McDonnell defends decision to accept Tory income tax cuts - as it happened
Rolling coverage of the day's political developments as they happen, including Philip Hammond's morning interviews about his budget
- Hammond's morning interviews - Summary and analysis
- IFS verdict on the budget - Summary
- Afternoon summary
4.20pm GMT
Media reports have surfaced this weekend suggesting UK intelligence services were aware of the Saudi plan to abduct the journalist Jamal Khashoggi and take him back to Riyadh, and of the deployment of the hit squad to Istanbul for that purpose. Can I give the foreign secretary the opportunity to tell the House today that those reports are categorically untrue?
I hope she will understand that I don't comment on intelligence matters, but if it reassures her I had absolutely no prior knowledge myself of the terrible Khashoggi murder and was as shocked as I think everyone else.
4.08pm GMT
4.02pm GMT
This morning Philip Hammond, the chancellor, claimed that overall the poorest gained most from the budget. (See 8.22am.) As evidence for this, he cited the Treasury's distributional analysis. But this focuses on the impact of all changes since autumn 2016, and this timescale means that the impact of the massive welfare cuts announced in the George Osborne summer budget of 2015 are not included. In its own briefing on the distributional impact of the budget the Institute for Fiscal Studies looks at the impact of all changes since the 2015 general election and, over this timescale, it is clear that the poor have lost the most; policy has been regressive.
Here is the key chart. It shows that what was announced yesterday made almost no difference to the overall pattern since 2015 (see the difference between the black and orange lines).
3.44pm GMT
This is from the Joint Council from the Welfare of Immigrants on Caroline Nokes, the immigration minister, saying employers would have to check the status of EU nationals from April next year if there is a no deal Brexit. (See 3.31pm.)
This is utter drivel and yet terrifying. No such paperwork exists! This is basically inflicting the full spectrum of the Hostile Environment on most EU nationals left in Britain. Employers will find it impossible to determine has a right to work, given the Government doesn't know https://t.co/KVXTDz131G
3.31pm GMT
The Commons home affairs committee is just winding up a hearing about immigration after Brexit. According to colleagues who were following the proceedings, it was a bit of a car crash, with Caroline Nokes, the immigration minister, making a particularly poor impression.
Here are some Twitter highlights.
Very difficult grilling for immigration minister Caroline Nokes at home affairs committee. She seems unable to answer very basic questions on how immigration system for new EU nationals will apply if there's no deal. It will be "an enormous challenge, she admits.
In brief: Nokes says EU nationals will have to go through a settled status system to be able to work if there's a no deal. But employers will be completely unable to tell if someone has done that. Nor will anyone else, eg landlords.
This looks like a huge mess brewing.
Oddly enough, the MPs on the committee don't seem that reassured when Nokes says the trials of the settled status scheme have gone well, given these involved 600 people, and there will be about 3 million to process by March.
This is pretty astonishing: immigration Caroline Nokes is unable to give MPs any information at all about what checks employers will need to do if there's a no deal to ensure EU nationals can work in the UK. This could be happening in *five months* from now.
BREAKING: Home Office minister Caroline Nokes reveals employers are going to have to check EU citizens they employ have paperwork to show they have right to work in April next year if there is no deal. 1/
Home Office Caroline Nokes - EU citizens who come to Britain after March 29 in no deal scenario will face "mandatory" registration. 2/
BREAKING Nokes: "Employers will now have to make sure they go through adequate vigorous checks to evidence people's right to work" after March 2019 in no deal. 1st time time HO has said employers need to do this.3/
So far Home Office has only registered 650 people for "settled status". Only 3.5999999million people to go before 29 March. https://t.co/n0efYnxF8o
Home Office briefings up to now have made it clear that employers would not be required to do checks on EU citizens currently employed by them, but new employers may have to do so. So Caroline Nokes seems to be announcing new policy
Chair of @CommonsHomeAffs accuses Home Office officials are "not being straight" with MPs after they repeatedly decline to tell @YvetteCooperMP what intelligence the Border Force will lose if there's No Deal over Brexit.
Paul Lincoln, head of the border force, repeatedly declines to spell out what his officers would lose if their access to SIS II was suddenly turned off. The database is so important that it is accessed 1.4m times *a day* by British police and immigration officials.
