In response to the House of Commons voting in favour of cutting the Winter Fuel Payment, Independent Age Chief Executive Joanna Elson, CBE said: “People in later life living in financial hardship will be rightly concerned that, despite mounting public pressure about the impact on older people on the lowest incomes, the UK Government will continue with its plans to means test the Winter Fuel Payment from this year. It’s clear that making this decision now means many people in later life struggling in poverty will be forced to make dangerous cutbacks.
“The Chancellor still has time to reassess. Even with today’s vote, the UK Government can show it is listening to the concerns of older people in poverty, and delay this policy change until more older people start receiving Pension Credit.
“Boosting take-up is complex and will take time, the latest take-up figures show that up to 1.2 million older people could be missing out on this financial entitlement. They will already be living on a low income as they are eligible for Pension Credit, but now they will have even less money to live on this winter.
“We are also concerned about the large group of older people that just miss out on Pension Credit. Many of them are in financial hardship and do not have enough money to live well, but will still have their income cut at an already challenging time of year with energy prices on the rise.
“In the short term we hope the UK Government listens to the evidence being shared, and doesn’t means-test the Winter Fuel Payment now.
“Long-term there must be financial security for all of us as we age.
“We urge the UK Government to lead a review where all major parties come together and agree on what an adequate income in older age is, then ensure that everybody receives it so that no one lives in poverty in later life.”
Caroline Abrahams CBE, Charity Director at Age UK said: “We’re deeply disappointed, but not surprised, that the vote to brutally means-test Winter Fuel Payment was passed today.
“As soon as the Government announced it was instructing its MPs to support it this was the inevitable result, but we would like to thank all those in every party who voted against the policy or abstained.
“There’s been a lot of discussion about the Government’s decision, but at heart Age UK’s critique of their policy is really simple: we just don’t think it’s fair to remove the payment from the 2.5 million pensioners on low incomes who badly need it, and to do it so quickly this winter, at the same time as energy bills are rising by 10%.
“It is crystal clear that there is insufficient time to make any serious impact on the miserably low take-up of Pension Credit before the cold sets in this autumn, and the Government has brought forward no effective measures to support all those whose tiny occupational pensions take them just above the line to claim.
“It’s true they have agreed to extend the Household Support Fund until April and they deserve some credit for that, but the HSF is an all-age fund that you have to apply for, so we know it will only help a small proportion of all the pensioners who will be in need as a result of their policy change.
“The Government has also tried to suggest that the increase in State Pension for older people next year as a result of the Triple Lock means there’s no need to worry about how they will cope now, but that won’t help anyone this winter and most pensioners will not benefit to the extent being suggested – either because they are on the old State Pension which attracts less of an increase, or because they don’t qualify for a full State Pension in the first place.
“The reality is that driving through this policy as the Government is doing will make millions of poor pensioners poorer still and we are baffled as to why some Ministers are asserting that this is the right thing to do.
“We and many others are certain that it is not, and that’s why we will continue to stand with the pensioners who can’t afford to lose their payment and campaign for them to be given more Government support.
“Meanwhile, winter is coming and we fear it will be a deeply challenging one for millions of older people who have previously relied on their Winter Fuel Payment to help pay their energy bills and who have no obvious alternative source of funds on which to draw.
“As a charity we will do everything we can to help them, but with so many in need and no extra support on offer from the Government at the moment it’s looking like an incredibly uphill task.”
ALL Scottish Labour MPs voted with the government, butRebecca Long Bailey was one of more than fifty Labour MPs who refused to vote in favour of the cut. She explained why:
Former Labour Party leader and now independent MP Jeremy Corbyn also voted against the withdrwal of the payment. He said: “I voted against cuts to winter fuel payments. Politics is about choices, and the government has chosen to push pensioners into poverty.
What’s next for means testing? The NHS?
“I will always defend the principle of universalism. That is how we build a fairer society for all.”
A major change to this year’s Winter Fuel Payment means that to get the allowance that’s worth up to £300, you must also receive Pension Credit.If you don’t currently get Pension Credit, but think you could be eligible, it’s vital to check now and apply, otherwise you could miss out.
The allowance is now linked to certain means-tested benefits including Pension Credit. Pension Credit helps those over State Pension age who are living on a low income. It works by topping up income to a minimum level and can be worth more than £3,900 a year.
To keep getting your Winter Fuel Payment you must be eligible for Pension Credit or one of the other following benefits during the ‘qualifying week’ of 16 to 22 September 2024:
Universal Credit
income-related Employment and Support Allowance (ESA)
income-based Jobseeker’s Allowance (JSA)
Income Support
Our Benefits calculator will show you if you’re entitled to any of these benefits
In Scotland the Winter Fuel Payment will be replaced by the Pension Age Winter Heating Payment, worth up to £300.
This will also be linked to Pension Credit and certain means-tested benefits.
It’s the Pension Credit Week of Action and Work and Pensions Secretary Liz Kendall recommends checking if you, a loved one or a friend could be eligible for Pension Credit.
For someone aged 66 or over it could entitle them to the Winter Fuel Payment and other benefits: https://ow.ly/NRPh50Tcu6m
The Department for Work and Pensions (DWP) to launch Pension Credit Week of Action to boost take-up of vital benefit
Joining forces with charities, broadcasters and a range of partners, the campaign will encourage pensioners to check their eligibility and apply
Up to 880,000 pensioners could be missing out on this cash boost worth on average up to £3,900 per year
Hundreds of thousands of pensioners are being urged to apply for a benefit that could be worth on average £3,900 per year as the Department for Work and Pensions (DWP) is launching a campaign to increase Pension Credit take-up on Monday 2 September.
With as many as 880,000 pensioners missing out, the Pension Credit Week of Action aims to spread awareness and increase claims for Pension Credit, which from this year will also automatically passport eligible pensioners to receive the Winter Fuel Payment.
Joining forces with charities, broadcasters, Local Authorities, and a range of partners, the campaign will tackle myths that may prevent people applying, for instance having a small private pension, savings or owning their own home.
Families, friends and neighbours are being encouraged to reach out to retired family members to encourage them to check their eligibility and apply. 21 December is the last possible date to make a successful backdated claim in order to receive the Winter Fuel Payment.
While around 1.4 million pensioners are already receiving Pension Credit, up to an estimated 880,000 households are eligible for the support but are not claiming it.
Chancellor, Rachel Reeves, said: “The £22 billion blackhole inherited from the previous governments means we are having to take tough decisions now to fix the foundations of our economy – including making the Winter Fuel Payments available to those most at need.
“1.3 million pensioners are already going to get help with fuel bills this year because they’re claiming pension credit – but thousands more are eligible. So, if you know someone who could get pension credit and help with their fuel bills, now is the time to help them apply for pension credit.”
Work and Pensions Secretary, Liz Kendall said: “Thousands of pensioners are missing out on Pension Credit worth on average £3,900 per year. That needs to change.
