hours, days, weeks and months ahead amongst Labour MPs. Now, I was struck listening to her and the central measures within the budget, how focused it was on speaking to the concerns of plenty of Labour MPs and what they would like to see done. Now, you might think, well, of course. I mean, that's, of course, what a Labour Chancellor would seek to do. But I think there's a particular sense of the importance of that this time round because of the tension, frankly, that there is between a lot of Labour backbenchers and the government, because backbenchers, a lot of them fear that the government is desperately unpopular and they need things to go out and sell and things that they really believe in. We now have, in hard copy form, the two documents connected to a budget. This one, the blue one, was the one scampering around on the internet a couple of hours before it should have seen the light of day. And then this is the Treasury's budget book, which I can't claim to have read every word of, or indeed many of the words of, but just one point to illustrate that argument, if you like, that was being made in the direction of Labour MPs. Page 33 of the red book talking about the impact on households and the Treasury here claiming that, on average, all but the richest 10% of households will benefit as a percentage of income from overall policy decisions by 2028-29. So that underlines the argument we heard repeatedly from Rachel Reeves that, as she sees it, this is a proudly Labour budget, where those with, as she puts it, the broadest shoulders, in other words, the better off, are shouldering a substantial amount of the burden and those less well off are the other beneficiaries.

[02:42:28] Speaker 2: And in terms of, you know, we heard a lot, didn't we, about manifesto promises, about tax rates and all the rest of it. Taxes will be going up for a lot of people, but Rachel Reeves making the argument that this is necessary in order to stabilise the finances.

[02:42:42] Speaker 4: Yeah, and that particularly big revenue raiser around the thresholds for income tax and that freeze to come in a couple of years' time. What was interesting was that she chose in her statement to absolutely own it, to own the fact that she had tried to make a virtue, or she had made a virtue a year ago, of doing the opposite, of unfreezing them. And so knowing that that question would come from opposition MPs and from journalists, she sought to own that, but to sell it in the round as something she believes to be necessary and responsible. But it does mean, as the various books flush out, that a lot of people are going to be paying more income tax as a result of that. So you can have an argument all day long about the specific lettering and wording of the manifesto, but the reality is, courtesy of this measure, people will be paying, a lot of people will be paying more income tax.

[02:43:33] Speaker 2: OK, Chris, I know you need to dash off. You've got lots of other things to do. Thank you very much for being with us today. We're just going to pop over to the city and Jane Foley from Rabobank. Thank you very much for joining us. What's been the reaction from the markets?

[02:43:46] Speaker 21: Not much, to be honest, and that is good news. I mean, we did see a little bit of volatility come into the markets, both to Gilts and to Sterling, just before the budget, and that, of course, was on the leaked documents from the OBR as a market to try to grapple with what was being said. But as Rachel Reeves stood up, and indeed probably about 15 minutes into her speech, Sterling was a little bit higher on the day and it carried on, just edging a little bit higher, as she spoke about tax increases. Now, from the market's point of view, well, that's sort of a good thing. And the reason for that is that if she wasn't going to be raising income taxes, well, she may well have been announcing more debt. And the fact that she didn't do that was brought some relief, both to the government debt market and therefore to the pound. And indeed, she did pledge, of course, to keep a tight rein on fiscal and public finances. And she also increased that buffer, that crucial fiscal buffer, and that was a relief to the market, too. So Sterling edged high through most of her speech. A little bit of that price came down a little bit as she began to speak about welfare spending. And indeed, as the opposition leader took to the benches, Sterling came a little bit lower. So now we are effectively where we were this morning, no change on the day thus far. And that, I suppose, should be taken as a success for this chancellor.

[02:45:08] Speaker 2: Jane, thank you very much indeed for giving us the view from the city. Now, Henry Zeffan has joined us, but I've still got Faisal here as well, our economics editor. What are your takeaways from what we heard in this budget?

