The U.K.’s budget watchdog has taken full responsibility for the unprecedented early publication of its budget forecast — but warned that it may happen again if its arrangements don’t change. Last week, the Office for Budget Responsibility’s economic and fiscal outlook — which contained detailed information on what would be in the budget — was accidentally made accessible before Chancellor Rachel Reeves delivered her budget in parliament.  In its investigation into what happened, the OBR said the “pressure on the small team involved” to ensure that the fiscal forecast was published immediately after Reeves finished her speech on Nov. 26 led to the use of a “pre-publication facility” which although is “commonly used” creates a “potential vulnerability if not configured properly.” “The twice-yearly task of publishing a large and sensitive document is out of scale with virtually all of the rest of its publication activities,” said the investigation, which was hastily carried out by peer Sarah Hogg and OBR board member and City bigwig Susan Rice. It called for “completely new arrangements” to be put in place for the publication of market-sensitive documents, and urged the Treasury to pay “greater attention” to the need for adequate support when funding the OBR. The watchdog said that given its small size, it used an outside web developer to upload its contents. It found multiple attempts by outside parties to access the document before it was published, by guessing the URL, and also revealed there was a successful attempt to do so in an earlier major March publication. On Nov. 26, the day of the budget, there were 44 unsuccessful requests to the URL between 5.16 and 11.30 a.m. as the document had not yet been uploaded. Between 11.30 and 11.35 a.m., the web developer began uploading documents to the draft area of the OBR’s website, which the watchdog believed was not publicly accessible. At 11.35 a.m., an IP address which had made 32 previous unsuccessful attempts to gain access to the site accessed it for the first time successfully. Six minutes later, at 11.41 a.m., Reuters sent a news alert reporting the government would raise taxes by £26.1 billion by 2029-2030. The URL was then widely accessed by journalists, markets and other parties between 11.30 a.m. and 12.08 p.m., after which it was removed by the OBR. The report also reveals that one IP address successfully accessed the March version of the fiscal outlook, when Reeves delivered her spring statement. The log shows the document being accessed at 12.38 p.m., five minutes after Reeves started speaking and nearly 30 minutes before publication. “It is not known what, if any, action was taken as a result of this access and there is no evidence at this stage of any nefarious activity arising from it,” the report says. The report doesn’t review how financial markets were influenced by the early publication, but says the OBR will cooperate with the Financial Conduct Authority. The investigation described the mistake as the “worst failure” in the 15-year history of the OBR, but said that it was not a case of intentional leakage, or “pressing the publication key too early.”  OBR chief Richard Hughes is due to appear before MPs Dec. 2 where he will be fighting for his future. Speaking to Sky News on Sunday, the chancellor repeatedly declined to say whether Hughes was safe in his job.  Earlier today, Keir Starmer said that while he was “very supportive” of the OBR, the breach of market-sensitive information was a “massive discourtesy” to parliament. 