“It’s easier than ever to check if you are eligible, including with our online calculator, and if your circumstances have changed since the last time you looked – I urge you to check again.
“Friends, families and neighbours can also encourage their loved ones to apply, so that they are not missing out on this vital benefit.”
Energy Secretary Ed Miliband said: “The legacy of failure on energy policy we have inherited means energy prices are set to rise in autumn. We must ensure that pensioners in the greatest need get access to help with rising bills.
“We will do everything in our power to increase take up of Pension Credit to the 880,000 households who are yet to claim – opening the door to other vital support such as the Winter Fuel Payment.
“The government will also continue our mission to deliver clean power by 2030, helping to finally give families the energy security they deserve and our country the energy independence we need.”
Pensioners whose weekly income is below £218.15 for a single person or £332.95 for a couple should check to see if they are eligible for this support which is worth £3,900 a year on average, using DWP’s online calculator.
People with a severe disability, carers and those who are responsible for a child or young person who lives with them could get more. Pension Credit can also include extra amounts for certain housing costs, such as ground rent or service charges.
This work is part of a wider plan to ensure economic stability for pensioners by protecting the Triple Lock and supporting households with their energy bills through the £150 Warm Home Discount and the Warm Homes Plan – upgrading millions of homes this Parliament.
Over the next five years, more than 12 million pensioners could see their State Pension increase by over a thousand pounds as a result of the commitment to the Triple Lock.
Over the phone by calling 0800 99 1234 (Monday to Friday 8am to 6pm)
By printing out and filling in a paper application form
For more information visit the Pension Credit GOV.UK page.
The Winter Fuel Payment is worth £300 for households with someone aged 80 or over. Households with someone aged 66-79 will receive £200.
We will work with Local Authorities to bring together the administration of Pension Credit and Housing Benefit as soon as operationally possible.
People who have reached State Pension age before September 23, 2024 and are in receipt of Pension Credit, Income Support, Income based JSA, Income related ESA, Universal Credit, Child Tax Credit or Working Tax Credit, will be entitled to a Winter Fuel Payment – subject to eligibility conditions.
The regulations to means-test the Winter Fuel Payment will be laid on 22 August 2024. The qualifying week in 2024 for Winter Fuel Payments will be from 16 to 22 September.
Pensioners need to be entitled to Pension Credit for at least one day in week September 16 to 22 to be eligible for a Winter Fuel Payment for this winter.
21 December is the last date for backdating a claim for Pension Credit to 22 September, assuming the claimant met the Pension Credit entitlement conditions throughout the previous three months.
Anyone who is entitled to Pension Credit for at least one day of the Winter Fuel Payment qualifying week will have automatic entitlement to Winter Fuel Payment. There are some exceptions which are detailed on GOV.UK: https://www.gov.uk/winter-fuel-payment/eligibility
People do not have to do anything extra to backdate their claim. If they make their application online, they will automatically be asked if they would like to backdate it. If they make their application over the phone the advisor will talk them through this.
Around 1.3 million households in England and Wales will continue to receive Winter Fuel Payments due to some other pensioner households being eligible and expected extra Pension Credit take up due to this reform.
Pension Credit recipients by region (as of February 2024):
The Chancellor ‘ushered in a new era of business partnership’ yesterday (29 August) as she met business groups together for the first time as Chancellor.
Rachel Reeves told senior business leaders that just as they had worked together in opposition to write their plans for government, they will work together now to deliver them.
In her first meeting with the BCC, CBI, FSB, Make UK and IoD as Chancellor, she said that businesses will be at the heart of delivering the government’s growth mission, as it takes action to fix the foundations of the economy to rebuild Britain and make every part of the country better off.
Ahead of October’s Budget, Reeves promised to ‘co-design’ policy with business on shared priorities to boost growth, pointing to the same approach being taken for designing the National Wealth Fund.
She pledged to establish a new British Infrastructure Council to advise government on how to support more investment into UK infrastructure projects, and work closely with business to bring down barriers to growth and investment.
Reeves told senior business representatives the Treasury’s door was always open to valuable business insights on the opportunities and challenges they face.
She added that the Business Secretary is committed to the new Industrial Strategy Council having a strong business voice and is also consulting with business on the details on Plan to Make Work Pay.
Business representatives also gave their views on what a successful partnership with government could look like and areas to prioritise to help their members grow and invest.
Speaking after the meeting, Chancellor of the Exchequer Rachel Reeves said: “Under this new government’s leadership, I will lead the most pro-growth, pro-business Treasury in our history – with a laser focus on making working people better off.
“That can only happen by working in partnership with businesses: big, medium and small. I want to continue the strong partnership we built with business in opposition now we are in government to deliver on our shared goal of fixing the foundations of our economy, so we can rebuild Britain and make every part of the country better off.”
Stephen Phipson CBE, CEO of Make UK, the manufacturers’ organisation said: “The Chancellor promised that she would engage properly with business and today was more evidence that the promise is being honoured.
“It was very welcome to have the Chancellor highlight further progress in delivering an Industrial Strategy with assurances that the governing Council would have a strong business voice.
“In order to build confidence for businesses to increase investment, it is critical we keep this momentum going and see more detail on the delivery as well as vision. UK Manufacturers are fully behind the government’s growth agenda and look forward to working in partnership with government to achieve it.”
Shevaun Haviland, Director General of the British Chambers of Commerce said: “Today’s meeting was a valuable opportunity to reaffirm our commitment, on behalf of the businesses across our Chamber network, to work in partnership with Government.
“We outlined our priorities for the Autumn Budget, recognising the public finance challenge. Boosting economic growth and investment is crucial, while maintaining a fiscal environment that protects the UK’s business competitiveness.
“We welcome the Chancellor’s pledge to work with us on plans for an industrial strategy and to boost infrastructure investment.
“We look forward to more discussions with the Chancellor and the Treasury team ahead of her statement on October 30th”
Tina McKenzie MBE, Federation of Small Businesses Policy Chair, said:“Today’s meeting was a crucial partnership moment, and I was pleased to raise issues and growth ideas from FSB members up and down the country, in every local community.
“You don’t get growth, jobs or wealth creation without UK small businesses; this was a core feature of our discussions in Opposition.
“Now as the Chancellor and her team turn to the Budget, the diversity of UK businesses – 99% of which are the small, micro or self-employed that we represent – needs reflecting in Government policy-making just as much.”
CBI CEO Rain Newton-Smith said:“Businesses are the engine of growth and will be central to achieving the government’s mission to boost the UK economy. It’s why the CBI welcomes the Chancellor’s promise to co-design policy with the business community.
“Together, we can find shared solutions to shared problems – to increase productivity and business investment – in turn, improving living standards.
“The CBI is proud to work in close partnership with the Treasury, providing a cross-economy voice to help remove the roadblocks holding back investment and sustainable growth.”
Jonathan Geldart, Director General of the Institute of Directors, said:“For the government to successfully deliver its growth mission, it will be crucial that it works in partnership with business.