[02:45:20] Speaker 1: There is another, I know we got the leak of the OBR inadvertent, accidental, we're told. There's another important nerdy document that's just come out and fed into the market reaction, which is this is when an arm of the Treasury, called the Debt Management Office, actually tells the bond dealers how much debt are we going to have to raise? This was the precise thing that caused the market reaction at the mini-budget. It was at this moment. It wasn't the speech. And that has gone down, seems to have gone down well, because they're having to actually physically borrow, as in issue bonds. Although it has gone up a bit, it's less than expectations. So that is very important. And it's why, on the day, the yield, the effective interest rate, is just down a little. There's no big move. It's not like...

[02:46:01] Speaker 2: But the Chancellor will be happy with that.

[02:46:02] Speaker 1: Very, very happy with having done this. Now, if you look at this red book, which didn't get leaked, which is the actual budget document, you get a much more three... So, you know, they'll be happy that some of it stayed in the box, or as it were. You get a sense of the pattern over time, which I think is really important. Because what you see is that there's a giveaway, as in consumers, there's less tax and there's more spending, essentially, up front over the next year or so, as you'd expect, to kind of deal with some of the concerns about cost of living, but also from backbenchers. But then over time, really, the big tax rise comes in really in the last couple of years. Now, that pattern is odd in terms of the electoral cycle. It does raise some questions about whether this is really going to happen. And you kind of have, like, the old football cliche, game of two halves. It's kind of budget. Budget really is a budget of two halves. At the minute, the markets aren't saying, well, we don't really believe any of that's going to happen. It's a reasonable question for us to pose, and I'm sure we will when the representatives come in. But they're getting the benefit of the doubt from the markets.

[02:47:03] Speaker 2: We've also got Helen Miller here from the Institute for Fiscal Studies, also scouring these books. What's your big takeaway from this? We talked, didn't we, at the beginning about, actually, that things weren't quite as bad for the Chancellor in the run-up to this, as partly she led us to believe, actually, and that we all thought was going to be the case.

[02:47:20] Speaker 3: Yeah, absolutely. So the reason we've had months of speculation is because we thought that the forecast would be downgraded. It doesn't look like the downgrade is as big as most people expected, actually. There has been a productivity downgrade. Actually, spending is running faster than people expected, partly because there's more spending on disability, special educational needs. But, actually, higher revenues, before any measures, have kind of ridden to the rescue. Revenues were up, partly as a result of inflation. Fiscal drag is in full force. So, actually, Rachel Reeves had a smaller repair job on her hands. But, interestingly, she did do what we all thought she would do. She froze tax thresholds, recognising herself that it's obviously a tax rise on working people. And now we have the numbers. As a result of that choice, something like another 800,000 people will be paying income tax, over another 900,000 people paying higher rates of income tax. These ongoing freezes really have and are continuing to reshape our taxes. And, of course, we're continuing to leave, actually, tax revenues to the vagaries of inflation. How much we actually get from these measures, how much tax increase they actually represent will depend on how inflation turns out.

[02:48:23] Speaker 2: OK. Is it possible yet to say how Labour MPs feel about this? They seemed pretty happy, didn't they, in the Chamber?

[02:48:30] Speaker 18: Yeah, I think we can say they are pretty happy. And I think there's a simple reason for that, which is that Rachel Reeves has spent money on things that Labour MPs like. In particular, but not exclusively, the abolition of the two-child benefit cap, which I think it's worth stressing, was not a call merely from the left of the Labour Party, as sometimes things like this are. It's much broader. It was Gordon Brown, the former Prime Minister and Chancellor, famously from the right of the Labour Party, who was leading much of the public campaigning on that. I think where the political debate is going to go, though, and I think Helen just hit upon it there, is as it soaks into people that, contrary to some of the speculation in advance, the forecasts weren't quite as bad as we were led to believe, that is going to actually crystallise a clear political divide. Rachel Reeves has decided to tax more, principally to spend more, though also to give herself a bigger buffer against future economic changes and future shocks and so on. And the Conservatives will say, well, she shouldn't be spending that money, therefore the tax shouldn't be going up. And I think that's going to be the big sort of political economic divide over the coming months.

