Helena Horton is a Guardian environment reporter. The National Farmers’ Union has accused Steve Reed, the environment secretary, of “misleading” spending review claims over the farming budget. The Department for Environment, Food and Rural Affairs (Defra) has claimed payments for the nature-friendly farming programme, called the environment land management schemes (ELMS), will “skyrocket” from £800m in 2023/24 to £2bn in 2028/29. This, on the face of it, looks like a large funding increase and has been reported by some as such. However, that would be misleading. This is because after the UK left the EU, farmers were promised that their subsidies would be the same as they were under the EU, and were promised a figure of £2.4bn a year. The Tory government at the time decided that, rather than being paid per acre, farmers should be paid for improving nature, so it devised the ELMS schemes. But while these were being set up, acreage payments known as basic payments schemes (BPS) were kept. These would be cut each year as the ELMS increased and are due to be phased out entirely by 2028. So, farmers currently get the £2.4bn a year in two streams - the ELMS and the BPS - as well as a smaller amount of money in grants for things like robotics trials. By 2028/29 they will not be paid BPS so will only get ELMS and this will have a value of £2bn. There may be some other grants available to top this up, but this has not been confirmed. In reality, the government has promised an average of £2.3bn a year up to 2028/29 for the farming budget, which is a £100m a year cut, and by the end of the spending period the budget shrinks to not much more than £2bn. NFU senior economist Sanjay Dhanda said Defra has been “misleading” in its claims. He said: A key pillar of Defra’s budget is the continued investment in ELMs, with funding set to rise to £2bn by 2028/29 compared to the £1.8bn earmarked in the autumn 2024 budget. While the government has framed this as a significant uplift from the £800m spent in 2023/24, this comparison is misleading as ELMs was not fully operational at that point, and de-linked payments (BPS) absorbed a large share of funding. The actual increase is a modest £200m over four years – barely sufficient to keep pace with inflation, let alone scale up delivery. David Lammy, the foreign secretary, has been urged to review the “rubbish” system in place for parliament to approve treaties. The criticism was made by Emily Thornberry, the Labour chair of the foreign affairs committee, during a statement on the agreement the government has reached with the EU over Gibraltar. While Priti Patel, the shadow foreign secretary, said the opposition wanted to read the full text of the agreement before making a final judgment, she and other opposition MPs speaking were generally supportive of the deal, which settles the one outstanding dispute between the UK and the EU left unresolved since Brexit. Thornberry congratulated Lammy and his negotiating partners for getting deal, but she said she was concerned by his comment that the deal would be considered by MPs in the usual way under the Crag (Constitutonal Reform and Governance Act) process. The Act, passed by the coalition government, in theory allows MPs to delay ratification of a treaty if they don’t like it. But they can only delay by voting against, and there is no obligation on the government to schedule a vote, and so in practice they never get the chance to hold up treaties. Thornberry said: I have to say, I think it’s rubbish, the Crag process, and I do ask [Lammy] to look again at it. MPs should have the right to vote on treaties, she said. She went on: The [current] requirement is that the government lays before parliament a treaty which this house may resolve not to ratify during a 21-day delay. How that’s done, frankly, I don’t know because it’s never been done … The Crag process is obscure. It is out of date. It is basically unfit for 21st century, unfit for this place, and I do ask the foreign secretary to look at it again. In response, Lammy said he heard what Thornberry was saying, and wanted to ensure there would be proper parliamentary scrutiny of the treaty. At the Downing Street lobby briefing the a No 10 spokesperson said that failure to reach a deal on Gibraltar could have cost the UK hundreds of millions of pounds. He said: If an agreement was not reached, the EU’s incoming system of entry and exit control would have meant a hard border. It would have cost Gibraltar hundreds of millions a year, ruining Gibraltar’s economy and leaving the UK taxpayer to pick up the bill. Peter Walker is a senior Guardian political correspondent. Businesses need to “get on the pitch” and come up with ideas for a leaner, more growth-oriented state, Kemi Badenoch has said at a speech in London. Addressing an investment conference a day after the spending review, the Conservative leader gave no new specifics about how a government she led might shrink the state or cut regulation, instead appealing to the business-heavy audience to help show a path. She said: So my message to business is this: I’m on your side, but I need you to be online too. You can’t sit back and hope that someone else is coming along to fix this. You need to speak up. You need to support policies that back enterprise, and you need to challenge those who want more state control. Don’t just wait for other politicians to do it. You need to get on the pitch too. So bring us your ideas. We’re in opposition. Now is the time for us to get them. Let’s hear your policies, your real world solutions, not just the things that are going to be great for your business, but bad for everybody else, but the things that