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Rachel Reeves declined to rule out 5% council tax rises this morning when she faced questions on Sky News after unveiling her spending plans. Political editor Beth Rigby says this is the tax she'll be keeping her eye on...

When something sounds too good to be true, it normally is.

For me, former shadow chancellor John McDonnell hit the nail on the head on Wednesday night as he remarked rather wryly to me that "the greater the applause on the day, the greater the disappointment by the weekend".

Because, in talking up the prospect of national renewal, the chancellor glossed over what the "hard choices" mean for all of us.

There are questions now swirling about where the cuts might fall in day-to-day budgets for those departments which are unprotected, with local government, the Home Office, the Foreign Office, and the Department for Environment all facing real-terms cuts.

My colleague Ed Conway, analysing the government figures, found cuts in the schools budget for the last two years of this parliament - the chancellor's top-line figure showed an overall rise of 0.6% over the five-year period of this Labour government.

There are questions too over whether council tax bills might be increased to top up local government and police budgets.

Reeves told me in an interview after her speech that they won't, but she has predicated increases in police funding and local government funding coming locally, rather than from central government, so I will be watching how that will play out... Read on here

What Reeves told us this morning

Speaking to Wilfred Frost on Sky News Breakfast, Reeves declined to rule out tax increases and insisted her spending review was fully funded: "I'm not going to write another four years' worth of budgets before we've even got through the first year of this government."

She added: "There was nothing that I did in the spending review that required further taxes, because everything that I set out yesterday was fully costed and fully funded."

Asked about council tax, she said: "The previous government had a policy of increasing or having a maximum increase in council tax of 5% a year. 

"Councils don't have to increase that council tax by 5% a year. But that was a cap that the previous government put in. And it's one that we've stuck to. So we haven't changed that policy."

She reiterated that "this government is not increasing taxes on working people".

"People have been through a lot these last few years and that's why it's really important for me to honour that commitment to not increase those key taxes that government levies on ordinary working people," she concluded.

Stamp duty changes announced by the chancellor at the last budget and that came into force in April contributed to the contraction of the economy, the Office for National Statistics has said.

Director of economic statistics Liz McKeown said there were signs some activity was brought forward from April to earlier in the year.

Services and production were behind what Rachel Reeves, the chancellor, has called "disappointing" figures in April.

"Both legal and real estate firms fared badly in April, following a sharp increase in house sales in March when buyers rushed to complete purchases ahead of changes to stamp duty," says McKeown.

"Car manufacturing also performed poorly after growing in the first quarter of the year.

"In contrast, April was a strong month for construction, research and development and retail, with increases in these only partially offsetting falls elsewhere."

Overall, however, the economy still grew as a whole in the last three-month period, McKeown said.

The latest GDP figures are "clearly disappointing", the chancellor has told Sky News. 

The data for April, which you can read more about below, shows the economy shrank by 0.3% - 0.2 percentage points more than economists had predicted. 

Speaking to Sky News, Rachel Reeves says GDP is "very volatile" and the contraction was "perhaps not entirely unexpected". 

"We also know that April was a challenging month. There was huge uncertainty about tariffs," she adds, pointing to figures that show exports and production are weakening due to Donald Trump's trade war. 

"April was a difficult month and since then we have secured three trade deals with the US, India and the EU." 

The figures come after the government's spending review yesterday, which set out plans to boost economic growth. 

"I really focused on the priorities of the British people, investing in our country's security, in our health and in growing the economy because we need to get out of this low-growth cycle we've been in for the last few years," Reeves says.

The economy hasn't been able to sustain the strong performance it recorded at the beginning of the year, says business and economics correspondent Gurpreet Narwan.

The economy expanded by 0.7% in the first quarter, but has contracted by 0.3% in April, the Office for National Statistics estimates.

It shows this year's early boost was temporary, with people bringing forward house purchases to beat stamp duty and businesses trying to get orders out the door to beat any potential US tariffs, says Narwan.

"Now that some of that has fallen away, what we're seeing is this economy that's stuck in this low growth and high tax loop.

"You've got poor business confidence, consumers being hit with inflation and high government borrowing costs, which are impacting the chancellor's room for maneuver."

Services are down 0.4%, says Narwan, contradicting economists' expectations that a revival in consumer confidence at the beginning of the year was going to continue.

Construction, on the other hand, grew 0.9%, compared to a weak start to 2025.

"We might see some of the government's investment spending starting to come out of the door there."

The UK economy shrank by 0.3% in April, the latest data from the Office for National Statistics shows. 

Services shrank by 0.4% and production by 0.6%, but construction moved in the opposite direction, growing by 0.9%. 

Economists had expected a 0.1% contraction in April after growth of 0.2% in March.