[02:49:41] Speaker 2: And in terms of Rachel Reeves herself, it's been a really difficult year for her. She was under a lot of pressure. Do you think now, of course, there was the leak as she stood up, which was not the best start for her, but do you think for her now, does this calm all the chat about her future, about Keir Starmer's future?

[02:49:58] Speaker 18: No, is the short answer to that, because I think the chat about her political future is inseparable from the chat about Keir Starmer's political future. And his political future is in large part dictated by what Labour MPs see when they look at the opinion polls and hear when they campaign on doorsteps in their constituencies and others every week. But I was saying all morning that the immediate question for Rachel Reeves is how Labour MPs respond and how the markets respond. And from the sounds of the markets and from what I know of Labour MPs, she'll be pleased so far.

[02:50:29] Speaker 1: And these things are linked, OK? What it did for the Quartain Trust's brief era was not just the market response, but it was because she couldn't pass that spending cuts budget. She's shown today that she's got, I think, again, after that wobble. And that's important for the markets as well, because they're looking at how, can you pass this budget? And I think the answer to that at this moment is yes.

[02:50:50] Speaker 2: OK, we're going to pop over to Dyington, because Jim Connolly is there to get reaction.

[02:51:00] Speaker 5: Hi there, Vicky. Yeah, today is all about cash, but it's also all about how people are feeling. And that's what we've been discussing today, how people are feeling about the budget, how people are feeling about the money in their pocket. And what we've got here is a couple of businesses and a couple of charity workers to discuss it. But we've also got some members of the public too, so we'll get a real sense of what people are feeling today. One thing's really interesting. Often when we come to places like this, you get a sense that maybe people are talking about the budget just because we're here, but actually today it is the genuine chatter in the cafe. Hello, guys. Just, you've been watching it with us all day. Would you like to introduce yourselves?

[02:51:34] Speaker 22: Yeah, I'm Abby Knowles. I am Regional Area Manager for the Trussell Trust in the North East.

[02:51:39] Speaker 19: And yourself? Hi, Jimmy. I'm Craig Walsh. I'm the Director of Castle Homes. We're an estate agency based here in Darlington.

[02:51:45] Speaker 5: We've been watching it today, reading some of the reaction coming through. What's your big takeaway from it all?

[02:51:51] Speaker 19: Yeah, OK. Well, I suppose the good news is that all of the scary stuff that's been leaked out over the last few months mostly hasn't come to pass, although it has done its damage, paralysed the market. I think the big takeaway for me, though, is on landlords. Another 2% increase in the tax that they pay. There's a lot of questions around it. Does it apply to properties in limited companies? How does it sit with the current special tax regime, Section 24? But ultimately it's coming right on the back of the Renters' Rights Act. There's a lot of nervous landlords there. And, you know, I just worry that it's going to break some people. And also, ultimately, it's going to be paid by the tenants, isn't it? Landlords are a business. The higher the costs, ultimately, the more rent that they're going to have to charge.

[02:52:38] Speaker 5: Abi, what are you making of it all today? You've got a very different perspective. You're looking at it from the eyes of people that are really struggling out there. What do you make of it, and what's in it for those people?

[02:52:48] Speaker 22: Well, we're really delighted, actually, by some of the announcements in the Budget today, and particularly the removal of the two-child limit, which has really, over the last couple of years, pushed people into poverty, bigger families, but pushed people towards food bank use as well. So Trussell's end-of-year stats came out quite recently, and in those we saw that one in every three food parcels that were given out by food banks in our network went to families with three or more children. So what the Government's done today in removing that two-child limit has been incredible. It's going to make a massive, massive difference to those families who are struggling and are using our network for food parcels. If it's going to lift 470,000 children out of poverty in the next two years, that will be an incredible achievement for this Government, who have ran on a policy of reducing child poverty and reducing the need for food banks in this country. And it will reduce some of the pressure on our network as well. We're seeing hugely increased levels of food bank use this time five years ago. We gave out 2.9 million food parcels throughout our network in the last 12 months, which has really vastly increased. So we're really looking forward to seeing how this plays out.