Mujtaba Rahman is the head of Eurasia Group’s Europe practice. He tweets at @Mij_Europe. When it comes to the spring statement from Britain’s Chancellor of the Exchequer Rachel Reeves, one thing is certain: It won’t be the one she originally intended. The U.K.’s economic clouds have darkened considerably since Reeves’ first budget last October. Despite higher inflation and wages boosting government tax receipts, lower than forecast growth and higher than expected government borrowing costs have wiped out the slender £9.9 billion fiscal headroom Reeves gave herself against her fiscal rules — notably, to balance the current budget by 2029–2030. Furthermore, in an unwanted backdrop to Wednesday’s upcoming statement, the U.K.’s GDP fell by 0.1 percent in January, down from a rise of 0.4 percent in December. And government officials expect the Office for Budget Responsibility to downgrade its forecast of 2 percent growth this year to around 1 percent. This means financial markets are watching Reeves closely. The wobble that saw government borrowing costs rise in January (before falling back down) was a sign the chancellor still has to prove her mettle. She thus wants to take immediate action on Wednesday, showing her “ironclad” rules are still “nonnegotiable” and she’s determined to meet them. In her statement, Reeves isn’t expected to raise taxes, but she will likely cut her proposed rise in overall public spending of 1.3 percent per year in real terms from 2026 to 2027 to about 1 percent instead, saving a further £5 billion a year. The details of the squeeze will be included in her government-wide spending review in June. Significantly, the chancellor had to head off criticism from fellow members of Prime Minister Keir Starmer’s cabinet during its March 11 meeting. In the first direct challenge to Reeves’s authority since last year’s general election, about half of the 22-strong cabinet expressed concern over the impact her fiscal rules will have on departmental budgets, including £5 billion in cuts to welfare spending — her main route to meeting her objectives, along with government efficiency savings. Importantly, Keir Starmer continues to back Rachel Reeves, so the cabinet ultimately did restate and reinforce its support for her fiscal rules. | Pool photo by Frank Augstein via AFP/Getty Images Those expressing reservations included Deputy Prime Minister Angela Rayner, Home Secretary Yvette Cooper; Energy Security and Net Zero Secretary Ed Miliband, Justice Secretary Shabana Mahmood and Leader of the House of Commons Lucy Powell — all of them powerful figures. Some ministers also cited Germany’s recent landmark decision to relax its fiscal rules in order to boost defense and infrastructure spending. But Reeves hit back, reminding that Germany’s national debt stands at 62 percent of GDP compared to the U.K.’s at 95 percent. Reeves believes the U.K. is susceptible to interest rate changes, as well as a rise in borrowing costs in line with what happened in Germany, which would add £4 billion to the country’s debt interest payments — already running at £100 billion in the current financial year. Importantly, Starmer continues to back Reeves, so the cabinet ultimately did restate and reinforce its support for her fiscal rules. However, the welfare cuts will continue to prove highly controversial with many Labour MPs, who are likely to intensify a wider internal debate over what the party stands for. Although Starmer has won party praise for his response to developments regarding Ukraine and his handling of U.S. President Donald Trump, a growing number of MPs worry the prime minister is shifting to the right, in an attempt to head off the threat from Nigel Farage’s Reform UK party. Additionally, some party loyalists worry Starmer’s Labour is more right wing than former Prime Minister Tony Blair’s.   There will, therefore, continue to be calls from within the party to introduce a wealth tax, or to revisit Labour’s manifesto pledges of not raising income tax, national insurance or VAT, on the grounds that the facts have changed in this new geopolitical order. But Reeves is unlikely to do so. Further tax rises — on top of the £40 billion in last October’s budget — would be politically painful and could harm economic growth. So, the chancellor hopes to square the circle by filling the gap with welfare cuts and government efficiency savings instead. Although many of her pro-growth measures will only come to fruition in the long term, Reeves hopes that, with inflation and interest rates under control, the markets will acknowledge she’s created stability and that investment will pick up in the short term.  Ultimately, though, it will all hinge on getting higher growth. This is a gamble — but for now, Reeves will continue to argue there’s no other way than to take the bet she’s making.

