Rachel Reeves told it would be ‘politically suicidal’ to impose further cuts as economy falters
Good morning. Rachel Reeves, the chancellor, is back from her trip to China and, according to Politico, she will make a statement in the Commons. This will allow her to address the criticism she has been facing about the rise in government borrowing costs, and what this means for her spending plans. Reading some of the Tory papers this morning you would think she is on the point of being sacked. This is more partisan wishful-thinking than objective truth-telling, but Reeves is is definitely in some difficulty, because she promised growth and events are not going as planned.
As Pippa Crerar and Jessica Elgot report, with the rise in borrowing costs putting the government at risk of breaking its fiscal rules, the Treasury is looking at potential cuts to balance the books.
Yesterday all the flak coming at Reeves was coming from the right. But the Labour left have not entirely disappeared, and this morning John McDonnell, shadow chancellor under Jeremy Corbyn, was on the Today programme saying further cuts would be “suicidal”.
McDonnell, who is technically an independent MP at the moment because he had the whip withdrawn last year after voting with the SNP and against the government to get rid of the two-child benefit cap, told Today:
There is obviously a problem. There’s turbulence in the international markets, and we’ve just got to see those through.
And the way you do that is – you don’t turn to cuts, certainly, because not only will that … be politically suicidal, that would undermine the political support upon which Labour got elected.
But in addition to that, you would be taking demand out of the economy, and you would be looking at turning a crisis into a recession.
So I think you just have to see through the turbulence sets in the markets.
McDonnell said that, although market opinion mattered, the views of voters were more important.
There are two groups of people who make judgments on an incoming government. One is the international markets, the money markets, of course.
But actually the most important people are the electorate and I think what has to happen here is the electorate have to be protected.
Otherwise, I’m afraid, we’re looking at a level of disillusionment which then turns people towards, unfortunately, Reform. And I think that would be a disaster for the country. So it is important now to look at what the electoral response would be to another round of cuts.
McDonnell said he thought Labour’s problems went back to its failure to have an “open debate” about the state of the economy before the election. He said it was a mistake to rule out putting up income tax or corporation tax. Asked what Reeves should be doing now, he said Reeves should accept the need for a wealth tax.
You should tax the grotesque inequality that we have within our society – 16 million living in poverty, and yet at the same time, we’ve now created in our society 165 billionaires. And on the last calculation I saw, in the two years from 2020 to 2022, they made an additional £150bn of wealth. I think you have to look at redistribution.
McDonnell said this would be in line with the principles Keir Starmer set out when he talked about the need for those with the broadest shoulders to bear the biggest burden.
We can be fairly sure that Reeves will not be adopting this advice when she speaks to the Commons later.
Here is the agenda for the day.
9.30am: Keir Starmer chairs cabinet.
11am: Russell Findlay, the Scottish Conservative leader, gives a speech.
11.30am: Downing Street holds a lobby briefing.
11.30am: David Lammy, the foreign secretary, takes questions in the Commons.
Morning: Starmer holds a meeting with the Iraqi PM, Mohammed Shia al-Sudani.
12.30pm: Lucy Powell, the leader of the Commmons, gives evidence to the Commons standards committee about the rules for MPs having second jobs.
After 12.30pm: Rachel Reeves, the chancellor, is expected to make a Commons statement about her visit to China.
Afternoon: MPs debate the final stages of the renters’ rights act before it goes to the Lords.
If you want to contact me, please post a message below the line or message me on social media. I can’t read all the messages BTL, but if you put “Andrew” in a message aimed at me, I am more likely to see it because I search for posts containing that word.
If you want to flag something up urgently, it is best to use social media. You can reach me on Bluesky at @andrewsparrowgdn. The Guardian has given up posting from its official accounts on X but individual Guardian journalists are there, I still have my account, and if you message me there at @AndrewSparrow, I will see it and respond if necessary.
I find it very helpful when readers point out mistakes, even minor typos. No error is too small to correct. And I find your questions very interesting too. I can’t promise to reply to them all, but I will try to reply to as many as I can, either BTL or sometimes in the blog.
Key events
Reeves gives statement to MPs
Rachel Reeves is making her statement to the Commons now.