[02:53:59] Speaker 5: Craig, you mentioned it a minute ago, that sense of uncertainty, because this has been quite a leaked, trialled budget.

[02:54:06] Speaker 19: It's been a rendition, to be honest. I counted, I think, 12 different leaks from the end of August until very recently. The housing market has an annual cycle. August's always very quiet. Christmas, of course, December, is very quiet. So we get a pick-up at the beginning of September. It gets busy, people are putting their houses on the market, people are buying, and we have a big surge in January. What Rachel Reeves has effectively done is kill that busy period between August and now, really. So maybe we'll have a short period of people being able to sell their houses for a week or so before we're talking about Christmas. It's not good, though. It's cost a lot of people a lot of money. I'm sure it's cost the economy. Of course, there's the human factor as well. People have not been able to move.

[02:54:53] Speaker 5: Well, it's been great chatting to you guys as the budget's been happening, but we thought it'd be nice just to get a few people just having a chat over it all. It's really interesting, I was saying before, that often when we come to places, I feel that the only reason people are talking about the budget is because we're here, but actually, you guys were having a bit of a natter about it when we came over. What do you make of it?

[02:55:13] Speaker 23: It's not very good at the moment, I'm afraid. People, the working, they're getting nothing in return for it. Everything's gone up. Housing, bills, everything. It's shocking.

[02:55:28] Speaker 5: So you're feeling the pinch?

[02:55:30] Speaker 23: Oh, definitely. Definitely.

[02:55:32] Speaker 5: And what about yourself? You were pretty frustrated, but you were frustrated not just with the money side of it, but the politics of it all as well.

[02:55:39] Speaker 24: The government's absolutely ridiculous. They need to have thrown out the whole of Britain.

[02:55:44] Speaker 5: But it's not just this government. You're frustrated with year after year of...

[02:55:47] Speaker 24: Year after year. False promises. All the time, false promises. Do this, they'll do that. People vote for them on the hope that things are going to get better. They don't. They don't. They're just getting worse. And this country is just abominable at the minute. Because we've got people that are homeless and living on the streets and we've got people coming in living in the lap of luxury, more or less. And old people and all. And the veteran on the telly the other week when it was Poppy Day when he said about he didn't think the war was worth it. I mean, that's really, really sad. Because a lot of family members have died in that war.

[02:56:31] Speaker 5: Thank you ever so much. And thanks for your time today. Thanks for chatting to us. As you can see today, the budget has really got people talking here. Some positive, some pretty negative, too.

[02:56:41] Speaker 2: Jim, thank you very much indeed for bringing us all of that. Now, I'm delighted to say that we're joined in the studio by the Chief Secretary to the Treasury, James Murray. Thank you for coming to speak to us straight from the Chamber of the House of Commons. Can we just start very briefly? Rachel Reeves at the beginning of her speech blaming squarely the Office for Budget Responsibility for releasing by mistake the details of the budget. Do you think that the head of the OBR should resign?

[02:57:04] Speaker 25: Well, look, it's a very serious matter. What happened, really disappointing for that to happen. The OBR put out a statement, and I think they're doing an internal investigation into it. So let's let that investigation play out.

[02:57:16] Speaker 2: OK. In terms of what she announced, the biggest revenue raiser, if you like, was a freeze on income tax thresholds. It's a huge tax rise. It's another one following on from last year's budget. And the Chancellor had promised not to come back for more. Are you worried about trust with voters?

[02:57:34] Speaker 25: What I think was really important was that the Chancellor was up front about why she's taking the decisions that she took today. And there were a lot of decisions in the budget which were fair decisions, necessary choices we had to take. And the reason why the Chancellor has made those decisions is to cut the cost of living, to cut NHS waiting lists and to cut government borrowing. And that's what was driving her decisions today in the budget.