LONDON — It was supposed to be the moment Keir Starmer corrected months of drift with a reset that would finally set a clear course of direction for his newish government. Instead, the headlines that followed his “reset” speech on Dec. 5 served only to reinforce the view of his harshest critics: that he is an unimaginative technocrat with no grand vision for the country. After his efforts flopped with critics and voters alike, the U.K. PM was forced into days of damage control — to little avail. Polling from Ipsos, gathered the week before his speech, showed Starmer is the most unpopular prime minister after five months in office since the firm began conducting approval ratings in 1979. Reflecting on the early months of this government, a Labour minister — like others in this article, granted anonymity to speak freely — scored it “at best a medium,” adding this was perhaps understandable given “there are so many domestic and foreign crises all at the same time.” A second minister complained politicians were “so over-exposed now with the current media climate” that voters “soon become sick of governments and quickly want change.” “I think people wish they could just press a button and change ministers,” they added. Already beset by internal No. 10 divisions, a rolling scandal over freebies, worsening economic indicators and public backlash over £40 billion in tax hikes, the prime minister’s big “plan for change” speech this month was supposed to mark a fresh start, drawing a line under a bumpy few first months in power. Instead, what Starmer announced was “six milestones” for the country to judge his government on by the next election — which need not be held until summer 2029. WHAT’S THE PLAN? The speech referenced policy outcome goals, including the improvement of living standards in every part of the U.K. and bringing hospital waiting lists down to target levels. The problem was that these milestones followed hard on the footsteps of a series of very similar-sounding sets of Labour targets already offered up by Starmer over the past two years. In a bid to set a governing vision, he has now outlined two “priorities,” three “pillars of growth,” six “first steps,” six “milestones” and seven “foundations” — the only thing missing is a partridge in a pear tree, critics said of the ever expanding layers of slogans and targets Starmer has wrapped around his young government. The saga was emblematic of a government pushed in different directions by Cabinet ministers and as a result failing to resonate with the public. Downing Street now wants to funnel its key announcements through the six milestones to show the government is focused on voters’ priorities. | Justin Tallis/Getty Images One Starmer-supporting Labour MP said the fault lay with the PM’s seeming inability to communicate a clear and concise vision for the country. “No one is asking Keir to be [former Prime Minister] Tony Blair — he’s his own man,” they said. “But he could learn an awful lot from Tony’s ability to tell the story about where we’re going, and why, the perils and pitfalls we face along the way and how we’re going to triumph come what may.” A second Labour MP described the prime minister’s approach to governing as painstaking — and sometimes painfully slow. “He generally gets to the right decision, but it takes him a while to get there,” they said. FIGHTING WORDS Along with confusion over what is a mission and what is a milestone, Starmer’s big reset was overshadowed by a full-blooded attack on the civil service, the unelected and politically neutral officials who take direction from politicians, and gripes about declining public sector productivity. “Too many people in Whitehall are comfortable in the tepid bath of managed decline,” he said. The unexpectedly inflammatory language, redolent of similar attacks by previous British governments from the rival Conservative party, was a clear sign of the prime minister’s frustration with the civil service machine since entering government. It’s a sentiment shared by many within this new government, including members of the Cabinet. One anecdote doing the rounds among Starmer’s top ministers is about how Blair, Labour’s most electorally successful prime minister, would often describe the pathologically sclerotic civil service. If postwar Prime Minister Clement Attlee came back to the streets of modern day Westminster he would be absolutely astonished by all the cars and modern technology — but then he would step into any government department in Whitehall and feel right at home, the punchline goes. One Labour government aide said their experience working with the civil service “has been positive,” but that this was not the norm across Whitehall for incoming political appointees. A BUREAUCRACY THAT STIFLES “I do think in other departments there have been very valid complaints about slow decision making and stifling bureaucracy,” the aide said. Labour grandee Ed Balls said on his “Political Currency” podcast that Starmer has “to stop blaming other people and get on and deliver.” | Leon Neal/Getty Images The first minister quoted in this piece said the previous Conservative government “neglected the civil service machinery,” but also said Whitehall mandarins essentially needed to suck it up. “They’re all grownups, they need to have clear direction in a relatively pointy way. I think they can take it,” they said. However, the language used by Starmer in public to describe his frustrations was pilloried by former Cabinet ministers from Blair and Gordon Brown’s Labour governments of 1997 to 2010. One told POLITICO the prime minister’s attacks “were ridiculous” and counter-productive. “Why take a pot shot at them like that? It’s not going to work at all. It’s very easy to criticize the civil service, but the question should then should be for Starmer — ‘What are you going to do about it?’”  