are going to be good for the whole economy. Elsewhere in the speech and media Q&A, Badenoch dismissed worries about the Tories’ low polling numbers, saying these could change hugely before the next election and insisting there was “a gap in the market for a serious centre-right plan”. At one point she referenced her slightly grumpy Radio 4 interview earlier on Tuesday (see 9.59am), saying she had been “going in a loop with an interviewer [Emma Barnett] who didn’t understand that there are other ways to reduce the size of the state, and that not everything the state does is public services”. The Institute for Fiscal Studies has delivered its own verdict on the spending review. Much of what it says overlaps with what the Resolution Foundation concluded (see 9.34am), but some off the language is a bit more colourful. Here are the main points from the opening remarks from Paul Johnson, the IFS’s director. Johnson suggested Rachel Reeves is a “gnat’s whisker” away from tax rises in the autumn. He said: Ms Reeves is now going to have all her fingers and all her toes crossed, hoping that the OBR will not be downgrading their forecasts in the autumn. With spending plans set, and “ironclad” fiscal rules being met by gnat’s whisker, any move in the wrong direction will almost certainly spark more tax rises. He suggested the figures for projected departmental efficiencies savings published by the Treasury were not credible. [The chancellor] also stressed how this was a zero-based review, looking in detail at every aspect of spending. One wonders how effective that was. We can’t find any particular area of spending the government has decided it wants to withdraw from – other, perhaps, than overseas aid. On the efficiency savings one thing is quite striking. It seems that virtually every department is ripe for exactly the same cut in its administration budgets – 10% for all of them over the three years to 2028-29 and then another 5% in one year, 2029-30 – irrespective of how much they might have grown recently, and irrespective of planned spending increase. That is not the result of a serious department by department analysis. I hesitate to accuse the Treasury of making up numbers, but … He said government suggestions that the economic outlook has improved over the past year were not true. Despite some of the rather odd recent claims, neither the economic forecasts nor the public finances have improved relative to the genuinely difficult situation we knew about a year ago. Rather the reverse. He said he expected he expected the government to end up spending more over the next three years than it set out in the plans yesterday. And he said health and defence were likely to get more money. While spending reviews are supposed to provide full and final settlements they rarely do – they are nearly always reopened, especially in the last year of the SR period – and almost always in an upwards direction … Health spending nearly always gets topped up. Growth of 3% a year is below the historic average. It may not even prove enough to fund the official workforce plan and it is at best marginal whether it will be enough to achieve the government’s waiting list targets. Defence spending is rising to 2.5% of national income by 2027, but no increase thereafter. Given external demands and government promises to get it to 3% of GDP at an unspecified date in the next parliament there will be pressure to increase it further. He said the spending review would be difficult for Scotland. He explained: One part of the UK that is going to face some especially sharp choices is Scotland. Its RDEL [day-to-day spending] funding from Westminster will rise not by 1.2% a year over the SR period but by just 0.8% a year. This is a result of the so-called “Barnett squeeze” which, as budgets rise, is designed ever so slowly to reduce the large gap in per capita spending between Scotland and England. (Spending per head in Scotland is still 20-25% higher than in England – hence “free” higher education and social care, higher public sector pay, and so on). Because the Scottish government is prioritising spending on welfare benefits, it could actually be looking at cuts in spending on public services in 2027-28. SNP activists and senior figures have vented their frustrations at their leader, John Swinney, after a “disastrous” byelection campaign that saw the party lose a pivotal Holyrood seat to Scottish Labour, Libby Brooks reports. Next month the Guardian is holding an event to mark the Labour government being in office for a year. On Wednesday 9 July, the Guardian’s political editor Pippa Crerar will chair a panel of experts at the Conway Hall in London, including the Guardian columnist Rafael Behr, Salma Shah, the former Conservative special adviser to Sajid Javid and Frances O’Grady, Labour peer and former TUC general secretary, who will be discussing what’s gone right – and what’s gone wrong. There are more details, including information about how to apply for tickets, here. My colleague Peter Walker has been listening to Kemi Badenoch’s speech at the Peel Hunt FTSE250 conference this morning. He has posted these on Bluesky. Kemi Badenoch is making a speech in response to the spending review at an investment event in the City. While there’s a good reason for such an audience in this instance, it does seem she mainly does speeches in central London recently. Badenoch is talking about economics and a “morass of regulation”. It’s quite content-rich, but as tends to be the case with her, feels more like an address to a policy think tank than a political speech. For some this might be good. But some of her MPs would like a bit more... excitement. Badenoch