[02:57:57] Speaker 2: But she did say last year very clearly that extending the threshold freeze would hurt working people. That's why she said she didn't do it last year. She has done it this year. So she has just introduced something that she has previously admitted will hurt working people.

[02:58:11] Speaker 25: Well, look, she was up front in her speech today saying that everyone has to make a contribution in this budget. And we recognise that that is the implication of the decision, that everyone will have to make a contribution. But what she also made clear is that we kept that contribution from everyone as low as possible, the contribution from working people as low as possible, as well as all the other reforms that we're doing to the tax system, asking people who get their income from property or savings or dividends to pay a bit more, people with high-value properties to pay more through their council tax, reforming the taxation of electric vehicles and gambling to modernise the taxation of those. And all of that means that we are fulfilling our manifesto commitment to keep taxes on working people as low as possible.

[02:58:52] Speaker 2: I just want to bring Helen in here on the freezing of income tax thresholds because there are different ways you can raise money when it comes to income tax. If you look at it this way, what does it mean in terms of how progressive it is, how fair it is to people on different incomes?

[02:59:06] Speaker 3: Yeah, so freezing thresholds is progressive in the sense that it will take more from people with higher earnings than lower earnings. But if you were comparing a threshold freeze to, say, an increase in rates, the rate increase would have been more progressive. So increasing rates would have skewed more to the top of the distribution. Relative to that, a threshold freeze skews more to lower-income people. One way to think of it is that you're changing the threshold. For everyone above that, it has the same effect.

[02:59:30] Speaker 2: So in those terms, actually, it would have been more progressive to raise the rate, which actually, Rachel Reeves did warn us that she might well do.

[02:59:38] Speaker 25: No, but what makes it progressive, what makes it fair, is that to keep the contribution from working people as low as possible, we've chosen to increase taxes on the income people might get from property or dividends or savings and also the high-value property charge. So that's a way of making it progressive.

[02:59:54] Speaker 2: But you're not denying that some people will be paying tax for the first time. So they weren't paying tax previously. They are on very low income. And they will be dragged into paying tax for the first time. Almost a million of them.

[03:00:05] Speaker 25: The Chancellor said very clearly in her speech today that we're asking everyone to make a contribution. But we're keeping that contribution from working people as low as possible because of the other choices that we've taken. So you see it as a package of changes that the Chancellor announced in the budget today. It's a fair set of choices. They're necessary choices to achieve what we want to achieve, cutting the cost of living, cutting NHS waiting lists, cutting government borrowing. But together they are fair.

[03:00:32] Speaker 2: Can I just ask you about the second highest revenue raiser, which is salary sacrifice. Now, it's not something that everyone will know about. There are very many people who are in salary sacrifice schemes. Now, they tend to be in the private sector rather than the public sector. We have had some comments about this from people. Some are not happy about all of that, saying that why are you penalising people who are trying to save?

[03:00:58] Speaker 25: Well, the principle behind salary sacrifice for pension contributions was introduced with good reasons. But the truth is the cost of it has gone up a lot and it's now becoming unaffordable when we have other choices to take. And that's why we've put a cap in the way that it can be used. So it'll still be available to people, particularly on low and middle incomes. But we're capping it to make sure that it can make a contribution to the overall tax package.

[03:01:23] Speaker 2: So it's Charlie who said he's disappointed to see a cap on salary sacrifice. He says, doing my best to save now and plan for the future, instead restricted by the government, those in the middle lose again.

[03:01:32] Speaker 25: Well, as I said, people on low and middle incomes will still be able to use it because of the £2,000 cap that we've introduced. But we're making sure that we control the cost of it. But they won't benefit as much, will they?

[03:01:41] Speaker 2: They'll be paying more National Insurance and more tax.

[03:01:43] Speaker 25: Well, we're making sure that we control the cost of this. Because, you know, that alongside some of the other measures in the budget are reforms that we have taken through this budget. Reforms that, to be honest, previous governments have ducked and haven't taken for many years. And that's the way that we can keep the contribution from working people as low as possible.