A MISTAKE A second former Labour cabinet minister said Starmer’s attack on the civil service “was a mistake.” “The civil service does need change … but you have to work within the machine to fix it and together with the Cabinet secretary,” they said. Labour grandee Ed Balls said on his “Political Currency” podcast that Starmer has “to stop blaming other people and get on and deliver” and that “it’s Downing Street which hasn’t been doing well enough in the last few months.” This backlash, which included pointed criticism by public sector unions, prompted Starmer to write a letter to civil servants a few days after his speech to say they were “admired across the world.” One Labour aide admitted to POLITICO that it had been a mistake to attack civil servants in such a high-profile manner and that damage limitation was required. Despite this, Downing Street is refusing to acknowledge there had been a row back in the prime minister’s approach. One senior government aide said Starmer had “been entirely consistent in what he’s been saying and in identifying the challenges faced by government, but he also sees the civil service as a part of the solution as well.” The decision to go after Whitehall leaders so directly has already seen a backlash from civil servants, who say it shows the prime minister has no grip on the government’s direction. The problem was that these milestones followed hard on the footsteps of a series of very similar-sounding sets of Labour targets already offered up by Keir Starmer over the past two years. | Leon Neal/Getty Images One told POLITICO that the political operation in No. 10 was “chaotic” and “performing worse than any other government of the past decade.” A second accused Starmer’s team of “micromanaging” everything that other departments do to “a very unhelpful degree.” ‘BUDGET PARALYSIS: THE SEQUEL’ Looking ahead to 2025, Downing Street now wants to funnel its key announcements through the six milestones to show the government is focused on voters’ priorities. First among them is trying to improve living standards and fix Britain’s underperforming health service, with YouGov opinion polls showing these are the public’s two biggest worries. However, there are some concerns about the long gap between January and the announcement of the government’s spending review in June, which will set out its spending plans until at least 2028. There has been speculation that such a long gap will create a vacuum, as ministers are forced to bat away endless press questions about future spending decisions. One senior civil servant said the government was setting itself up for “budget paralysis: the sequel” by delaying the major departmental spending review until June. They said there had been an “unbelievable amount of effort and angst over setting one year’s spending [in the budget], and now another six months to set the actual forward programme.” That may well mean that the first six months of 2025 could look a lot like the last few months of 2024.

Rachel Reeves’ first budget wont achieve her aim for the U.K. to have the best economic growth in the G7, the boss of the influential Institute for Fiscal Studies said.  Speaking at a budget debrief event today, the think tank’s chair Paul Johnson said the chancellor got a “hospital pass” from the last government, but her high-tax, high-spend and big-borrowing budget has little in it to boost growth over this parliament.  “Set against the ambition to achieve the fastest economic growth of the G7 this parliament, there was little in the budget itself [to achieve this],” he said. “What we didn’t see in this budget is anything to increase growth in this parliament.”  Reeves hiked taxes by £40 billion in her maiden budget Wednesday and borrowed billions to ramp up spending on struggling government departments. Spending will grow in real terms by 4.8 per cent this year, 3.1 per cent next year, and only by an average of 1.3 per cent between 2025-26 and 2029-30. But the Office for Budget Responsibility, the U.K.’s spending watchdog, expects growth to remain anemic over the next five years, with projections at 2 percent or below every year until 2029. Johnson said he would bet a “substantial sum” that the chancellor will need to boost day-to-day public spending after next year — and that means finding more revenue.  “I am willing to bet a substantial sum that day-to-day public service spending will in fact increase more quickly than supposedly planned after next year. It would be odd to increase spending rapidly only to start cutting back again in subsequent years,” he said. “This is not going to feel like Christmas has come for the public realm.”

