Business
Chancellor to face more questions after Budget overshadowed by major leak
Rachel Reeves will face further questions after delivering a Budget that raised tax by £26 billion but was overshadowed by an unprecedented leak.
The Chancellor’s decisions put Britain on course for a record tax burden as she hiked levies after weaker economic forecasts left holes in her previous spending plans.
The increases are also needed to pay for increased welfare spending, with Ms Reeves announcing the abolition of the two-child benefit cap, expected to lift 450,000 children out of poverty.
Having abandoned plans for a manifesto-busting income tax rise, the Chancellor opted for a range of smaller tax increases to pay for Government spending and build a larger buffer against her borrowing rules.
These include a new pay-per-mile tax for electric vehicles, increased taxes on online betting and a so-called “mansion tax” on homes worth more than £2 million.
But she continued to face accusations of breaching Labour’s election promise not to raise taxes on “working people” after deciding to keep tax thresholds frozen until 2030/31 and levying national insurance on some pension contributions.
Ms Reeves sought to defend herself on Wednesday, telling a press conference the manifesto had been “very clear it was the rates of income tax, national insurance and VAT” that would not be raised.
But she added: “I’m not going to get into semantics. I recognise that we are asking people to contribute more by freezing those allowances.”
While the Chancellor faces questions from the media on Thursday, economists at the influential Institute for Fiscal Studies (IFS) and Resolution Foundation think tanks will give their full verdicts on her Budget.
In its initial response, the Resolution Foundation warned of a hit to living standards after the Office for Budget Responsibility (OBR) said threshold freezes had contributed to a downgrade in forecasts for real household disposable income.
And experts said taxing pension contributions would both reduce workers’ take-home pay and see many people saving even less for their retirement.
Ruth Curtice, chief executive of the Resolution Foundation, called the Chancellor’s Budget “front-footed – and front-loaded” on cost of living support, but argued that Ms Reeves’s decision to stick to her “manifesto tax pledge has cost millions of low-to-middle earners”.
“Over half a million larger families will get a major income boost next spring, while typical energy bills will be cut by around £130 annually for the next three years, though support then fades away,” she said.
“Sensible tax reforms will also help to level up the tax treatment of income. But, ironically, sticking to her manifesto tax pledge has cost millions of low-to-middle earners, who would have been better off with their tax rates rising than their thresholds being frozen.”
She said the Chancellor “has taken steps to repair the public finances” by “more than doubling the headroom against her fiscal rules” but warned debt remained up and “the fiscal repair job has been put on hold for three years”.
Meanwhile, the IFS described the Budget as a “spend now, pay later” announcement, saying Ms Reeves was relying “heavily” on tax rises just before the next election and expressing “scepticism” about whether these would be implemented.
Conservative leader Kemi Badenoch said the Budget was a “total humiliation” for Rachel Reeves and “if she had any decency she would resign”.
But the Budget announcement was overshadowed by an unprecedented blunder that saw the OBR publish its assessment of the economy and the Chancellor’s plans before Ms Reeves had even begun her speech.
The OBR apologised, blaming a “technical error”, and its chairman Richard Hughes said an internal investigation had been launched to “get to the fundamental causes and make sure it doesn’t happen again”.
The investigation will report to the OBR’s oversight board, the Treasury and the Commons Treasury Committee and Mr Hughes said he would “abide by the recommendations” – including if they suggest he should quit.
The UK must not “cut ourselves off” from trade opportunities in China despite security and business risks, the head of the Confederation for British Industry has warned.
CBI chief Rain Newton-Smith highlighted that British businesses see increased trade with Chinese firms as an opportunity to drive growth.
Her remarks came as business leaders were questioned by MPs on Parliament’s Business and Trade Select Committee regarding the UK’s economic relationship with China.
Last December, Prime Minister Sir Keir Starmer admitted China poses security threats to the UK but urged for greater business ties.
Ms Newton-Smith, chief executive of one of the UK’s largest business groups, was positive about the Government’s engagement with China.
“You can’t have a growth strategy without a strategy for China,” she said.
“China has the biggest contribution to global growth, is the third largest trading partner, and the world’s largest consumer market.
“The UK is second largest exporter of trade and services.
“We are mindful as all businesses are of security risks but it is really important that we have a strategy towards China.
“This Government has increased the economic engagement with China and including business within this does help us as a country.”
She added: “If we think about the future economy, there is a huge market in China and I think we mustn’t cut ourselves off from some of the opportunities there, even if in some areas there are difficult conversations and negotiations that need to be had.”
Peter Burnett, chief executive of the China-Britain Business Council, told the committee: “There are risks associated with technology advancement, AI, industrial development that they need to assess.
“Increasingly you will find them saying that they need to engage more in China to understand those risks and to develop some of the technologies along some of those risks themselves.”
Business
Trump says he’d be disappointed if Fed pick doesn’t cut rates; Warsh vows to be ‘independent actor’ – The Times of India
US President Donald Trump on Tuesday said he would be disappointed if his nominee for Federal Reserve chair, Kevin Warsh, does not cut interest rates right away after taking office if confirmed by the Senate. Trump, during an interview with CNBC’s “Squawk Box,” also said “we have to find out” about the construction costs of the new Federal Reserve building.Warsh, a former Federal Reserve official and financier, is currently facing Senate confirmation hearings where he has stressed his independence from political pressure.“The president never once asked me to commit to any particular interest rate decision, and nor would I agree to it if he had,” Kevin Warsh said under questioning by the Senate Banking Committee, as quoted by LA Times. “I will be an independent actor if confirmed as chair of the Federal Reserve.”Warsh told lawmakers that fighting inflation would be one of his main priorities if confirmed.“Congress tasked the Fed with the mission to ensure price stability, without excuse or equivocation, argument or anguish,” Warsh said. “Inflation is a choice, and the Fed must take responsibility for it.”The comments come as investors closely watch his confirmation hearing, with inflation remaining at 3.3% annually and global tensions, including the war in Iran pushing up gas prices, adding pressure on the economy. Higher inflation typically leads the Federal Reserve to keep interest rates steady or raise them rather than cut them, as rate changes affect mortgages, auto loans, and business borrowing.Democrats on the Senate Banking Committee accused Warsh of shifting his stance on interest rates over time, supporting higher rates under Democratic presidents and lower rates during Trump’s presidency.Warsh, if confirmed, would take over at a time when inflation pressures make it difficult for the Federal Reserve to cut rates, even as Trump continues to push for lower borrowing costs. Trump has repeatedly urged rate cuts and has long clashed with current Fed chair Jerome Powell over monetary policy. Powell has also been the subject of a Department of Justice criminal probe after refusing Trump’s requests for faster rate cuts. Trump told CNBC that he does not plan to pressure the Justice Department to end that probe.
The consultancy Teneo says airspace restrictions caused by the conflict have forced airlines to reroute many flights.
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