[03:02:00] Speaker 2: You said about choices, and one of the choices is to raise the two-child, to lift the two-child benefit cap, which allows families who qualify for universal credit to claim for more of their children. At the moment, they can only claim for two. So you are increasing welfare spending. You're putting up taxes on some people, some of whom will not be earning very much, in order to fund an increase in welfare spending, aren't you?

[03:02:24] Speaker 25: Well, let's be clear that this budget includes ways in which we can cut the cost of welfare, whether that's the changes to motability, meaning that you can no longer get luxury cars, the extra work to crack down on fraud and error within the welfare system, some of the changes around getting young people who are on benefits a guaranteed job, to get them off welfare and into work. All of that means that we can raise extra money, and some of that money we're using to scrap the two-child limit. And the reason why we're doing that is because this is about the children. When I talk to people in my constituency about the two-child limit, people have reasonable questions about the parents involved and about the situation. But actually, when you think it through, this is about the young people. This is about the children. And there are hundreds of thousands of children who will now not grow up in poverty because of what we're doing. And that means their lives will be better, and our country will be better in the future.

[03:03:12] Speaker 2: Christine from Sheffield says, if you cannot afford to have a larger family, then don't have more than two children. The state is not a never-ending source of cash handouts. It's about fairness for some people, they would say.

[03:03:22] Speaker 25: Absolutely. I've had conversations with people in my constituency where they raise reasonable concerns. But this is about the children. And do we want to say to the 450,000 children who will now be taken out of poverty as a result of this measure, we're not going to do that, we're going to let you live in poverty, and all the impact that will have on your life, on our society, on the future of our country, that's a decision we've taken on that today.

[03:03:43] Speaker 1: Faisal? To accept that you've tried to address in this budget a structural misjudgment from last year's budget, which was to fly too close to the wind with a small amount of headroom, to have the finances assessed regularly, and there was this constant hamster wheel of speculation, which was caused by the structure that you set up. So the rollercoaster of instability that's affected the economy is down to how you set up the budget last year. I acknowledge that you've tried to address that, but that is a reflection on the judgments of this government.

[03:04:13] Speaker 25: I think a lot of the instability is a reflection of what's going on around the world. We know that the world is more unstable, we know that global instability has increased, we know that global borrowing prices have gone up, we know that obviously the OBR have done their evaluation of productivity, which has had an impact, it's shown some deep scars on our economy. But those are the points that we need to address, and that's why the changes that we've made today, the speech that the Chancellor set out, is to make sure we have that extra headroom, that £21.7 billion headroom, so that we are better insulated in the future.

[03:04:48] Speaker 1: Are you saying now, as a result of this system, we won't be coming back again next year? Now, this was said last year as well. Are you not going to come back for further tax rises next year? Can you make the same promise that the Chancellor made a year ago?

[03:05:01] Speaker 25: Look, I think the budget finished about an hour ago, and you're already asking me about next year's budget. No, I am. Forgive me if I'd like to focus on what's just been announced by the Chancellor. I see you're not denying that. You're not making the same promise.

[03:05:12] Speaker 2: You've chosen not to raise the rate of income tax, which many saw as a sort of easier way of doing it. Why did the Chancellor call that press conference a few weeks ago, and very much hint, and hint to my colleague Matt Chorley on Five Live, that that was exactly what she was going to do? She would already have known the figures that we have seen today from the OBR, which suggested that she was never going to have to do that.

[03:05:36] Speaker 25: No, because what the Chancellor set out in that speech a short while ago was around the challenges that we face, and so she spoke at that conference... But there were massive hints, and she did it to Matt Chorley. If I can just set out what the purpose behind that press conference was. It was to make sure people were aware that we were facing some real challenges, and you've seen that laid bare today in terms of the impact of the badly handled Brexit, in terms of austerity, all of the impact of that on the productivity downgrade that the OBR have confirmed today. The Chancellor wanted to be up front with people that these are challenges that we're facing. Obviously, after that point, it's an iterative process between the OBR and the Treasury getting towards the final budget which is announced today.