says there is “a gap in the market foir a serious centre right plan… that is the space that I fill.” And yet the only specific plans she mentions are reversing the inheritance tax changes for farms and ending VAT on private school feels. These are arguably a bit peripheral. Badenoch references her slightly peevish R4 interview this morning, and complains about “an interviewer who didn’t understand that there are other ways to reduce the size of the state”. That’s Emma Barnett told. The speech is over, after 12 mins. A good proportion of it felt like an appeal to the investors in the audience to start engaging with - and donating to - her party. I will post more from the speech when I’ve seen the text. Rachel Reeves told the Today programme this morning that the government would not U-turn on its proposed cuts to sickness and disability benefits, while also saying that ministers would listen to “representations” from people wanting changes. (See 10.14am.) As for what this means, there is more detail in a letter that Liz Kendall, the work and pensions secretary, send to the Commons work and pensions committee about the cuts. It was published by the committee on its website yesterday. Kendall confirmed that the government is conducting a review of how the assesment for Pip (the personal independence payment –a non-means tested benefit for disabled people) is carried out. This will be led by Stephen Timms, the disability minister. But she also said that the government needs to legislate urgently on its plans, because the bill needs to pass by November for the benefit changes to be implemented in time for the 2026-27 financial year. She said the bill would need to start going through parliament before the Timms review was finished, and this meant the key changes were not subject to review. She explained: We have consistently been clear that we are not consulting on every proposal. Instead, parliament will have the opportunity to fully debate, propose amendments to, and vote on areas where we have announced urgent reforms that are not subject to consultation. With Pip caseload and costs forecast to continue rising, reforms are needed now to make the system sustainable, while supporting those people with the greatest needs. And, referring to the Timms review, she says: Our long-term ambition is to make Pip fit for the future for those it supports, which is why we have recently launched a wider review of the Pip assessment … The Pip assessment review will rightly take time and require extensive engagement, and we cannot wait for its conclusion to make the urgently needed changes to the Pip eligibility criteria. Cutting eligibiligy for Pip was one of the main proposals, and the most controversial, in the Pathways to Work green paper published in March. There is a summary of all the plans here. The government wants to legislate to change Pip so people will need to score a minimum of four points in at least one activity to qualify for the “daily living element” from November 2026. In the green paper it said: “We are not consulting on this measure.” The government is due to bring a bill implementing these changes to the Commons for second reading very soon. Here is Eleni Courea’s story on Rachel Reeves ruling out a U-turn on the cuts to sickness and disability benefits. Kemi Badenoch has also written an article for the Times saying she wants to see the size of the state reduced. She says: Cutting spending isn’t about austerity. It’s about smarter government. A state that does fewer things — but does them properly. One that protects borders, enforces the rules, defends property rights, and creates a climate where business can thrive. As a country we’ve lost the courage to say the obvious: that government can’t do everything. That the state can’t fix every problem. And that when we punish the people who create growth — the business owners, investors, entrepreneurs — the whole country loses. In her Today programme, Emma Barnett, the presenter, quoted this article, and asked Barnett what she meant when she said there were lots of problems the government could not fix. Badenoch replied: There is a lot that government does that has nothing to do with public services. We have endless quangos. We have endless sort of busybody work inspections. We can cut down on things like planning. There’s a lot that the government says they want to do in terms of getting housebuilding going. I want us to see what we can do in terms of deregulation. But, when Barnett asked her to give specific examples of what she would cut, Badenoch said she would not set that out now because the election was a long way away. Kemi Badenoch was on the Today programme earlier, and she insisted that the government was to blame for growth falling in April. She said: We have to start from the news that we had this morning – that the economy is shrinking, and it’s shrinking because of choices that the government has made. That is causing a problem that needs to be fixed. The first budget went after businesses, who are the ones who create growth. They went after jobs with the NI [national insurance] rises, and now we’re seeing that businesses are closing. Unemployment has risen pretty much every month since Labour came in. And that means that we have fewer people paying taxes and more people on the state. That needs to be fixed. She also accused the governemnt of waging “a war on the private sector”. But she would not say whether the Conservatives would reverse the rise in employer national insurance that is one of the main Labour policies criticised by business. The Resolution Foundation is holding a briefing about its spending review analysis. There is a live feed