Some pretty, shall we use their own jargon, 'sub-optimal' moments at Home Affairs Cttee this afternoon - Home Office and Immigration Minister trying to explain what may or may not happen to borders and immigration after Brexit
Jon Thompson from HMRC has just used the phrase 'sub-optimal space' - Yvette Cooper asks, 'how will you know if organised crime is trying to take advantage' of no deal situation - 'we won't' he says - you have to feel for officials trying to work all of this out
3.06pm GMT
This is from Ayesha Hazarika, who worked as a Labour adviser to Harriet Harman and Ed Miliband in a previous era.
It's so weird that Labour is supporting this... JC & JM would have rinsed any labour leadership for this. How things change. Genuine question - was this a mistake or is this a new (& totally understandable) shift to "pragmatic" politics which means compromising to be electable? https://t.co/eAzEeBnzeO
2.39pm GMT
John McDonnell, the shadow chancellor, has been speaking to journalists and defending his decision to accept the income tax cuts in the budget (see 10.13am), my colleague Heather Stewart reports.
John McDonnell defends decision not to oppose Hammond's tax cuts for higher earners. "We're not going to take money out of people's pockets: simple as that," he tells journalists.
Related: McDonnell criticised for backing income tax cut for high earners
2.25pm GMT
Turning back to the IFS briefing, here are the main points from the briefing (pdf) from Paul Johnson, the IFS director.
All that said, this is no bonanza. Many public services are going to feel squeezed for some time to come. Cuts are not about to be reversed. If I were a prison governor, a local authority chief executive or a headteacher I would struggle to find much to celebrate. I would be preparing for more difficult years ahead.
This is a long term trend and a big one at that. Health spending will have risen from 23% of public service spending in 2000 to 29% in 2010, and is set to reach 38% by 2023-24. That is a remarkable increase. Other public services have been paying the price. At some point, we will need to pay more tax if we are to continue to increase spending on the NHS like this.
As for health, despite its favoured status, there is nothing particularly historic about these announcements. Depending on exactly what you are measuring spending is rising by between 2.6% a year (an estimate of total health spending increases between 2017-18 and 2023-24) and 3.4% a year (NHS England RDEL between 2018-19 and 2023-24). That compares with average increases of 3.7% a year over the NHS's entire history, and a 6% a year over the period of the last Labour government.
With some other changes designed to smooth its roll out, this will increase planned spending on universal credit by around 2bn a year. For many people this increase in work allowances will essentially undo the cuts announced by George Osborne in 2015 - though not for the childless non-disabled. Their work allowances were cut to zero in 2015 and there they remain.
These changes, on top of the cut in the taper rate announced last year, will help "make work pay" for many recipients. They are just about enough to push the expected cost (and hence generosity) of universal credit higher than the system it replaces.
Of course these changes benefit the better off - though you only need 12,500 in income to benefit from the personal allowance increase. On average they will benefit over 30m people by an average of around 44 a year, with the typical higher rate taxpayer gaining 176 and the typical basic rate taxpayer gaining 24. Contrast that with the changes to universal credit. They help far fewer people - about 2.4m families - but help them a lot more, by over 600 a year.
Whilst capital spending is still set to rise and to reach a high level by historic standards, Mr Hammond actually raided some of the increases he announced a couple of years ago to pay for more day-to-day spending. Capital limits were cut by a pretty chunky 7bn for 2020-21. Mind you the OBR had assumed that most of this would not have been spent in any case. To announce big increases in capital spending, fail to persuade the independent fiscal watchdog that you are capable of actually spending it, and then raid it a couple of years later, does not speak to the highest quality of spending control and planning.
It's important to put improvements in the forecasts in context. Yes they got better. Borrowing this year is set to be 12bn less than forecast in March. But that is still nearly 30bn more than was forecast in March 2015. Borrowing next year, after the measures announced yesterday, is forecast to be 2bn less than expected in March this year, but 40bn more than forecast in March 2016.
And when considering the public finances don't forget the debt. The deficit is down a lot on its peak. Debt is not, it is 50% of national income higher than it was pre-crisis, and it is set to fall only gradually - by about 3% of national income between now and 2023-24 once Bank of England interventions are stripped out. It is not on a decisively downward path into the long run.
1.55pm GMT
1.53pm GMT
Q: When you leave the EU, will you follow Nordic environmental and climate change politcies? Or will you make your own?