[03:06:13] Speaker 2: But you must have known at that point that things were not as bad as had been told to us.

[03:06:18] Speaker 25: No, as I say, things continue to be iterated between the OBR and the Treasury, but what we did know is that as a result of the OBR's evaluation of productivity, there were some real challenges ahead.

[03:06:28] Speaker 18: In the OBR's report, James, it says that their final fiscal forecast was finalised on 30 October, that's before Rachel Reeves did that press conference, sent to the Chancellor on 31 October. They say no further adjustments were made to their economy or fiscal forecasts after this, other than to take into account the impact of policy measures that the Treasury told the OBR it was going to do. So it's not the case that their forecast appreciably improved after that press conference by Rachel Reeves, is it?

[03:06:56] Speaker 25: That's what I said, it's an iterative process where the Treasury submits measures to the OBR, the OBR has a response, so it iterates. But the point that the Chancellor was making at that press conference was about the challenges, and she spoke about those challenges today, about the impact on productivity and the fact that the decisions of the previous government mean the growth forecast over the coming years has been rised down.

[03:07:16] Speaker 2: It's slightly alarmist, I think some people would say. We've heard from businesses who say that they've not been investing because of their concerns. We've heard about people saying that the housing market has ground to a bit of a halt, all waiting for what was going to be announced. Was it really necessary to bust into breakfast live TV news and cause quite a lot of alarm?

[03:07:37] Speaker 25: I think there were some big decisions taken in the Budget today, and the Chancellor wanted to set out the context around those decisions. And you can see the package of decisions that we've announced in the Budget today and why we've taken those decisions. You can see what we're doing on the back of the decisions we're taking, and that is to cut the cost of living with the cut in energy bills and the freeze of railfares and prescriptions. It's to protect the NHS so we can continue to get more appointments in the NHS, open 250 new neighbourhood health centres, and why it's so important to get government borrowing down. Because at the moment, one pound in every ten of taxpayers' money is spent just servicing the interest on debt. Now, that is money that should be spent on taxpayers' priorities, not on interest. We're determined to get that down.

[03:08:19] Speaker 2: Can I just ask you one other thing on here? £5 billion of efficiencies by 2031. I have to say, we've heard this a lot, haven't we? How confident are you that that kind of saving can be found?

[03:08:30] Speaker 25: We're absolutely determined to do this, and we've got a process set out in the Budget documents about how we're going to work with the non-executive directors, people from outside who come in and look at departments to work out how they could be better run. We're going to work with them to work out where the efficiency should come from, because the number one job, or certainly my number one job as Chief Secretary of the Treasury, is to make sure that public money is spent wisely. And you've seen some of the changes we can make right now, getting rid of the police and crime commissioners, getting the money back from dodgy asylum hotels or Covid fraud. But in the future, in 2039, as you said, we want to make sure that we're making serious efficiency savings so that public money is spent well.

[03:09:09] Speaker 2: I'm going to bring Faisal in just to say that the Office for Budget Responsibility is holding a press conference right now, where of course they will be, I assume, explaining how the early release of that document came about. Faisal?

[03:09:19] Speaker 1: Chief Secretary, can you confirm that the mansion tax, council tax scheme, could that be the first steps of a full council tax revaluation that's been avoided since 1991? And likewise, the electric vehicle scheme, could that be the first steps towards a national road pricing scheme?

[03:09:37] Speaker 25: No and no.

[03:09:37] Speaker 1: No and no. Right, OK. That's confirmation. Do you understand why I asked the question? I'm just making a claim that this is a big reform.

[03:09:43] Speaker 25: I can explain it to get you a bit more context on that. So with the high-value council tax surcharge, that's very specifically targeted at those high-value properties. So it's those high-value properties making sure that they can make more of a contribution. And with the electric vehicle charging, this is about saying, look, at the moment, if you have a petrol car, you basically pay for a mile through fuel duty, right? When you fill up the tank, you pay on every litre of petrol you put into the tank. At the moment, electric vehicles don't make a contribution. They're charging that through this new electric vehicle system, where they will pay every year about 3p per mile, and that will be fair. So they then contribute to the public finances, into the upkeeping of roads and all of the infrastructure that people need as motorists.