“Therefore, we look forward to building on the productive relationship that we have developed with the Chancellor, to ensure that the priorities and challenges of businesses and entrepreneurs are understood and acted upon.
“Specifically, as we approach her first Budget in the autumn, we are calling on the Chancellor to take time to get policy design right for the long-term, to deliver the stable tax and policy framework needed to support business confidence and investment.”
Chancellor Rachel Reeves calls on UK pension schemes to invest more in the UK economy and deliver better returns for savers
Wants UK to learn lessons from ‘Canadian model’ ahead of meeting with major Canadian retirement funds
Reeves confirms first Mansion House address will focus on financial service sector’s role in delivering more investment and financing growth as work continues to fix foundations of the economy, rebuild Britain and make every part of the country better off
The Chancellor Rachel Reeves has called on pension funds to “learn lessons from the Canadian model and fire up the UK economy”.
The Chancellor hosted a roundtable with the so-called ‘Maple 8’ group of Canadian retirement funds in Toronto on Wednesday (7 August), who have invested billions of pounds in the UK economy in recent years.
She will urge the funds to continue backing Britain and take home lessons about how consolidation of pension schemes into larger funds can help drive investment in productive assets such as vital infrastructure and high-growth businesses.
The meeting is part of intensive industry engagement for the landmark review of pension fund investment announced last month to boost investment in the UK and deliver higher returns for people’s pension pots.
Also on the Chancellor’s agenda to deliver more investment and finance growth is the financial services sector, with Rachel Reeves confirming her first Mansion House address will set out how she will work in partnership with industry and regulators to deliver growth.
This will include delivering the stability the sector needs to grow, the support it needs to invest across the UK and reforms it needs to remain at the cutting-edge of new innovations and technologies.
Chancellor of the Exchequer Rachel Reeves said: “The size of Canadian pension schemes means they can invest far more in productive assets like vital infrastructure than ours do.
“I want British schemes to learn lessons from the Canadian model and fire up the UK economy, which would deliver better returns for savers and unlock billions of pounds of investment.
“We’re already beginning to see schemes announce plans to invest. That’s a vote of confidence in our work to fix the foundations of the economy, rebuild Britain and make every part of our country better off.”
Industry strongly welcomed the announcement of the pension fund investment review, with supportive comments made by groups such as Legal & General, the BVCA, Aviva, Barclays and Phoenix.
New investment vehicles have since been announced to channel pension fund money into infrastructure and the UK’s fastest growing companies. Last week Phoenix and Schroders launched their Future Growth Capital co-investment fund, which will invest up to £20 billion in the UK over the next decade.
Channelling more pension fund money will release investment demand and comes alongside measures to unlock supply through fixing the broken planning system, setting up a National Wealth Fund and the biggest overhaul of listings rules for the UK stock exchange.
Rachel Reeves to bang the drum for Britain in visit to New York City and Toronto this week.
Chancellor to share her vision for growth and champion UK sectoral strengths across financial services, clean energy and infrastructure to investors and CEOs.
Trip to build momentum for the International Investment Summit on 14 October.
Chancellor Rachel Reeves has visited New York and Toronto this week with the message that Britain is open for business.
She met with CEOs and senior representatives from major players across the US and Canada’s foremost industries, highlighting that early steps taken by the government to fix the foundations and restore economic stability makes the UK an attractive destination for investment.
Chancellor of the Exchequer Rachel Reeves:“I’ve wasted no time in my first month in office in taking the difficult decisions necessary to fix the foundations of our economy, so we can rebuild Britain and make every part of the country better off.
“That means restoring economic stability so we can attract the investment needed to create good jobs, boost wages, and improve opportunity across Britain.
“There is no credible plan for growth without private sector investment. That’s why I’m breaking down barriers at home and banging the drum for Britain abroad as we gear up to host the International Investment Summit.”
While in New York, the UK’s first female Chancellor of the Exchequer met with Wall Street leaders and host a reception to celebrate women in finance.
The US is the UK’s biggest financial services trading partner, with UK exports to the US valued at £23.4bn annually. The sector is at the heart of the government’s core mission to deliver sustainable economic growth as a jewel in the crown of the UK economy and one of its success stories, contributing almost 10% of UK GVA and employing 1.2 million people.
In Toronto, the Chancellor met with names in the world of clean energy and infrastructure. The government’s mission to make Britain a Clean Energy Superpower will bring opportunities for economic growth whilst helping the UK meet its target of clean power by 2030.
That mission has started in earnest with the creation of Great British Energy to partner with the private sector and secure the investment needed to accelerate the transition, the sweeping away of barriers to onshore wind farms, and a record £1.5 billion budget for this year’s renewable energy auction to get Britain building green.
During her time in the US and Canada, Reeves has pointed out that the government has moved quickly to create a stable environment where businesses have the confidence to invest in the UK.
This has included reform of a planning system that has long frustrated investment, ending the ban on on-shore wind and the establishment of a National Wealth Fund, backed by £7.3 billion to catalyse further private investment in our world-leading green and growth industries of the future.
The UK is already Europe’s leading hub for investment, with UK markets raising more capital than the next two highest European exchanges combined in 2023.
The Chancellor visited North America with a renewed purpose to build upon this, with it being announced yesterday that Britain is to play host to the International Investment Summit on 14 October.
In doing so, Ms Reeves is looking to deepen the strong economic relationship between Britain and the two North American countries.
The United States is the largest source of foreign investment in the UK and the UK is the third largest investment destination for Canadian companies, whom invested more than $73 billion of FDI stock in 2021.
It ain’t pretty. But there’s also politics at play.
Rachel Reeves gave a statement to the House of Commons on what the government calls the “spending inheritance” (writes Fraser of Allander Institute’s JOAO SOUSA).
It’s important to make clear what this is and isn’t about. If you hear people saying that this is all to do with fiscal rules, that’s incorrect. We have highlighted many problems with them, but this statement is all to do with this year’s public finances, meaning 2024-25 – all the fiscal rules will apply to 2029-30, although there will be some knock-on effects into future years from these decisions.
Ultimately, this is only a partial fiscal statement – setting the scene for the Budget, the date of which has been announced for 30 October. It is a welcome return to normality in that there will be more than 10 weeks for the OBR to prepare its forecast.
The spending pressures and the ‘black hole’ – how does the Treasury calculate it?
Rachel Reeves said in her statement that pressures on public spending exceeded allocated funding by £35 billion. Some of this is additional spending from accepting the recommended pay awards from the Pay Review Boards in England, which are higher than the previous government had budgeted for.
Others come from areas like accommodation for asylum claimants, which the previous government had just assumed would come from the Home Office’s spending limit. Given that the Home Office’s total allocation is £21 billion, you can see why accommodating a pressure worth nearly a third the size of its envelope was not credible.
The Treasury had set aside £9 billion in reserve – a usual management practice for unforeseen circumstances during the course of the year, and which allows the government to plan in some budget cover for unspecified departments. This reduces spending pressures to £26 billion.