here. Here is a summary of the analysis. And here are the main points. Britain is morphing into a “national health state”, because health will take up half of day-to-day public spending by the end of the decade, the thinktank says. Yesterday’s NHS-dominated settlement continues a pattern of recent Spending Reviews, which has led to a major reshaping of the state. By the end of the decade (2028-29), the health service will account for half (49 per cent) of all day-to-day public service spending controlled by Westminster – up from a third (34 per cent) in 2009-10. While real, per-person funding for health has increased by 36 per cent between 2009-10 and 2028-29, it has fallen by 16 per cent for Justice, 31 per cent for Work and Pensions, and 50 per cent for Housing, Communities and Local Government over the same period. And Ruth Curtice, chief executive of the thinktank, said: Health accounted for 90 per cent of the extra public service spending, continuing a trend that is seeing the British state morph into a National Health State, with half of public service spending set to be on health by the end of the decade. The 2020s will see day-to-day public spending rising by much more than in the 2010s, but by much less than in the 2000s, the thinktank says. Real day-to-day spending is now rising again in the 2020s (2019-20 to 2028-29) by 2.2 per cent a year, following a 0.5 per cent fall per year in the 2010s (2009-10 to 2019-20). In the decade prior to that, spending rose by 4.3 on average each year (2001-02 to 2009-10). The extra public spending will benefit poorer families more, the thinktank says. The extra funding for hospitals, schools and the police relative to plans set out by the previous government will deliver important benefits-in-kind to families. The foundation estimates that a middle-income household will gain £1,400 on average for extra public service provision (in 2028-29), rising to £1,7000 for the poorest fifth of families. This is why the Treasury was able to publish figures yesterday suggesting that, overall, its record on tax, benefits and public spending has been highly progressive. Tax rises are “likely” in the autumn, the thinktank says. The large increase in public spending has been funded in large part by the £39.7 billion of tax rises (in 2028-29) announced in the Budget last Autumn and £3.6 billion of benefit cuts (in 2028-29) announced in the Spring Statement – equivalent to £1,550 for every family in Britain. But the combination of a weaker economic outlook, an unfunded spending commitment on winter fuel payments, and just £9.9 billion of headroom against the chancellor’s fiscal rules, mean further tax rises are likely to be needed this autumn. Q: Will there be fewer civil servants as a result of your plans? Yes, says Reeves. She says one example is the government’s decision to scrap NHS England. Q: You guarantee that the extra police promised by Labour in its manifesto will be funded? Reeves say she gave that commitment in her speech yesterday. Q: Are you assuming councils will increase council tax by the maximum 5% each year. That would be a £7.5bn tax rise. Reeves claims her plans are not based on the assumption that every council will raise council tax by the maximum allowed every year. Abel asks about the winter fuel payments U-turn cost, and gets the same reply ITV’s Good Morning Britain did. (See 8.40am.) It’s Times Radio next for Rachel Reeves. She is being interviewed by Stig Abell and Kate McCann. Abel starts off with the GDP figures, and Reeves repeats points she has made earlier, saying monthly figures are volatile, and the three-month figure much better. Q: What does stabilising the economy mean? Reeves says the Bank of England has been able to cut interest rates four times. But she recognises conditions are still tough for people, she says. Q: Where will asylum seekers be living when you get them out of hotels? Reeves says: “We need to deport more of them.” She claims this is happening. Q: But you are still budgeting for costs of £2.5bn. What are those for? Reeves says hotel accommodation is the most expensive form of accommodation. That is why the government is getting rid of them. Q: It will be a record year for cross-Channel crossings? That is why we are putting more money into Border Force. Abell repeats the question about where people will go. Do you know? Reeves says that is a matter for the Home Office. Q: Is it possible you may have to raise taxes more? Reeves says Labour committed in the manifesto not to raise the key taxes working people pay, income tax, national insurance, and VAT. She has kept to that and will stick to that, she says. And that’s the end of the ITV Good Morning Britain interview. Q: Do you accept that you are in a weaker position as chancellor than when you started? Reeves says she does not view the job as “trying to win a popularity contest”. Q: What taxes will have to go up? Reeves says her spending plans are funded. Q: But the winter fuel payments U-turns was not funded. So currently your sums do not add up. Reeves says this will be paid out in the winter. There are another OBR forecast to come before then, she says. Q: You claim all your spending plans are funded. But every economist says taxes are going to have to go up. Are you saying that won’t be necessary. Reeves repeats her point about no chancellor being willing to set budgets for years ahead. Rachel Reeves is now on ITV’s Good Morning Britain. Susannah Reid and Richard Madeley are interviewing her. Q: You must be disappointed about the growth figures? Reeves repeats the point about monthly growth figures being volatile. But she says the three-month figure shows growth at 0.7%. Reeves