LONDON — U.K. Prime Minister Keir Starmer has gone hard with his government’s first program of tax and spend as he places his faith in higher growth. Wednesday’s budget, laid out by his finance chief Rachel Reeves, set out £40 billion in taxes — the highest tax take introduced by a British chancellor since comparable records began. It was the first budget presented by Labour after being out of government for 14 years. It was also a first chance for the country to see how the party would actually deliver on its promise of “change.” After vague election promises to restore growth and to prioritize “working families,” followed by a summer of speculation about the new government’s policy priorities, Reeves rolled out an agenda for a return to government from the center left that will please her party’s newly swelled ranks of MPs: higher taxes on businesses and higher borrowing, to sustain public services. Yet the small print made for somewhat uncomfortable reading, with economic growth remaining stubbornly sluggish in the official forecast, accompanied by little in the way of giveaways for voters.  Reeves’s aim was — in her words — to “put the economy on a firm footing” with an eye on future growth, but that carries considerable risks in the meantime.  Theo Bertram, a former adviser to Labour’s last prime ministers, Tony Blair and Gordon Brown, said the budget contained “a lot of political pain” with “very little sweetener — it’s almost the opposite of retail politics.” FEEL THE BURN  Starmer and Reeves have long warned of pain to come in the budget, but on Wednesday they finally gave a clearer idea of where that falls.  By far the biggest revenue raiser will be an increase in taxes paid by employers, raising up to £25 billion a year. Taxes owed when selling shares and the air passenger duty on private jets will go up, while VAT will be added to private school fees from January 2025. While these ram home Reeves’ message that Labour will “protect the payslips of working people,” it is not without various downsides. Jill Reeves, a former senior Treasury civil servant now at the Institute for Government think tank, said the risk of relying on “a lot of second-order taxes,” as opposed to broader-based income tax, was that it could “mean revenue estimates will be quite uncertain.” The overall headline on record tax rises is also hard to avoid, even though Labour figures such as economist and MP Torsten Bell argue this is partly due to tax hikes put in place under the previous government.  Keir Starmer and Rachel Reeves have long warned of pain to come in the budget, but on Wednesday they finally gave a clearer idea of where that falls. | Leon Neal/Getty Images Harry Quilty-Pinner, director of left-of-center think tank the IPPR, said: “Ultimately, any party in the coming parliaments would have to be doing some of this,” because “we have to fund an older population with more complex needs and higher expectations from government.” The difficult thing for Labour is that the tax rises are not matched by an equivalent uplift in public spending.  Reeves has targeted her firepower on the NHS, which will receive £22.6 billion for day-to-day spending, while overall public spending will rise by only 1.5 percent per year after 2025. Ben Zaranko of the Institute for Fiscal Studies said that beyond the NHS, the government was only able to “hold most things flat,” and predicted that “it’s going to feel quite austere.” The budget was equally short on good news when it came to GDP, with growth predicted to rise next year before falling in 2026 and 2027 and then holding steady, according to the independent Office for Budget Responsibility.  Treasury officials privately admitted they were disappointed by the figures, and Reeves will hope that the numbers change as capital spending — which she sought to boost with a change to borrowing rules — makes an impact further ahead. A new MP, granted anonymity to speak candidly, said that fixing the “hideous growth trajectory left to us by the last government” was “the whole ball game.” “TREASURY BRAIN“ The budget also revealed some long-awaited detail of the political choices being made by Starmer and Reeves.  Broadly speaking, taxes fell on businesses and higher earners, while the crowd-pleasers in the budget were designed to provide some solace to those on more modest incomes. Reeves promised to end the freeze on income tax thresholds sooner than expected, maintained the freeze on fuel duty, and cut the duty on a pint of beer by a penny.  As she explained in remarks to her party after the speech, these measures aimed to “take the fight to the Tories” because “if they disagree with our taxes on the wealthiest or on business, they will not be able to protect the incomes of working people.” While Labour MPs remain overwhelmingly united behind the chancellor, some grumbles nonetheless began to circulate in Westminster at what they saw as a lack of insight into how certain measures would go down with voters — a blind spot sometimes referred to as “Treasury brain.” Rachel Reeves has targeted her firepower on the NHS, which will receive £22.6 billion for day-to-day spending, while overall public spending will rise by only 1.5 percent per year after 2025. | Leon Neal/Getty Images One MP in a northern seat said an increase in bus fares was “already going down like a cup of cold sick” in their constituency, while another long-serving MP worried about the absence of any policies aimed directly at tackling poverty. More broadly, the budget suggested just how hard the road ahead is for Starmer and Reeves. With no quick fixes and few goodies, they will now hope voters can trust in better times to come.  Glen O’Hara, professor of politics at Oxford Brookes University, said this budget was “an even bigger challenge” than the first Blair and Brown budget because “they hadn’t had this early unpopularity,” and because “public services are, if anything, in a worse state.” Reeves and Starmer have already tested public goodwill with a series of missteps made soon after entering government — notably the unpopular withdrawal of a universal cold-weather payment for pensioners — and have seen their poll ratings plummet.  Ed Balls, a Treasury minister in the last Labour government, spelled out on his Political Currency podcast that Reeves’ big move is a one-time deal.  “If it falters, and people feel squeezed and the tax revenues don’t come in, she’s not going to be coming back for a second time in this parliament with ‘Rachel Reeves massive tax rise 2,’” he said. Stefan Boscia, Sam Blewett and Andrew McDonald contributed reporting.