The Treasury also assumes that some of these pressures will either not materialise (they are pressures after all, not crystallised spending yet) or that some will be “managed away” – usually by playing hardball and forcing departments to find savings somewhere else.
Ever wondered why the Home Office keeps putting fees for anything to do with visas and passports? The Treasury allows them to deduct it against their budget (fees are classified in Estimates as “negative spending”, for the fiscal aficionados) and it’s the quid pro quo of accepting responsibility for the financial risk for spending pressures.
There are a few rounds of this over the course of the year, and by the time of Supplementary Estimates – usually mid-February – the Treasury and other departments essentially have a stare-down contest, which tends to end up with both sides conceding somewhat, and so the Treasury assumes something about its ability to do that – what is called ‘fallaway’ in the document. This amounts to £7.1 billion, and bring estimated pressures down to £19 billion.
The Treasury then adds back £2.9 billion to get to what they call “total pressures”, because this is how much the OBR assumes that the UK Government will underspend its limits by. Essentially, the OBR assumed actual spending would be £2.9 billion lower than the limits; given that pressures on the Treasury side are relative to the limits, this amount needs added to get to the total pressures compared with the OBR forecast.
This ‘Treasury maths’ is all fine – but what does this mean in practice?
This statement only looked at the spending side of the ledger, comparing what had been budgeted for with what the most recent view of spending plans is. It’s actually quite consistent with the latest data from the ONS as well, which when compared with the OBR’s forecast and extrapolated for the rest of the year, would suggest that consumption spending (mostly comprising of departmental spending) is running around £20 billion higher than expected in March.
Faced with this, the Chancellor has several options: she can let borrowing increase – which would happen automatically if she accommodated pressures; she can reallocate spending from other areas to combat pressures; she could raise taxes; or a combination of the three.
The immediate signal appears to be that the Chancellor is not prepared to just borrow the additional £22 billion. She has committed to £5.5 billion in savings this year: £1.4 billion coming from means-testing winter fuel payments to pensioners, with most of the rest coming from as-yet not fully specified ‘efficiencies’: out of the £3.2 billion pencilled in, just £0.9 billion are itemised.
This is a legitimate criticism of the plans – these savings are hard to deliver and can’t just be magicked into existence. Although the same (or even more) could be said about the fantasy £20 billion in productivity improvements that Jeremy Hunt claimed he had delivered in his response.
But this still leaves around £16 billion to cover. Rachel Reeves left the door open to some tax rises – she said she would not increase any of the headline rates of income tax, National Insurance contributions, VAT or corporation tax, but that still leaves room for base-broadening reforms and increases in other taxes.
We’ll have to wait until the Autumn to see how much of this additional £16 billion will be covered by tax rises, and to what extent the Chancellor will accommodate some additional borrowing. A combination of the two seems likely.
Did Jeremy Hunt or the Treasury hide this?
The more politically heated debate was the extent to which there was some sort of hiding of the ugly truth of what spending pressures looked like in March, at the time which the OBR included the Treasury’s plans in the forecasts for the public finances.
Richard Hughes, Chair of the OBR, wrote a letter to the Treasury Committee announcing a review of the “adequacy of the information and the assurances provided to the OBR by the Treasury regarding departmental spending.”
This is a pretty strongly worded letter, and in my view – as someone who was included in the scrutiny of these spending plans – reflects long-standing frustrations of OBR officials and commissioners about their inability to fully assess the credibility of spending plans.
The Chancellor announced she would be updating the Charter for Budget Responsibility to include the sharing information on ‘immediate spending pressures’ with the OBR. This sounds like a good idea, right? So good that in fact it already is in place, and is provided in legislation by compelling the Government to make available to the OBR essentially any information that is relevant for the preparation of the forecasts.
And the Treasury does share this, in my experience – although with some prompting required at times. Ultimately, the biggest issue here is more political and less tractable than the Chancellor let on, and reflects what former commissioner Andy King wrote earlier in the year.
The OBR is really in a bit of a bind, having to reflect spending policy which is set at a very aggregate level and which it cannot opt out of including in the forecasts. If it did, it would be the nuclear option – it would cause a breakdown in the institutional framework between it and the Treasury.
This is quite a difficult institutional arrangement, and there’s probably no single solution that would solve that. But I do think that a bigger focus on economic categories such as pay, procurement and other elements – much like Andy King’s suggestion – would be helpful in increasing scrutiny and understanding of the underpinnings of the forecast.
I would go further in suggesting doing this for the largest departments as well as the overall central government sector – which would allow further scrutiny in terms of understanding what’s being planned for different areas in the face of an ageing population.
This is an area where the Treasury’s lack of interest and buy-in into providing always struck me as odd and self-defeating. Of course it might unearth some difficult trade-offs, but it is also what a responsible workforce planning authority should be doing anyway. And in any case, to govern is to choose – and all of us members of the public would benefit from having access to better information on this.
That alone would be enough to make it worthwhile keeping the pressure on the Treasury to agree to provide this.
Brace yourselves: a spending review is coming
The Chancellor also provided some much needed clarity in terms of the spending review timetable. We now know that what is essentially an interim 1-year review will be concluded alongside the Budget on 30 October, where 2025-26 budgets will be set.
The spring of 2025 will see a welcome return to multi-year budgeting, with a full spending review covering at least three of the five forecast years. There will also be a requirement for a spending review every two calendar years, bringing a much-needed default assumption about the frequency of these exercises. They had become progressively ad hoc, and it will be up to the Government to show it does indeed comply with its own set of timetables.
Implications for the Scottish Government
A few things stand out in terms of what this means for the Scottish Government. In terms of timings, we now know when the UK Budget will be and that it will come alongside a block grant settlement for 2025-26, a pre-condition for the Scottish Budget.
This means we are likely to see the Cabinet Secretary for Finance appearing in the Debating Chamber to deliver the Budget Statement in late November or early December – hopefully avoiding the difficulties the Finance Committee had in scrutinising the Budget last year due to proximity to recess.
In the case of most of the measures announced, the direct impact on the Scottish Budget might be relatively limited, though we’ll have to wait until 30 October to be sure. A non-negligible proportion of the accommodated pressures will come from reductions in other spending areas – most of those reallocations would not change budget totals, although composition matters for Barnett consequentials.
If there is increased borrowing to allow for some of this additional spending, then there might be some added funding for Scotland.
But where there is an immediate prospect of a decision for the Scottish Government to make is on winter fuel payments (or pension age winter heating payments, as they are now known in Scotland). This is now a devolved benefit, and the Scottish Government gets an additional block of funding on the basis of equivalent in England and Wales, worth around £180 million.
With eligibility being restricted, the transfer from Westminster will be reduced, and it will therefore be for the Scottish Government to decide whether it follows the UK Government in changing eligibility or whether it wants to maintain universality and therefore needs to find additional funds for it.
Age Scotland is urging the UK government to reconsider plans to scrap the winter fuel payment for pensioners who do not receive pension credit.