She is flanked by Darren Jones, the chief secretary to the Treasury, and Jonathan Reynolds, the business secretary.
She says she focused on improving market accesss for UK firms to China.
No 10 says Starmer would not use Badenoch’s ‘peasant background’ term to describe grooming gang offenders
At the Downing Street lobby briefing the PM’s spokesperson was asked about Kemi Badenoch’s decision to say that some of those involved in grooming gang crimes were from a “peasant background”. Keir Starmer would not say that, the spokesperson said.
It’s not language he’s used, or indeed, I’d envisage him using.
A council has rejected concerns that its introduction of a four-day week could lead to potential conflicts of interest after it emerged some staff have second jobs, PA Media reports. PA says:
South Cambridgeshire district council, which is led by the Liberal Democrats, was urged to boost employee monitoring after an internal survey suggested nearly one in six were undertaking paid work during their extra day off.
A motion by independent councillor Dan Lentell backed the four-day week, introduced in January 2023 and heavily criticised by Conservative ministers at the time, but warned there should be further action to prevent conflicts of interest under the code of conduct for officers.
The code stipulates that employees should not use their position to benefit themselves or others, and potential conflicts of interest must be declared.
Considering the motion on today, South Cambridgeshire’s cabinet agreed not to take any further action, arguing that safeguards were already in place and the four-day week had led to service improvements.
In November, Labour withdrew guidance established by the Conservatives which said the government does not support a four-day working week in local authorities.
Starmer tells cabinet ‘pragmatism led by national interest’ will guide relations with Trump’s administration
Keir Starmer and Rachel Reeves both spoke about the state of the economy at cabinet this morning, according to No 10. Here is an extract from the Downing Street cabinet readout.
The prime minister then moved on to the economy, reiterating that growth must continue to be embedded and prioritised across all policy-making, with a relentless focus on clearing any barriers or blockages, and that this was underpinned by this government’s approach to deliver economic stability and deal with the inheritance left by the last government.
The chancellor then provided an update on the global and UK economy, and her visit to China which secured new benefits for the UK – for example moving in line with the United States on banking licences where their approach to engage with China had seen tangible benefits to US companies. She reiterated that the government would continue to take an approach that was relentless in supporting growth and cracking down on waste and inefficiency.
Starmer also spoke to cabinet colleagues about relations with Donald Trump’s administration, which will take office next week. He said the UK wanted a relationship “based on pragmatism led by the national interest”.
The prime minister spoke of his determination to pursue a partnership with the US for the 21st century, which would protect security, advance our economic growth and leverage the opportunity of new technologies. He outlined engagement with the US transition team to date and said the government’s approach would be based on pragmatism led by the national interest.
Photograph: Lucy North/PA
MPs will debate the final Commons stages of the renters’ rights bill later today. The Labour MP Paula Barker has tabled an amendment that would cap rent increases so that they have to go up either in line with inflation or average earnings, whichever is lower and it has now been backed by 36 Labour, Green and independent MPs.
Explaining the need for her plan, which is not backed by the government, Barker said:
The housing crisis needs immediate action. In the long term, building more social and affordable housing will help to address the emergency – but to help renters who are struggling right now, a measure to limit rent rises would stop landlords from using unaffordable rent hikes as de facto no fault evictions.
By preventing landlords from raising the rent for sitting tenants by more than inflation or wage growth, my amendment to the renters’ rights bill would help keep renters in their homes. Which is why I am urging my fellow MPs to support it.
The Renters Reform Coalition has welcomed the fact that Barker is getting backbench support for this proposals. Tom Darling, its director, said:
It’s great to see increasing support across the Labour party for the idea that eviction via unfair rent hikes is a loophole in this bill that needs to be fixed. Rent stabilisation measures clearly needn’t be a left-right issue – they are sensible policies commonplace across Europe, where they work to keep renters in their homes for longer.
We hope the government will heed these calls from its backbenches.
It is not clear yet whether or not the amendment will be put to a vote.
UK government has told Greenland that its future is matter for them, minister tells MPs
Stephen Doughty, a Foreign Office minister, has told MPs that the future of Greenland is a matter for the people who live there. And he said that he made this clear in a meeting with Greenland’s foreign minister.