Happy budget day! Labour’s first tax-and-spend statement for 15 years kicks off at 12.30 p.m., as British Chancellor Rachel Reeves unveils a host of “tough choices” and tries to turn around the British economy — not to mention the new government’s dire poll numbers. Follow all the action with the POLITICO team here through Wednesday.

Weight-loss drugs could be given to unemployed people with obesity as a way of getting them into work, British Health Secretary Wes Streeting has suggested. “Our widening waistbands are also placing significant burden on our health service, costing,” he wrote in an opinion piece for the Telegraph. He suggested that weight loss jabs, like Novo Nordisk’s Wegovy and Lilly’s Mounjaro, could be “life-changing” for people using them and reduce the £11 billion the country’s national health service spends on obesity each year — which is even more than smoking.   “The long-term benefits of these drugs could be monumental in our approach to tackling obesity,” he wrote. “For many people, these weight-loss jabs will be life-changing, help them get back to work, and ease the demands on our NHS.” Streeting’s suggestion comes the same day after the U.K. government announced a £279 million investment from Lilly — the world’s largest pharmaceutical company and the chief rival to Wegovy and Ozempic-maker Novo Nordisk in the obesity drug market. Streeting said the collaboration will include “exploring new ways of delivering health and care services to people living with obesity, and a five-year real-world study of a cutting-edge obesity treatment.” The study in Greater Manchester between Lilly and Health Innovation Manchester will look at whether using Lilly’s obesity and diabetes drugs impacts participants’ “health-related quality of life” and “changes in [their] employment status and sick days from work.” Last year, the Observer reported that Novo Nordisk had lobbied the then-Conservative government, suggesting they could profile people who claim state benefits and target them with weight-loss jabs.

U.K. Prime Minister Keir Starmer’s Labour Party is about “greed and power,” a top MP said Sunday after resigning over the leader’s austerity measures and a billowing scandal around his acceptance of expensive freebies from donors. “It is so profoundly disappointing to me as a Labour voter and an activist … to see this is what we have become,” Rosie Duffield told the BBC’s Laura Kuenssberg on Sunday, a day after she announced that she was quitting the party to sit as an independent. Her move follows revelations that Starmer and top Cabinet officials had accepted hundreds of thousands of pounds’ worth of free gifts from donors. Starmer’s leadership, Duffield said, was “more about greed and power than making a difference … I just can’t take any more.” In her resignation letter, published in the Sunday Times, Duffield said Starmer had acted hypocritically by accepting lavish gifts while maintaining a controversial cap on child benefits and slashing winter fuel payments for as many as ten million people.  “Forcing a vote [on the winter fuel payment] to make many older people iller and colder while you and your favorite colleagues enjoy free family trips to events most people would have to save hard for — why are you not showing even the slightest bit of embarrassment?” she wrote in the letter. The departure of Duffield, who previously clashed with Starmer over trans rights, is a blow to a party that is yet to complete its first hundred days in office after winning a sweeping parliamentary majority in July.  The new government has been consumed by scandal since revelations surfaced that the prime minister and close associates had accepted expensive gifts — including designer clothes —  from longtime Labour donor and peer Waheed Alli and other donors. Starmer himself is reported to have accepted £100,000 worth of gifts and has caused further frustration by repeatedly defending his decision.   “We all had our faith in Keir Starmer and a Labour government, and I feel that voters and activists and MPs are being completely laughed at and completely taken for granted,” Duffield told the BBC.  Duffield is the first MP to voluntarily quit since Starmer took office, but her move follows the suspension of seven MPs earlier this year who rebelled by calling for the two-child benefit cap to be abolished.  In her letter, Duffield also lambasted Starmer’s “technocratic and managerial approach,” citing his “promotion of those with no proven political skills … but who happen to be related to those close to you, or even each other.”