Scotland’s charity for older people has said the move will push tens of thousands of low income pensioners in Scotland further into poverty, and puts some of the poorest older people at greater risk of ill-health and burgeoning debt.
The Chancellor, Rachel Reeves, announced the decision to means test the winter fuel payment – which is worth up to £300 a year for those of state pension age – on Monday. Anyone who does not receive, or claim, pension credit will no longer get the payment aimed at helping older people with fuel bills over the coldest months.
Katherine Crawford, chief executive of Age Scotland, said: “This move will effectively take money away from some of the lowest income pensioners in Scotland.
“There are currently more than 150,000 pensioners living in poverty in this country, and we know that many more are living on incomes just above the pension credit threshold. They will now miss out on a payment which could help them heat their homes and stay warm over winter.
“I would urge the UK government to look again at this decision, which affects older people who are already struggling with the high cost of living and will now face being worse off at a time they desperately need support.
“Already we are getting calls to our helpline from older people who are distressed by the announcement and worried about what lies ahead. I would call on anyone in that position to get in touch with our free helpline on 0800 12 44 222 where our advisers can carry out a full benefits’ check to ensure that you are getting everything you are entitled to.
“We know that around 123,000 pensioners in Scotland who are eligible for pension credit are not claiming it – and they are some of the people who are going to be worst affected when the payment is withdrawn. Just 140,000 pensioners do claim pension credit, which leaves many thousands losing out who really cannot afford to do so.
“The winter fuel payment is due to be devolved to the Scottish Government and our hope is that it will be restored as a universal benefit, particularly in light of the fact that Scotland does generally experience worse weather than other parts of the UK and more than half of those who receive it use it as an important part of winter budgeting.
“Keeping or reinstating the winter fuel payment will also ensure that money is going to those who need it most, when they need it most.”
The Scottish Government has also expressed ‘disappointment’ at Rachel Reeves decision.
Social Justice Secretary Shirley Ann Somerville said: “The Chancellor’s decision to means-test Winter Fuel Payment is disappointing and was made without consultation or discussion with the Scottish Government.”
The UK Government has set out the next steps for tax measures from the manifesto on which the Government was elected, including policies to close tax loopholes and tackling tax avoidance.
This is to provide taxpayers with certainty ahead of their final confirmation at the Budget on 30 October 2024.
Further details on all policies including costings will be published at the Budget, and will be certified by the Office for Budget Responsibility.
Ending tax breaks for private schools and raising revenue to fund state education priorities
The Government is publishing a technical note setting out its plan to introduce 20% VAT on education and boarding services provided by UK private schools from 1 January 2025.
o 20% VAT will also apply to pre-payments of fees for terms starting on or after 1 January 2025 made on or after 29 July 2024.
Over 94% of school children in the UK attend state schools and ending the tax breaks on VAT and business rates for private schools will secure additional funding to help recruit 6,500 new teachers and roll out breakfast clubs to all primary schools.
These changes will not impact pupils with the most acute special educational needs, where their needs can only be met in private schools. Where pupils’ places in private schools are being funded by local authorities (LAs) because their needs can only be met in private school (e.g. in England, where attendance at that private school is required by a child’s Education, Health and Care Plan (EHCP), LAs will be able to reclaim the VAT so it does not apply to those fees.
This change will only apply to tuition fees and boarding fees charged by private schools. The VAT treatment of other services or goods provided by private schools – such as nursery care, wrap-around childcare, school meals and holiday clubs, and part time classes operated by third parties within schools – such as music and drama clubs and Sunday schools – will not change. The VAT treatment of state boarding fees will also continue to be exempt from VAT.
The government will also end business rates relief for private schools. This change means private schools in England will no longer be eligible for charitable rates relief and will pay their full business rates liability. This is intended to take effect from April 2025, subject to Parliamentary passage.
The VAT changes will be legislated for in the Finance Bill introduced following the Budget. The business rates changes will be legislated for through a Local Government Finance Bill led by the Ministry for Housing, Communities, and Local Government (MHCLG).
Non-Doms: Removing domicile status from the tax system and implementing a new internationally competitive residence-based regime
The Government is committed to addressing unfairness in the tax system, so that everyone who makes their home in the UK pays their taxes here.
That is why the Government will remove the outdated concept of domicile status from the tax system and replace it with a new internationally competitive residence-based regime, focused on attracting the best talent and investment to the UK.
A policy note has been published to set out the government’s plan to end the use of offshore trusts to avoid inheritance tax and scrapping the 50% tax reduction on foreign income in the first year of the new regime.
From April 2025, anyone who has been tax resident in the UK for more than four years will pay UK tax on their foreign income and gains (FIG), as is the case for other UK residents. This is a simpler and clearer test, with less scope for ambiguity than the current regime.
New arrivals to the UK will benefit from 100% UK tax relief on their FIG for their first four years of tax residence, provided they have been non-resident for the last 10 years. This is more attractive than the current approach, as they will be able to bring FIG into the UK without attracting an additional tax charge, encouraging them to spend and invest these funds in the UK.
To support transition and provide time for adjustment, a Temporary Repatriation Facility (TRF) will be available for individuals to bring pre-6 April 2025 FIG held offshore into the UK at a reduced rate of tax, to encourage these funds to be spent and invested in the UK.
Behavioural impacts and costings will be published at the Budget.
Energy Profits Levy
The Government is publishing a policy document that confirms its intention to increase the rate of the Energy Profits Levy (EPL) by three percentage points to 38% from 1 November 2024.
The levy will also be extended from 31 March 2029 to 31 March 2030.
The Government will remove unjustifiably generous investment allowances from the EPL, starting by abolishing the levy’s core investment allowance from 1 November. The decarbonisation allowance will be retained.
The Government will reduce the generosity of capital allowances (including First Year Allowances) when calculating EPL profits – providing further details on these changes at Budget.
The Energy Security Investment Mechanism will remain, helping to provide operators and their investors with confidence the levy will no longer apply if prices fall to, or below, historically normal levels for a sustained period.
Further details on the Government’s approach to all allowances in the EPL, and costings, will be set out at the Budget.
The Government recognises the importance of providing the oil and gas industry with long-term certainty on taxation after a period of change. The government will work with the industry and others to develop and implement a successor regime for responding to price shocks after the EPL ceases.
The UK Government is also:
Publishing a call for evidence confirming its intention to take action against the carried interest loophole, and to form the basis for detailed engagement with expert stakeholders.
o Carried interest is a form of performance-related reward received by fund managers, primarily within the private equity industry.
o Reforms will ensure fairness, whilst also recognising the vital role that our world-leading asset management industry plays in channelling investment across the UK.
Tackling the tax gap. Reforming the tax system by making policy changes to simplify tax, close loopholes and reduce non-compliance, designing out non-compliance before it happens. At the Budget, the government will provide an update on the implementation and development of measures that form its plan to close the tax gap.
