FirstFT: What to expect in Rachel Reeves’ first UK Budget today

Today’s agenda: Alphabet and Reddit shares up; Harris calls Trump ‘unstable’; Ukraine and Russia in talks; FT visual investigation on Sudan war; and why boards should take a chance on youth

Good morning. It’s Budget day in Britain, with Rachel Reeves expected to unveil her tax-and-spend plan this afternoon. Here’s what we know.

Where will the tax burden fall? The biggest measure is expected to be an increase of up to £20bn in employers’ national insurance contributions, which will affect jobs, wages and consumer prices. The chancellor is also expected to introduce value added tax for private school fees, increase taxation on the private equity sector and extend an existing six-year freeze on personal tax thresholds. The Treasury has also been working on reforms to capital gains tax and inheritance tax.

Will the increased revenue help? Improving public services and fixing public finances will entail closing a funding gap of up to £40bn, officials have said. Ministers also said they discovered a £22bn overspend after Labour’s election win. Economists are not optimistic about the near-term outlook for growth, even before factoring in the potential impact of new tax increases. But Reeves hopes to make the case that this short-term pain will lead to mounting economic benefits across a 10-year horizon and beyond.

How will markets react? The UK’s long-term borrowing costs hit a post-election high yesterday, as investor anxiety over a rise in gilts issuance added fuel to a sell-off in government bonds. Reeves has said she will relax her fiscal rules to allow a wave of new borrowing for projects including hospitals, schools, green energy and transport schemes. How much of the expected £50bn of newly created borrowing headroom she uses will prove critical to how gilts react.

Here’s more on what to expect in Reeves’ first Budget, and we’ll bring you the latest updates here as she delivers her speech.

• ‘Fiscal black hole’: Jeremy Hunt has made a last-minute attempt to block a politically explosive official report due today on the alleged £22bn overspend under his watch as chancellor.

• ‘Working people’: Labour’s struggle to define the term reflects a lack of political direction from the top, writes Stephen Bush in Inside Politics. Sign up for his analysis of the political fallout in today’s newsletter.

And don’t miss today’s Newswrap newsletter, which will round up the FT’s Budget coverage and post-event analysis. Sign up here.

Here’s what else I’m keeping tabs on today:

• Economic data: The EU and US report flash third-quarter GDP, as does Germany, which will also have September labour and October inflation data.

• EU tariffs: Tariffs of up to 45 per cent on Chinese electric vehicles will come into force today and be imposed for five years.

• Results: Volkswagen reports after announcing plans to shut German plants, cut tens of thousands of jobs and slash pay. Others reporting include Airbus, Eli Lilly, GSK, Kraft Heinz, Meta, Microsoft, Starbucks and UBS.

After the Budget, join FT reporters and commentators on Friday for a subscriber-exclusive webinar to discuss the UK’s economic prospects. Register for free.

Five more top stories

1. Alphabet’s profit jumped 34 per cent in the third quarter as the parent company of search giant Google reported strong growth in its cloud business amid robust demand for computing and data services used to train and run generative artificial intelligence models. Read the full story.

• Reddit: The social media platform surprised Wall Street by turning a profit for the first time just months after going public, sending shares up 25 per cent to a record high.

2. Kamala Harris attacked Donald Trump as “unstable”, “obsessed with revenge” and “out for unchecked power” during a speech at the Washington DC site where her rival had addressed supporters on January 6 2021 hours before they stormed the US Capitol. Read more from the vice-president’s speech last night.

• Trump rally fallout: The former president is facing backlash for comments made by speakers at his New York event, jeopardising his gains in the crucial swing state of Pennsylvania, which has a large Puerto Rican population.

3. A quarter-trillion dollars a year in taxes hang in the balance for US companies as the election nears, according to a Goldman Sachs analysis. Kamala Harris has promised to partly reverse Donald Trump’s big reduction in the corporate rate, while the former president has said he would lower the rate further. Here’s more on the two starkly different futures facing corporate America.

4. Ukraine and Russia are in preliminary talks about halting strikes on each other’s energy infrastructure, according to people familiar with the matter. They said Kyiv was seeking to resume Qatar-mediated negotiations that were derailed by the Kursk incursion. An agreement would mark the most significant de-escalation of the war since Russia invaded in 2022.

• North Korean troops: Kyiv is on high alert as it awaits Pyongyang’s possible entry into the war, which would mark the conflict’s first intervention by a foreign army.

5. Exclusive: The UK should reduce the cost and complexity of visas for experts in artificial intelligence and create special zones for data centres, a government-commissioned report is expected to say. The report by angel investor Matt Clifford, expected to be published next month, sets out dozens of recommendations. More details from his “AI Opportunities Action Plan”.

Visual investigation

Sudan has descended into what is arguably the world’s most brutal civil war, with no sign of a victor or a peace deal. Reporting by the Financial Times demonstrates one way atrocities are being committed: deliberate attacks on doctors and hospitals. Through satellite analysis and interviews, our latest visual investigation shows how the fighting is taking a devastating toll on the country’s health facilities.

We’re also reading . . . 

• Arm’s ambitions: The UK chip designer, whose shares have trebled in price over the past year, could be the unexpected winner of the AI investment boom.

• German politics: Speculation is growing in Berlin that Chancellor Olaf Scholz’s coalition could soon collapse, with some predicting possible snap elections in the spring.

• Apple Card: The tech giant’s credit card with Goldman Sachs is a cautionary tale for those seeking to reinvent retail finance, writes Brooke Masters.

• Giant African rat: A furry investigator has boosted the ranks of those sniffing out contraband in the lucrative illegal wildlife trade.

Chart of the day

The UK’s rising tax burden has pushed government revenues closer to EU levels than at any point in decades, according to IMF data. This gap is expected to narrow even further, with Rachel Reeves set to introduce massive tax increases in today’s Budget.

Take a break from the news

Age matters when it comes to boards, writes Anjli Raval. Just 5 per cent of directors within the S&P 500 companies are under the age of 50, but Raval argues companies should not be afraid to take a chance on youth.