[03:10:24] Speaker 2: We've heard someone's got in contact about this, actually, Mr Charles, saying, what is the point of the government offering EV electric vehicle subsidies, if they're going to then take it away with a per-mile tax?

[03:10:35] Speaker 25: So we want to get those subsidies now to make sure we're supporting manufacturers, particularly British-based manufacturers, to produce more electric vehicles, to help with all the jobs and the economic boost that that provides, but also to make sure people can transition to electric vehicles. Now, I think what governments have known for a long time is that fuel duty on petrol is in decline because of the shift to electric vehicles. That creates a pressure in the public finances, and governments over the last 15 years have ignored that. What we're saying is, look, this is a long-term fiscal sustainability question. We want to bring in the new system now to make sure that we've got solid public finances going into the future.

[03:11:13] Speaker 2: OK, thank you very much indeed for joining us today and giving us some of that context, James Murray, the Chief Secretary of the Treasury. That's what you are, of course you are. Thank you very much indeed. It's been a long day already. Labour backbenchers, do you think they are happy with all of this? And in terms of welfare reform, Rachel Reeves has sort of nodded towards asking them something of them that they might have to cross that bridge a bit later on. Do you think that that is going to happen?

[03:11:43] Speaker 18: I think when you look at the figures in these documents and you see how much welfare spending is forecast to rise over the next four or five years, I think it's hard to see how any Chancellor, any Labour Chancellor, certainly Rachel Reeves, isn't going to want to try to find ways to reduce that. Not cut, just slow the rates of increase, which was of course true of the package that was rejected by Labour MPs earlier this year. But it's going to be very hard. I mean, the Chancellor said behind closed doors, she had quite a vivid analogy for Labour MPs on Monday. She said this is a package, not a pick and mix. You can't just say you like the cola bottles and reject the fruit salad. I think that was probably delivered more in hope than in expectation. The reality, I think, just given the sequencing, given how these things work, is that Labour MPs will not, when the next package of welfare reform comes along, be thinking, well, we're so grateful for the two-child benefit cap. It's just not how they operate. Especially if, and it's a big if, this Labour Party is still in such a precarious position in the polls.

[03:12:43] Speaker 2: Helen, in terms of the state of the finances, if you like, and looking ahead actually for Rachel Reeves now, because we've said, haven't we, that last year she said she wasn't going to come back for more. Obviously, James Murray wasn't answering that question now. It's a difficult thing to answer, I guess. But in terms of where we are, are there any signs that things are picking up for the Chancellor?

[03:13:05] Speaker 3: Well, the higher headroom that she's given herself, if she can pull that off, should be a good sign for public finances. But, of course, what ultimately matters to the country is not that we think we're going to do it in the future, but we actually deliver it in the future. And the fact they've given themselves so much work to do at the end of the period, the tax rises are coming in at the end, the concern has to be that when we get there, when we get to that election year, actually the spending cuts, the efficiency savings won't be found, the tax rises won't come in as much as expected. And that will matter for the state of the public finances if we end up actually borrowing more than we expected and having a higher debt. And the track record of at least recent governments hasn't been good here. They often promise things in the end of the period and don't actually deliver them. I think stepping back from all of that, actually, in some sense there was a simpler choice that the Chancellor made here. Partly she was making a choice to raise taxes, to give herself a bit more buffer against the future. Partly she was just raising taxes to spend more, and that's just a political choice. She raised higher taxes from everyone, basically, a bit skewed to the top, but very broad-based tax rise in order to spend some more money on welfare and public services. I mean, that's a strengthful political choice, but that is the choice she looks like having made today.

[03:14:15] Speaker 1: I think that this is a bet that actually growth will return. I mean, obviously people will disagree, including your next guest.