The government will invest in HMRC’s compliance work, hiring around 5,000 additional staff to recover more tax revenues. HMRC has already started the process of recruiting additional staff into compliance roles.
The government will also invest in HMRC’s technology infrastructure, helping to make HMRC more efficient and improve taxpayers’ experience of interacting with HMRC.
Chancellor reveals £22 billion of unfunded pressures inherited from the previous Government
Findings of a Treasury spending audit reveal £22 billion of unfunded pledges inherited from the previous Government this year.
Chancellor takes “difficult decisions” to find £5.5 billion of savings this year and £8.1 billion next year.
A set of non-negotiable fiscal rules will be confirmed at Budget on 30th October, alongside further difficult decisions on tax and spending.
Finalised departmental budgets for this financial year and the next will be confirmed in October and a multi-year Spending Review will conclude in Spring 2025 to embed mission-led government and transform public services.
Addressing the House of Commons today (Monday 29th July) the Chancellor pledged to ‘restore economic stability’ after revealing £22 billion of unfunded pressures inherited from the previous Government.
Findings from a Treasury audit commissioned by the Chancellor expose billions of pounds of unfunded commitments from the previous Government, including the Rwanda scheme, the Advanced British Standard and the New Hospital Programme.
The previous Government also failed to increase Departmental budgets to cover public sector pay settlements, which were £11-12 billion higher than accounted for at the last Spending review. All of which were made on top of pressures resulting from higher inflation, increased asylum costs and funding for Ukraine.
Taking immediate action, the Chancellor announced £5.5 billion of savings this year and £8.1 billion next year to tackle the overspend. She also commits to set out full fiscal plans, alongside a Spending Review, at the Budget on 30th October.
Chancellor of the Exchequer, Rachel Reeves said: “This is not the statement I wanted to give today, and these are not the decisions I wanted to make. But they are the right decisions in difficult circumstances.”
The difficult decisions taken by the Chancellor have secured savings including over £1 billion next year, rising to over £4 billion by 29/30 by not proceeding with the previous government’s unfunded adult social care charging reforms.
Around £1.5 billion will be saved per year by targeting Winter Fuel Payments meaning households with someone aged over State Pension age receiving Pension Credit, Universal Credit, Income Support, income-based Jobseeker’s Allowance and income-related Employment and Support Allowance will continue to receive Winter Fuel Payments. This will better target support for heating costs at those who need it.
Immediate savings include £800 million this year and £1.4 billion next year from scrapping the Rwanda migration partnership and scrapping retrospection of the Illegal Migration Act, £70 million this year by cancelling the Investment Opportunity Fund and other small projects, £185 million next year from cancelling the Advanced British Standard and £785 million next year from stopping unaffordable road and railway schemes.
The Chancellor also announced a review of the underdelivering New Hospital Programme.
To provide certainty for public sector workers and help put an end to devastating strikes costing billions of pounds, the Chancellor accepted the independent Pay Review Body recommendations and confirm pay uplifts averaging 5.5% for public sector workers.
To ensure that no Government is faced with a spending cliff-edge like this again the Chancellor set out plans to ensure Spending Reviews are set every two years to cover a three-year period, with a one year overlap with the previous Spending Review, helping build in greater certainty and stability over public finances.
Transparency over in year spending pressures will also be enhanced, with more information being provided to the OBR. In the House the Chancellor also re-committed to a single major fiscal event a year.
The Chancellor also outlined long-term plans to tackle unacceptably high levels of welfare fraud and error as well as addressing falling public sector productivity and a new Office of Value for Money.
During her statement the Chancellor outlined next steps in delivering tax commitments from the manifesto, to provide taxpayers with certainty ahead of their final confirmation at the Budget.
This includes ending the VAT tax breaks for private schools from 1 January 2025 to help recruit 6,500 new teachers, as well as replacing the outdated non-domicile regime with a new internationally competitive residence-based regime.
As also set out in the manifesto, the Chancellor confirmed plans for the Energy Profits Levy to be extended one year to 31 March 2030, have its investment allowances tightened and to increase the rate of the levy by three percentage points to 38% from 1 November 2024.
A call for evidence confirming the government’s intention to take action on the carried interest loophole has also been published, as well as a commitment to update on policies at the Budget to help close the tax gap further.
Further details for all tax policies, including costings certified by the Office for Budget Responsibility, will be published at the Budget.
Chancellor of the Exchequer Rachel Reeves statement to the House of Commons on 29/07/2024:
Mr Speaker, on my first day as Chancellor of the Exchequer, I asked Treasury officials to assess the state of public spending.
That work is now complete, and today I am presenting it to this House.
In this statement, I will do three things.
First, I will expose the scale – and the seriousness – of what has been uncovered.
Second, I will lay out the immediate action we are taking to deal with the inheritance.
And third, I will set out our longer-term plans to fix the foundations of our economy.
Let me take each of these in turn.
First, the inheritance.
Before the election, I said that we would face the worst inheritance since the Second World War.
Taxes at a seventy year high.
Debt through the roof.
An economy only just coming out of recession.
Mr Speaker, I knew all those things.
I was honest about them during the campaign.
And the difficult choices it meant.
The British people knew them too.
That is why they voted for change.
But upon my arrival at the Treasury three weeks ago, it became clear that there were things I did not know.
[Redacted political content]
That is why we are today publishing a detailed audit of the real spending situation, a copy of which will be laid in the House of Commons Library.
I want to take the opportunity to thank Treasury officials for all their work in producing this document.
Let me explain what it has uncovered.
Mr Speaker, the government published its plans for day to day departmental spending at the Spring Budget in March.
But when I arrived at the Treasury…
… on the very first day…
… I was alerted by officials that this was not how much the previous government expected to spend this year.
Not even close.
In fact, the total pressure on these budgets across a range of areas was an additional £35bn.
Once you account for the slippage in budgets you usually see over a year…
… and the reserve of £9bn to deal with genuinely unexpected events…
… it means, Mr Speaker, that I have inherited a projected overspend of £22bn.
A £22bn hole in the public finances now – not in the future.
[Redacted political content]
If left unaddressed it would have meant a 25% increase in the government’s financing needs this year, pushing gilt issuance further into record highs outside of the pandemic.
So I will today set out the urgent work I have already done to reduce that pressure on the public finances by £5.5bn this year and over £8bn next year.
And let me be clear: I am not talking about bills for future years they signed up to but did not include, like the compensation for infected blood.
I am not talking about the state of public services in the future, like the crisis in our prisons, which they have left for us to fix.
I am talking about the money they were spending this year and had no ability to pay for…
[Redacted political content]
Resulting in the position that we have now inherited:
The reserve, spent three times over only three months into the financial year.
[Redacted political content]
Mr Speaker, the scale of this overspend is not sustainable.
Not to act is simply not an option.
We have already seen official ONS figures this month showing borrowing is higher this year than the OBR expected. [Redacted political content]
[Redacted political content]
There are very clear instances of specific budgets that were overspent…
… and unfunded promises that were made…
…but that, crucially, the OBR were not aware of for their March forecast.