But he did not explicitly criticise Donald Trump for threatening to use military force to seize the island for the US.
Speaking during Foreign Office questions, Doughty said:
Greenland is part of the Kingdom of Denmark and the future of their constitutional arrangements is a matter for the people and government of Greenland and indeed the Kingdom of Denmark. It would be wrong to speculate on any policy decisions the incoming administration of President-elect Trump may make.
Those are messages I delivered in a meeting with the Greenlandic foreign minister yesterday, but there are rightly important concerns about security in the Arctic, which is why I was proud to be one of the first British ministers in 10 years to attend the Arctic Circle Assembly and meet partners to discuss these issues just a few months ago.
Doughty was responding to a question from the Lib Dem MP Richard Foord who said that “Nato is stronger when all of its members stand against territorial acquisition” and that the government should remind Trump of this when he pronounces on how he would like to expand the United States’s sphere of influence”.
Reeves to give statement to MPs about her trip to China
David Lammy, the foreign secretary, is currently taking questions in the Commons. When he finishes at 12.30pm, a justice minister will respond to an urgent question from Robert Jenrick, the shadow justice secretary, about the use of drones to deliver weapons into prisons.
After that, at around 1.15pm, Rachel Reeves, the chancellor, will give a statement to MPs about the ‘“UK-China economic and financial dialogue”.
Farmers could be making crisps or flavoured gin to boost income, Defra official tells MPs
Helena Horton
The Departmen for Environment, Food and Rural Affairs’ food chief has told farmers they should be making products such as crisps or flavoured gins on their farms rather than outsourcing their production.
Farmers have been furiously protesting against the government after it introduced an inheritance tax on their assets, which they argue would cause their families to have to sell up because the value of their land dwarfs the meagre returns made from selling food. Research has found that farmers get less than 1p for every loaf of bread or block of cheese sold in the supermarket, and farmers tend to make a 0.5%-1% annual return, with an average £30,000 income.
Labour last week announced a plan for farming which they say will make farms more profitable and therefore less in need of specialised tax schemes.
Emily Miles, director general of food at Defra, was telling the Efra committee this morning how this could work, suggesting farmers could both grow the botanicals to flavour gin on farm while making their own specialised alcoholic beverages.
She said:
If the objective in terms of diversifying farm income is to bring parts of the supply chain on to farm, so you’re not just producing the primary product, so potentially doing some processing or marketing as well.
If you’re producing potatoes, you’re then able to turn it into crisps, or you could be producing flavoured gin or whatever.
Miles added farmers could be working on “turning potatoes in a field into a crisp business”.
Asked by committee chair Alistair Carmichael whether such schemes would benefit the poorest upland farmers, she said “it varies by farm, doesn’t it, about what the opportunities could be” and suggested planning changes could allow “the assets on the farm to be used in a different way”.
Kemi Badenoch posted this on social media this morning about the GB News interview last night in which she said “peasants” from “sub-communities” from some countries are the ones in grooming and rape gangs.
Last night I met rape gang survivors from Oldham and Rotherham. Their stories were shocking and it reaffirmed my belief that none of the victims in this scandal will get justice until a national inquiry has uncovered the full truth of what happened, why and who was involved in the cover-up.
The Conservative Party is under new leadership, and I won’t rest until the victims get justice.
Last week, after Badenoch devoted all of her six questions at PMQs to grooming gangs, the Tories faced embarrassment when they had to admit that Badenoch had not actually met any survivors to discuss the issue. Keir Starmer told MPs he had met survivors, some of whom told him they were worried a new inquiry would delay implementation of the recommendations from the last one. Badenoch has now rectified that.
In the excerpts from her interview sent out by GB News, Badenoch does not refer to the nationality of the abusers she said had a “peasant background”. But she was clearly talking about Pakistan, among other countries. The high-profile grooming gang scandals in northern towns that have been the focus of calls for a new inquiry predominantly involved Pakistani men.