May says the UK wants to see the EU continuing to be a strong entity.
1.46pm GMT
May finished her speech without saying anything newsworthy (even by the standards of a live blog.) But she is now taking questions.
Q: Can you assure us the Nordic people will still be able to enjoy the access to the UK they have now? And will you offer people a referendum?
1.30pm GMT
Theresa May is giving a speech in Oslo to the Nordic Council now. There is a live feed here.
So far she has just been making general remarks about links between the UK and Nordic countries, including the observation: "Some of us occasionally dance to Abba."
1.22pm GMT
This is what Paul Johnson, the IFS director, says in his statement at the briefing on whether the budget means that austerity is over.
So to the inevitable question, "is austerity over?". Well we will only really know when we have some firmer plans, but from the numbers we have I think we can say the following:
There was a big upward revision to overall spending plans;
1.15pm GMT
Here is the quote from the IFS's director, Paul Johnson, explaining why he thinks the budget was a gamble.
So now we know. When push comes to shove it's not tax rises and it's not the NHS that Mr Hammond is willing to gamble on, it's the public finances. Because yesterday's budget was a bit of a gamble. Yes the OBR reduced borrowing forecasts so he was able to find more money without committing to more borrowing. But what the OBR gives the OBR can take away. Suppose the public finance forecasts deteriorate significantly next year. They might. There's perhaps a one in three chance of that. What will he do then? It's hard to see austerity starting up again with promised spending increases not materialising. The chances of getting sizeable tax rises though parliament are next to nil. It's surely borrowing that would take the strain. Fair enough. That's a judgment. But it's a judgment that could see debt ratchet upwards.
1.11pm GMT
Here is the text (pdf) of the opening remarks from Paul Johnson, director of the IFS, at its briefing about the budget which is taking place now.
I will post a summary shortly.
1.07pm GMT
Philip Hammond has taken a "gamble" on the future health of the public finances by using better short-term borrowing figures to raise spending on the NHS, according to Britain's leading tax and spending thintank.
The Institute for Fiscal Studies warned that the public finances could deteriorate next year, at a time when Britain leaves the EU, which could pose difficult questions for the government after the chancellor increased spending on the health service.
When push comes to shove it's not tax rises and it's not the NHS that Mr Hammond is willing to gamble on, it's the public finances.
12.33pm GMT
James Rothwell, the Telegraph's Brexit correspondent, has more on what Oslo thinks about the UK staying in the EEA.
Senior Norwegian officials feel very differently behind the scenes about this. They have to make nice with UK in public because it's such a close trading partner. But the message in private is clear: please don't do this https://t.co/cj86qNswGi
For example, I understand an FT interview where Solberg appeared to endorse EEA/Efta went down badly in Oslo, where they felt the move had backfired. It was supposed to walk the tightrope between using cordial UK language and insulating EEA/Efta from chaotic Brexit process. https://t.co/EnlhVL0IEt
12.27pm GMT
In the Commons there is increasing interest in "Norway for Now" as a Brexit option - staying in the European Economic Area after Brexit, as a stepping stone towards a Canada-style free trade agreement. The Conservative MP Nick Boles, a remain-voting ally of Michael Gove's, has been championing the idea, and the leading Brexiter Frank Field recently came out in favour in a Guardian article.
But this morning, in Norway, Theresa May rejected the idea, as Sky's Faisal Islam reports.
PM on growing interest in the Norway model at least temporarily from some in her party: "Norway has a particular relationship with the EU"has things which would not deliver on people voted for"
And then the actual Norwegian PM sounds somewhat down on the Norway then Canada option for the Uk: @erna_solberg - "We would welcome any good cooperation with Britain. But to enter into an organisation which you're leaving [ie the EEA] is a little bit difficult for rest of us"
12.17pm GMT
Speaking in Norway at the Northern Future Forum event this morning, Theresa May praised the budget. She said:
Austerity coming to an end isn't just about more money into our public services, it's about more money in people's pockets as well.
Yesterday, we confirmed that announcement that we had made in the summer of giving the biggest single injection of extra money into our National Health Service in its history.
12.04pm GMT
The local newspapers namechecked by Philip Hammond in yesterday's budget have declined to endorse his proposals.