I will now take each of those instances in turn.
First, the asylum system.
The forecast for the number of asylum seekers has risen dramatically since the last Spending Review, and costs for asylum support have risen sevenfold in the last three years.
But instead of reflecting those costs in the Home Office budget for this year, the previous government covered up the true extent of the crisis and its spending implications.
The document I am publishing today reveals a projected overspend on the asylum system, including their failed Rwanda plan, for this year alone of more than £6.4bn.
That was unfunded and undisclosed.
Next, in the wake of the pandemic, demand for rail services fell.
But instead of developing a proper plan to adjust for this new reality, the government handed out cash to rail companies to make up for passenger shortfalls, but failed to budget for this adequately.
Because of that, and because of industrial action, there is now an overspend of £2.9bn in the transport budget.
That was unfunded and undisclosed.
Mr Speaker, since 2022, the government – with the support of this whole House – has rightly provided military assistance to Ukraine in response to the Russian invasion.
The spending audit has found that there was not enough money set aside in the reserve to fund all these costs.
We will continue to honour these commitments in full.
[Redacted political content]
On top of these new pressures, since 2021, inflation was above the Bank of England’s target for 33 months in a row – hitting 11% at its peak.
But the government has not held a Spending Review since 2021.
That means they never fully reflected the impact of inflation in departmental budgets.
This had a direct impact on budgets for public sector pay.
When the last Spending Review was conducted, it was assumed that pay awards would be 2% this year.
Ordinarily, the government is expected to give evidence to the Pay Review Bodies on affordability.
But extraordinarily, this year, the previous government provided no guidance on what could or could not be afforded to the Pay Review Bodies.
This is almost unheard of.
But that is exactly what they did.
[Redacted political content]
I will not repeat their mistakes.
Where the previous government provided no transparency to the public, and no certainty for public services…
… we will be open about the decisions which are needed…
… and the steps we are taking.
That begins with accepting in full the recommendations of the independent Pay Review Bodies, and the details of these awards are being published today.
That is the right decision for the people who work in and most importantly the people who use our public services…
… giving hardworking staff the pay rise they deserve…
… while ensuring we can recruit and retain the people we need.
It should not have taken this long to come to these decisions.
And I do not want us to be in this position again.
So, I will consider options to reform the timetable for responding to the Pay Review Bodies in the future.
This decision is in the best interests of our economy too.
The last government presided over the worst set of strikes in a generation.
This caused chaos and misery for the British public.
And it wreaked havoc on the public finances.
Industrial action in the NHS alone cost the taxpayer £1.7bn last year.
That is why I am pleased to announce today that the Government and the BMA have agreed an offer to the Junior Doctors, on which my RHF the Health Secretary will set out further details.
And let me pay tribute today to my RHF, whose leadership on this issue has paved the way to ending a dispute which has caused waiting lists to spiral, operations to be delayed and agony for patients to be prolonged.
Today marks the start of a new relationship between the government and staff working in our National Health Service – and the whole country will welcome that.
Mr Speaker, where the previous government ducked the difficult decisions, I am taking action.
Because knowing what they did about the state of the public finances, they continued to make unfunded commitment after commitment that they knew they could not afford.
[Reacted political content]
Leaving us with an overspend of £22bn this year.
Where they presided over recklessness, I will bring responsibility.
I will take immediate action.
Let me set this out in detail.
First, pay.
I have today set out our decision to meet the recommendation of the Pay Review Bodies.
Because the previous government failed to prepare for these recommendations in departmental budgets, they come at an additional cost of £9bn this year.
So, the first difficult choice I am making is to ask all departments to find savings to absorb as much of this as possible…
… totalling at least £3bn.
To support departments as they do this, I will work with them to find savings ahead of the Autumn budget…
… including through measures to stop all non-essential spending, such as on consultancy and government communications.
And I am asking departments to find 2% savings in their back-office costs.
I will now deal with a series of commitments made by the previous government which they did not fund.
Because if we cannot afford it, we cannot do it.
First, [Redacted political content] the former Prime Minister announced the introduction of a new qualification: the “Advanced British Standard”.
That is a commitment costing nearly £200m next year, rising to billions in future years.
Mr Speaker, this was supposed to be the Prime Minister’s legacy.
But it turns out, he didn’t put aside a single penny to pay for it.
So we will not go ahead with that policy.
Because if we cannot afford it, we cannot do it.
Next, the Illegal Migration Act, passed by the previous government, made it impossible to process asylum applications or remove people who have no right to be here.
[Redacted political content]
We need a properly controlled and managed asylum system where rules are properly enforced so that those with no right to be here are swiftly removed.
So we have scrapped their failed Rwanda scheme, which placed huge pressure on the Home Office budget.
To bring down these costs as soon as possible, my RHF the Home Secretary has already laid legislation to remove the retrospective element of the Illegal Migration Act…
… which will significantly reduce the use of hotel accommodation.
These measures will save nearly £800m this year and avoid costs spiralling even further next year.
This was a bad use of taxpayers’ money and we will not do it.
Mr Speaker, the previous government claimed it was “levelling up” our country.
[Redacted political content]
At Autumn Statement last year, the former Chancellor announced nearly £150m for an “Investment Opportunity Fund”.
But not a single project has been supported from the Fund.
So, following discussions with my RHF the Deputy Prime Minister, I am cancelling it today.
The previous government also made a series of commitments on transport.
Promises that people expected to be delivered.
[Redacted political content]
We have seen from the National Audit Office the chaos that the previous government presided over.
Projects over budget and delayed again and again.
The spending audit has revealed nearly £800m of unfunded transport projects that have been committed next year.
So my RHF the Transport Secretary will undertake a thorough review of all these commitments.
As part of that work, she has agreed not to move forwards with projects that the previous government refused to publicly cancel, despite knowing full well they were unaffordable.
That includes proposed work on the A303 and the A27…
… and my RHF will also cancel projects in the “Restoring our Railways” programme which have not yet commenced.
If we cannot afford it, we cannot do it.
Mr Speaker, the previous government had plans for a retail sale of Natwest shares.
We intend to fully exit our shareholding in NatWest by 2025-26.
But having considered advice I have concluded that a retail share sale offer would involve significant incentives that could cost taxpayers hundreds of millions of pounds.
It would therefore not represent value for money, and it will not go ahead.
This is a bad use of taxpayers’ money and we will not do it.
Next, let me address the unfunded pressures in our NHS and our social care sector.
In October 2020, the government announced that 40 new hospitals would be built by 2030.
Since then, only 6 have started their main construction activity.
And less than half of the 40 hospitals have even started construction.
The National Audit were clear that delivery was wildly off track.
But since coming into office, it has become clear that the previous government continued to maintain its commitment to 40 hospitals…
… without anywhere close to the funding required to deliver them.
[Redacted political content]
We need to be straight with the British people about what is deliverable and what is affordable.