has got three more interviews this morning, according to Politico’s London Playbook. She will be on ITV’s Good Morning Britain, Times Radio and GB News. Before Today, she had already done three others. Q: Government borrowing costs are higher than they were just after Liz Truss’s budget. Reeves says the global situation has changed. But she accepts the government is spending too much on servicing government debt. And that’s the end of that interview. Q: Will you change your mind on disability cuts? No, says Reeves. But she says people are are unable to work have nothing to fear. There are 1,000 people a day going on to disability benefits, she says. The UK is the only developed country where the number of people in the labour market is lower than before Covid, she says. She says the government must help people back to work. Robinson explains the changes to Pip (the personal independence payments). Will you stop people getting it if they cannot wash properly. Reeves says the eligibility criteria are being reviewed. Q: So you might change your mind? Reeves says the policy has not changed. What has been announced already is a change to the eligibility criteria (which is what she was referring to a moment ago, she implies). UPDATE: Here is Eleni Courea’s story on this exchange. Q: Health leaders say the spending review plans won’t be enough to allow the government to hit its NHS performance targets. Reeves defends the settlement. But she says reform in the NHS is needed too. Q: The NHS budget is bigger than the entire budget of Portugal. Which is why are are squeezing in other areas. The mayor of London, Sadiq Khan, says the increase for the police will still lead to cuts in frontline policing in the capital. Reeves says the police have got 2.3% above inflation. She says she does not accept that there will need to be cuts. Q: The National Police Chiefs Council also says there will have to be cuts., Reeves repeats the point about the police getting an above-inflation settlement. Q: If there are cuts, will you do a U-turn? Reeves says, if the police are getting more than inflation, there will be no need for cuts. Robinson asks about the growth figures out today. Reeves says monthly growth figures are “notoriously volatile”. But April was a challening month. Q: It was challenging because you put taxes up? Reeves says the number of jobs in the UK has gone up. April was when President Trump announced his tariffs, she says. She says business surveys are “all ticking up” and “confidence is returning”. Q: That is what you said before the election – that nothing in your plans required tax rises. But you put taxes up by £40bn in your first budget. Reeves says no chancellor would write a budget for years ahead. But she repeats the point about all the spending review decisions being funded. Q: The former head of fiscal policy at the Treasury, Ruth Curtice, now runs the Resolution Foundation. She says tax rises are likely in the autumn. Other thinktanks say the same too. Is it fair to say you may have to increase taxes? Reeves says the OBR said policy changes would lead to more growth. The trade deals since then will help too. So lots is being done to “turbocharge the economy”. She says she set out plans yesterday to promote growth. All this is about “trying to put more money into working people’s pockets”, she says. Nick Robinson is interviewing Rachel Reeves on the Today programme. She is in Derby. Q: Do we have to prepare for tax rises in the autumn budget? Reeves says she made tax decisions in the budget last year. And she set a spending envelope. Yesterday was about allocating the money in that envelope. Everything was funded. Rachel Reeves has already been on Sky News. She told them the measures in the spending review did not require extra taxes, but she refused to rule out putting up taxes in the autumn budget. Good morning. Rachel Reeves, the chancellor, got a good reception from MPs when she addressed them yesterday after delivering her spending review. But she cannot avoid questions about whether taxes might have to rise in the autumn, and growth figures for April out this morning undermine the claim that the economy is turning round. Reeves is giving interviews this morning. Commenting on the growth figures, she said they were “clearly disappointing”. Our number one mission is delivering growth to put more money in people’s pockets through our Plan for Change, and while these numbers are clearly disappointing, I’m determined to deliver on that mission. In yesterday’s spending review we set out how we’ll deliver jobs and growth – whether that’s improving city region transport, a record investment in affordable homes or funding Sizewell C nuclear power station. We’re investing in Britain’s renewal to make working people better off. Here is the agenda for the day. Morning: Rachel Reeves, the chancellor, is doing a morning interview round. She is on the Today programme at 8.10am. 9am: The Resolution Foundation publishes its spending review analaysis. 10.30am: The Institute for Fiscal Studies publishes its spending review analysis. 10.50am: Kemi Badenoch gives a speech at the Peel Hunt FTSE250 conference in London. 11.30am: Downing Street holds a lobby briefing. Noon: John Swinney, Scotland’s first minister, takes questions from MSPs. 1pm: Wes Streeting, the health secretary, gives a speech at the NHS Confederation conference in Manchester. If you want to contact me, please post a message below the line when comments are open (normally between 10am and 3pm at the moment), 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.bsky.social. 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.
Author: Andrew Sparrow