The chancellor used his speech to announce an extension of the 1,500 discount on business rates for local news outlets, telling the House of Commons that "whatever the national press says, I've been assured a warm welcome for my budget from the Royston Crow and the Keswick Reminder".
11.57am GMT
Men will benefit more from yesterday's budget than women, according to an analysis commissioned by the Labour MP Yvette Cooper. Cooper has asked House of Commons library statisticians to develop a methodology for assessing the gender impact of budget measures and in the past she has published figures showing that women have lost disproportionately far more than men from the tax and benefit measures introduced since 2010. That research has been updated overnight, and it shows that yesterday's budget also favoured men.
Cooper said:
The gender gap in the Tories tax and benefit policies is getting worse. After 8 years of Tory austerity, women are now bearing nearly 90% of the losses from the changes to tax and benefit since 2010. Each time the chancellor has the chance to narrow the gap he does the opposite. By choosing to put more into raising tax allowances including for the highest earners than into tackling the problems with universal credit, the chancellor has ignored the fact that low earners are still being hardest hit, and that means women are still losing out.
Women are more likely to be hit by welfare cuts including universal credit whilst men are more likely to gain from the increased tax allowances. The chancellor's decision to cut taxes for those on 100,000 a year helps more men, when he could have done more to sort out the problems with universal credit and the welfare system for families in poverty instead.
11.21am GMT
Andy Burnham, the Labour mayor of Greater Manchester and Jeremy Corbyn's main rival in the 2015 Labour leadership contest, has criticised John McDonnell, the shadow chancellor, for saying Labour would accept the income tax cuts announced in the budget yesterday. (See 10.13am.)
At a loss to understand why we are doing this. https://t.co/cFVGuGOpem
10.53am GMT
At the news conference at the end of the Northern Future Forum meeting in Oslo Theresa May said the government was not planning an early election. She said:
We are not preparing for another general elections. It wouldn't be in the national interest.
10.13am GMT
John McDonnell, the shadow chancellor, has also been giving interviews this morning. Asked if he would reverse the tax cuts announced by the government yesterday, he said Labour would maintain them. He told Today:
We will support the tax cuts at the moment on the basis that it will inject some demand into the economy.
But we put forward in the general election a fairer taxation system so that does mean that we will be asking the top 5% to pay a bit more in income tax and we will be rolling back many of the corporation tax cuts that have taken place, and we will be cracking down on tax evasion and tax avoidance.
The Tories usually do this. If a general election is coming, what they'll do is they'll splash out some money and then if they win the election they then start cutting it back again.
10.00am GMT
Paul Johnson, director of the Institute for Fiscal Studies, told the Today programme this morning that Philip Hammond had "got lucky" because tax revenues were better than expected. Johnson told the Today programme:
He's just simply decided to spend all of that. I think he has abandoned any idea of getting to budget balance by the mid-2020s.
9.53am GMT
Philip Hammond, the chancellor, has given various interviews this morning. Here are the main points.
The overall envelope of funding that's available in the spending review, once you take out the commitment we've made to health, gives flat real spending available for all other departments.
That's a choice that we make, isn't it? You do have a choice of everybody having 0.0% real, in other words maintaining their spending power in real terms after inflation year after year after year.
We are raising both thresholds. Obviously people who pay higher rates of tax ... benefit from that. But 32m people who are paying basic rate tax will be 130 better off. 1.7m people will be moved out of paying high rate tax altogether. These are people on middle incomes who you could say should not be in higher rate tax at all. But over the years more and more people on middle incomes have been dragged into higher rate tax, and raising the threshold gets many of those people - who work in our schools, in our hospitals, in our police forces - back into being basic rate taxpayers again.
Nick, it is not a choice. When you make a promise to the electorate in an election manifesto, then you have an obligation to deliver on that promise.
While many people will look at any deal no doubt and say 'I don't like this bit of it, I don't like that bit of it', as with so many things in life, it isn't about, 'Can we get this exactly how we want it, exactly perfect?' It's about looking at the options available to use and deciding which is the best one to go with, which is in the best interests of this country and the future. And I'm confident that the prime minister will get a deal with the European Union which my colleagues in parliament will consider carefully and, although they may not like every last aspect of it, I'm confident that they will conclude in the end that it is right to do a deal.