But most abuse of this kind is not committed to Pakistani men. The police started publishing data on the ethnicity of people involved in child abuse last year and Tom Calver, the Sunday Times’ data editor, wrote up the figures in an article at the weekend. Referring to the figures for group-based child sexual abuse, says:
Among those offences we know about in 2023, 83 per cent were committed by white people – broadly in line with the general population. About 2 per cent were committed by Pakistani men, also broadly in line with the population.
The figures for group-based child sexual exploitation (abuse involving an “imbalance of powers” – a category that may cover grooming gang cases), Calver explains:
While 18 per cent of suspects in all group-based sexual abuse cases were non-white, that figure jumps to 30 per cent for suspects in group-based child sexual exploitation cases. A total of 23 per cent of group-based exploitation cases were Asian, including 7 per cent Pakistani, although there are also a large number of suspects whose ethnicity is unknown.
Calver says two conclusions stand out from the figures.
One: that ethnic minority men are more likely than the general population to be perpetrators of this kind of abuse. Two: that grooming gangs are not “predominantly” run today by ethnic minority men, Asian or otherwise.
Indeed, look closer, and there are plenty of cases of group-based exploitation by predominantly white gangs. In April 2023, 21 people, all white, were convicted of serious organised sexual offending against children in Walsall, after West Midlands police’s largest child sexual abuse investigation.
Public sector has paid ‘millions’ to hackers, says minister, as he unveils plan to stop them making ransomware payments
Schools, the NHS and local councils will be banned from making ransomware payments under government proposals to tackle hackers, Dan Milmo reports.
The Home Office has details of its plan in a news release.
In interviews this morning, Dan Jarvis, the security minister, said the public sector had paid out “significant” sums in recent years to hackers. Asked how much, he told Times Radio: “Millions of pounds have been paid. It’s a huge problem internationally.”
Asked how much the NHS had paid, Jarvis replied:
The truth of the matter is we don’t know the precise figures, because there isn’t a mandatory reporting regime.
Asked if that meant that a trust could have paid out thousands of pounds to criminals to get its computers back without the Government knowing about it, he said: “
In theory, that is the case, and that’s why we’re looking to change the law to bring in a mandatory reporting regime so we’ve got much more visibility of these kind of activities.
But fundamentally, this is about putting measures in place that will ensure that we are much less vulnerable to these attacks in the future.
Diane Abbott accuses Badenoch of ‘gross opportunism’ over grooming gangs
Commenting on Kemi Badenoch’s latest comments about grooming gangs (see 9.39am), Diane Abbott, the Labour MP and former shadow home secretary, has accused her of “gross opportunism”.
Gross opportunism by Kemi Badenoch. Claiming concern about grooming gangs now. But as shadow Minister for Women she never mentioned the issue in Parliament once.
Reform UK has 3-point lead over Tories, and just 1 point behind Labour, poll suggests
You might think that Kemi Badenoch’s latest comments on the grooming gangs scandal (see 9.39am) sound a bit more Lee Anderson than Rishi Sunak, David Cameron or any other mainstream Conservative party leader. You would be right.
One explanation (often the best explanation in politics) is that Badenoch is just saying what she thinks.
But the Conservative party is spooked by the rise of Reform UK and new polling out today shows that it should be. YouGov has resumed polling for the Times for the first time since the general election and it shows Reform UK ahead of the Tories by three points. Labour has a one point lead over Reform.
The poll suggests Labour is losing voters in all directions. “Labour has lost 7% of its 2024 voters to the Lib Dems, 6% to the Greens, 5% to Reform UK and 4% to the Tories, while a further 17% say they don’t know who they would vote for currently,” YouGov says.
But the Conservatives are not picking up votes from Reform in significant numbers, the polling suggests. In fact, the traffic seems to be going largely the other way, YouGov says:
While Badenoch may have hoped that her positioning would bring Reform UK defectors back into the fold, our results show that just 4% of those who voted for Reform UK at the 2024 general election now plan to vote for the Conservatives – while at the same time the Tories have lost 15% of their 2024 voters to Farage’s party.
The poll also suggests Reform has a huge lead over the Tories with voters under the age of 25.
Grooming gangs made up of ‘peasants’ from ‘sub-communities’, says Badenoch
Kemi Badenoch has said “peasants” from “sub-communities” from some countries are the ones in grooming and rape gangs, saying a national inquiry would seek to identify those in authority who did not act. Jessica Elgot has the story.