So we will conduct a complete reset of the New Hospitals Programme, with a thorough, realistic and costed timetable for delivery.
Mr Speaker, adult social care was also neglected by the previous government.
The sector needs reform to improve care and to support staff.
In the previous parliament, the government made costly commitments to introduce adult social care charging reforms.
But then, they pushed them back repeatedly…
… including just two years ago…
… because they knew that local authorities were not ready…
… and that their promises were not funded.
So it will not be possible to take forward these charging reforms. This will save over £1bn by the end of next year.
Mr Speaker, the previous government made commitment after commitment without knowing where the money was going to come from.
They did this repeatedly, knowingly and deliberately.
[Redacted political content]
And I am taking the first steps to clean up what they have left behind.
But the scale of the inheritance we have been left, means the decisions we have so far announced will not be enough. This level of overspend is not sustainable.
It therefore falls to us to take further difficult decisions on spending that generate in year savings.
Mr Speaker, the last Labour government lifted over one million pensioners out of poverty.
And I repeat today the commitment we gave that we will protect the Triple Lock.
But the scale of the situation we are dealing with means incredibly tough choices.
So that is why today, I am making the difficult decision that those not in receipt of Pension Credit will no longer receive the Winter Fuel Payment from this year onwards.
The Government will continue to provide Winter Fuel Payments worth £200 to households receiving Pension Credit…
… or £300 for households in receipt of Pension Credit with someone aged over 80.
Let me be clear: this is not a decision I wanted to make.
Nor is it one that I expected to make.
But it is a necessary and urgent decision I must make – It is the responsible thing to do to fix the foundations of our economy and bring back economic stability.
Alongside this change, I will work with my Right Honourable Friend the Work and Pensions Secretary to maximise the take up of Pension Credit by…
… bringing forward the adminstration of Housing Benefit and Pension Credit, pushed back by the previous government…
… and working with older peoples’ charities and local authorities to raise awareness of Pension Credit, and help identify households not claiming it.
Mr Speaker, this is the beginning of a process, not the end.
I am announcing today that I will hold a Budget on October 30th alongside a full economic and fiscal forecast from the Office for Budget Responsibility.
I have to tell the House that Budget will involve taking difficult decisions to meet our fiscal rules across spending, welfare and tax. [Redacted political content]
It will be a Budget to fix the foundations of our economy.
And it will be a Budget built on the principles that this new government was elected on.
First, we will treat taxpayers’ money with respect by ensuring that every pound spent is well spent…
… and we will interrogate every line of public spending to ensure it represents value for money.
Second, I can repeat – from the despatch box – our manifesto commitment that we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.
And today my Right Honourable Friend the Exchequer Secretary is publishing further detail on our manifesto commitments to close tax loopholes and clamp down on tax avoidance…
… to ensure we bring that money in as quickly as possible.
My third principle is that we will meet our fiscal rules.
We will move the current budget into balance…
… and we will get debt falling as a share of the economy by the end of the forecast.
These are the principles that will guide me at the Budget.
But let me be honest: challenging trade-offs will still remain.
So today I am also launching a multi-year Spending Review.
The review will set departmental budgets for at least three years, providing the long-term certainty that has been lacking for too long.
As part of that process, final budgets for this year and budgets for next year – 2025-26 – will be set alongside the Budget on 30th October.
I will look closely at our welfare system…
… because if you can work, you should work.
That is the principle of this government.
Yet under the previous government, welfare spending ballooned while inactivity has risen sharply in recent years.
So we will ensure the welfare system is focused on supporting people into employment…
… and we will assess the unacceptable levels of fraud and error in our welfare system, and take forward action to bring that down.
Mr Speaker, to fix the foundations of our economy, we must ensure that never again can a government keep from the public the true state of our public finances.
The fiscal framework which I have inherited had several flaws.
It allowed the government to run down the clock on departmental budgets…
… avoid difficult decisions
[Redacted political content]
So I am announcing the most significant set of changes to our framework since the inception of the Office for Budget Responsibility, which will come into effect this Autumn.
First, we have introduced legislation to ensure every significant and permanent tax or spending announcement must be accompanied by an OBR forecast through our “fiscal lock”, so we can never again see a repeat of the mini-budget.
Second, we will require the Treasury to share with the Office for Budget Responsibility its assessment of immediate public spending pressures, and enshrine that rule in the Charter for Budget Responsibility…
… so no government can ever again cover up the true state of the public finances.
And finally, we will ensure that never again do public service budgets get set at only a few months’ notice.
Instead, Spending Reviews will take place every two years, with a minimum planning horizon of three years, to avoid uncertainty for departments and to bring stability to the public finances.
I have already spoken to the Chair of the Office for Budget Responsibility to brief him on the findings of our audit and our reforms.
He has welcomed those, and will initiate his own review into the information provided to the OBR by the Treasury ahead of the Spring Budget. The Treasury stands ready to support this work.
Mr Speaker, by launching the Spending Review I am also today firing the starting gun on a new approach to public service reform to drive greater productivity in the public sector.
We will embed an approach to government that is…
… mission-led…
… that is reform driven, with a greater focus on prevention and integration of services, at both a national and a local level..
… and that is enabled by new technology, including through the work of my RHF the Secretary of State for Science, Innovation and Technology on the opportunities of AI to improve our public services.
And we will establish a new Office of Value for Money, with an immediate focus on identifying areas where we can reduce, stop or improve the value of spending….
… and we will appoint a Covid Corruption Commissioner, to bring back money owed to taxpayers after contracts worth billions of pounds were handed out by the previous government during the pandemic.
Ahead of the Spending Review, I will also review the cost of our political system, including restricting eligibility for ministerial severance payments based on time in office.
I expect all levels of government to be run efficiently and effectively and I will work with leaders across our country to deliver that.
That means effective local government …
… a civil service delivering good value for the British taxpayer…
… and reform of our political institutions, including the House of Lords, to keep costs as low as possible.
The Budget and Spending Review will also set out further progress on our number one mission: to grow our economy.
Because economic growth is the only way to sustainably improve our public services and sustainably improve our public finances.
So we will use the Spending Review to prioritise specific areas of capital investment that leverage in billions more in private investment.
It won’t happen overnight.
It will take time and it will take focus.
But we have already made significant progress.
Planning reforms to get Britain building.
A National Wealth Fund to catalyse private investment
A pensions investment review to unlock capital for our businesses.
Skills England to create a shared national ambition to boost skills across our country.
And work across government on a new industrial strategy…
… driven forward by a Growth Mission Board to ensure we deliver on our commitments.
We have fundamental strengths on which we can build.
And I look forward to welcoming business leaders to the International Investment Summit in Britain later this year.
Because I know that if we can create the stable conditions which investors need to thrive, we can build on the UK’s strengths and return confidence to our economy..
… so that entrepreneurs and businesses big and small know that this is a place to do business as that is the bedrock on which economic growth must be built.
Mr Speaker, the inheritance from the previous government is unforgiveable.