If the economy suffers a shock - and a no-deal Brexit is an example of a shock, but actually we know from history that sometimes the shocks that hit the economy are not the ones we are expecting but ones we aren't expecting - if there's a shock to the economy, we will deal with it in the usual way.
Very often a shock to the economy actually requires a boost to spending in the short term to support demand and to keep the economy going.
I hope not. What we are preparing for is Britain's future. We've now turned a corner and we are able to give Britain a bit of good news.
The large companies that are being targeted by this are global players, they are large serious companies. They are people that HMRC have contact with. When we introduce a law which says they have to pay tax at a certain level on certain of their activities, they will pay. We're very confident of that.
These are not companies that are going to scuttle off and try to avoid that. At the moment there is no obligation on them to pay tax in the UK. We don't have a tax that applies to them. That's why it's so important to introduce this digital services tax.
We retain an ambition to balance the budget.
You are painting a picture here that is designed to show that I'm abandoning fiscal rectitude. In every year of this forecast our deficit will get smaller.
Schools funding will be dealt with in the spending review. We put 1.3bn of additional money into schools funding last year to protect per pupil spending in our schools and all of these things will be dealt with in the spending review.
What I did yesterday was nothing to do with that process. It was simply giving back a little bit of the money that we have saved this year so that schools can buy the odd little piece of kit that they need.
8.56am GMT
The Resolution Foundation, a thinktank focusing on income inequality, has published its analysis of the budget. Here is its news release. Here is my colleague Jessica Elgot's story about it.
Related: Budget income tax cuts 'to overwhelmingly benefit the rich'
Income tax cuts for millions of workers announced in Philip Hammond's budget will "overwhelmingly benefit richer households", analysis has found, with almost half set to go to the top 10% of households.
The analysis by the Resolution Foundation thinktank found that welfare cuts would continue to affect the poorest households, despite Hammond's announcement that austerity was coming to an end.
8.51am GMT
Here (a little later than usual) is the agenda for the day.
9.40am (UK time): Theresa May attends the final session of the Northern Future Forum meeting in Oslo. It is a public session, and there is a press conference with other leaders at the end.
8.28am GMT
Q: A lot of people feel you were giving money to causes to buy parliamentary support for Brexit. What is more likely? That the DUP won't back a Brexit deal, or your party?
Hammond says neither. He thinks there will be a deal. He says in life nothing is perfect. But MPs will have to decide whether to back it. Although they "may not like every last aspect of it", he expects them to support it, he says.
8.24am GMT
Q: If Brexit goes wrong, this budget won't be worth the paper it is written on.
Hammond says the government will legislate for what's in the budget.
8.22am GMT
Q: Can you confirm welfare will still be cut?
Hammond says he put 6.6bn into universal credit yesterday.
8.21am GMT
Q: Some schools were offended by the plan to give them just a little extra. They want bigger budgets.
Hammond says the money announced yesterday was nothing to do with school funding. It was a one-off to give them extra. A cheque for 50,000 could help them buy some white boards, he says.
8.19am GMT
Q: With the NHS getting more money, other departments face cuts. Can you confirm that?
Hammond says the government has made a choice to fund the NHS generously.
8.17am GMT
Q: Growth rates are low. And yet you are spending more money. You have discovered a magic money tree, chopped it down and burnt the logs.
Hammond does not accept the analogy.
8.15am GMT
Q: You could have balanced the budget. But you chose to increase spending instead.
Hammond says, when he became chancellor, he chose to change the Treasury's approach.
8.13am GMT
Nick Robinson is interview Philip Hammond.
Q: Have you found the magic money tree? This change in public finances has not come about through real economic change.
8.10am GMT
Philip Hammond is giving interviews this morning about yesterday's budget, and he is just about to appear on Today. I will be covering it live.
Here is our overnight budget story.
Related: Hammond delivers budget of tax cuts and spending to shore up May
Philip Hammond declared "austerity is coming to an end," on Monday, as he sought to reassure voters, and shore up the morale of fractious Tory MPs Theresa May needs to back her Brexit deal by peppering his budget speech with spending pledges and a surprise income tax cut.
As negotiations with the EU27 enter their frantic final weeks, the chancellor cast off his cautious reputation and opted to spend almost all of a 68bn windfall handed to him over the next five years by the independent Office for Budget Responsibility (OBR).
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