Rachel Reeves told it would be ‘politically suicidal’ to impose further cuts as economy falters
Good morning. Rachel Reeves, the chancellor, is back from her trip to China and, according to Politico, she will make a statement in the Commons. This will allow her to address the criticism she has been facing about the rise in government borrowing costs, and what this means for her spending plans. Reading some of the Tory papers this morning you would think she is on the point of being sacked. This is more partisan wishful-thinking than objective truth-telling, but Reeves is is definitely in some difficulty, because she promised growth and events are not going as planned.
As Pippa Crerar and Jessica Elgot report, with the rise in borrowing costs putting the government at risk of breaking its fiscal rules, the Treasury is looking at potential cuts to balance the books.
Yesterday all the flak coming at Reeves was coming from the right. But the Labour left have not entirely disappeared, and this morning John McDonnell, shadow chancellor under Jeremy Corbyn, was on the Today programme saying further cuts would be “suicidal”.
McDonnell, who is technically an independent MP at the moment because he had the whip withdrawn last year after voting with the SNP and against the government to get rid of the two-child benefit cap, told Today:
There is obviously a problem. There’s turbulence in the international markets, and we’ve just got to see those through.
And the way you do that is – you don’t turn to cuts, certainly, because not only will that … be politically suicidal, that would undermine the political support upon which Labour got elected.
But in addition to that, you would be taking demand out of the economy, and you would be looking at turning a crisis into a recession.
So I think you just have to see through the turbulence sets in the markets.
McDonnell said that, although market opinion mattered, the views of voters were more important.
There are two groups of people who make judgments on an incoming government. One is the international markets, the money markets, of course.
But actually the most important people are the electorate and I think what has to happen here is the electorate have to be protected.
Otherwise, I’m afraid, we’re looking at a level of disillusionment which then turns people towards, unfortunately, Reform. And I think that would be a disaster for the country. So it is important now to look at what the electoral response would be to another round of cuts.
McDonnell said he thought Labour’s problems went back to its failure to have an “open debate” about the state of the economy before the election. He said it was a mistake to rule out putting up income tax or corporation tax. Asked what Reeves should be doing now, he said Reeves should accept the need for a wealth tax.
You should tax the grotesque inequality that we have within our society – 16 million living in poverty, and yet at the same time, we’ve now created in our society 165 billionaires. And on the last calculation I saw, in the two years from 2020 to 2022, they made an additional £150bn of wealth. I think you have to look at redistribution.
McDonnell said this would be in line with the principles Keir Starmer set out when he talked about the need for those with the broadest shoulders to bear the biggest burden.
We can be fairly sure that Reeves will not be adopting this advice when she speaks to the Commons later.
Here is the agenda for the day.
9.30am: Keir Starmer chairs cabinet.
11am: Russell Findlay, the Scottish Conservative leader, gives a speech.
11.30am: Downing Street holds a lobby briefing.
11.30am: David Lammy, the foreign secretary, takes questions in the Commons.
Morning: Starmer holds a meeting with the Iraqi PM, Mohammed Shia al-Sudani.
12.30pm: Lucy Powell, the leader of the Commmons, gives evidence to the Commons standards committee about the rules for MPs having second jobs.
After 12.30pm: Rachel Reeves, the chancellor, is expected to make a Commons statement about her visit to China.
Afternoon: MPs debate the final stages of the renters’ rights act before it goes to the Lords.
If you want to contact me, please post a message below the line or message me on social media. I can’t read all the messages BTL, but if you put “Andrew” in a message aimed at me, I am more likely to see it because I search for posts containing that word.
If you want to flag something up urgently, it is best to use social media. You can reach me on Bluesky at @andrewsparrowgdn. The Guardian has given up posting from its official accounts on X but individual Guardian journalists are there, I still have my account, and if you message me there at @AndrewSparrow, I will see it and respond if necessary.
I find it very helpful when readers point out mistakes, even minor typos. No error is too small to correct. And I find your questions very interesting too. I can’t promise to reply to them all, but I will try to reply to as many as I can, either BTL or sometimes in the blog.