The slowdown has been blamed on the financial uncertainty caused by steep tariffs imposed by Donald Trump.

"After increasing for each of the four preceding months, April saw the largest monthly fall on record in goods exports to the United States with decreases seen across most types of goods, following the recent introduction of tariffs," Liz McKeown, director of economic statistics at the ONS, said. 

The data shows US exports fell by 拢2bn. 

April also saw a number of bill rises for businesses and households. 

There was a hike in national insurance contributions and the minimum wage, as well as a rise in council tax, car tax, energy, water and broadband bills. 

What is GDP and why do we care about it? 

Basically, GDP is a tool used to assess the size and health of an economy.

It stands for gross domestic product and measures the monetary value of final goods and services produced in the country over a given period.

Generally, if GDP is growing and inflation is in check, it's a strong sign that the economy is doing well, with more jobs and better wages available, and people spending more money.

If it's falling, it signals the economy is doing badly, often bringing with it lower incomes and job cuts.

Governments, businesses and economists monitor GDP growth among other indicators to understand where the economy stands - and where it's headed.

Every Thursday, our Money blog team interviews chefs from around the UK, hearing about their cheap food hacks and more. This week, we chat to Richard Johns, chef-owner of The Plough in Wombleton, North Yorkshire.

I have never believed in charging for service... We are certainly in the minority on this but do believe it is the customer's right to leave a service tip if they wish.

The simplest tip to be a better cook is... to constantly taste your food, seasoning with salt and pepper.

The one thing I hate that some customers do is... booking a table and not honouring the booking. This happens less nowadays, but it still rears its head every now and then.

The most overrated single food item is鈥� fermented foods. I fully understand its origins, but it seems to be just a restaurant food fashion here in the UK.

The most annoying review I ever had was鈥� from a person who had clearly never visited our restaurant, let alone dined with us! It happens sadly.

My favourite cheap place to eat where I live is... Mannion's of Helmsley. They offer a cracking full-cooked breakfast, which is done with care and skill. A great Monday morning spot after a busy weekend.

I have absolutely no issue with people ordering tap water... We often do the same when eating out. 

The only rare time sharing is unacceptable might be... when a table of five orders one dessert and five spoons. That can be a bit much.

The best city in the world to eat in is... New York. A fantastic eating mecca. Something delicious for any budget, day or night.

I've cut costs in my restaurant by... literally turning off/powering down any equipment that is not in use. Other than fridges. Even turning off the kettle at the wall is now the done thing. A few years ago, this would not even have been a thought. 

My cheap recipe is for creme brulee...  

This dessert has been an almost permanent staple on our menu for the past 20 years - a very popular choice. 

The idea here is to obtain a silky-smooth custard, using rich egg yolks only. Whole eggs can be used but the results are very different.

If using fresh vanilla pods, reserve the pods for other uses, as they have bags of flavour.

For the best results, you will need a gas blow torch. This is a very controlled way of caramelising sugar.

The recipe makes six creme brulee...

Ingredients:

• 500g double cream
• 2 x vanilla pods, seeds scraped (or two tsp of high-quality vanilla extract)
• 60g caster sugar
• 235g egg yolk (cartons of liquid egg yolk can be bought easily online)
• Extra caster sugar for brulee

Method:

• Preheat oven to 90掳C.
• Place all ingredients in a heavy-based saucepan, except the egg yolks.
• Bring to a simmer, whisking constantly. Remove from heat, cover and leave for 30 minutes for vanilla to infuse.
• Place pot back on a low heat and whisk in the egg yolks to combine and bring to a very gentle simmer. Do not boil, as you will have scrambled egg custard!
• Pass the custard through a fine sieve into a jug.
• Pour the custard into suitable ramekins, almost to the top.
• Place the ramekins into the oven and bake for approximately twenty minutes.
• Keep an eye on the custard, giving a ramekin a gentle shake after twenty minutes. You want the custard to have a gentle wobble in the centre. This will look almost undercooked but do not be deterred!
• Remove the ramekins from the oven and allow to cool. Place in the fridge for at least six hours to set. (Egg carries on cooking in the residual heat, hence removing from oven before fully set.)
• When ready to serve, remove ramekins from the fridge. Sprinkle a fine, even layer of caster sugar over each custard. Caramelise the sugar using a gas blow torch.
• Leave for a minute or two to set and cool, then enjoy your efforts. 

AI will soon be used to set prices and promotions across the Debenhams Group's companies. 

The company, formerly known as Boohoo Group, owns several brands including Boohoo, PrettyLittleThing, Nasty Gal, Karen Millen, Coast, Oasis and Dorothy Perkins. 

It said it would be rolling out the technology across its portfolio to "respond more effectively to changing demand, seasonal trends and inventory levels". 

"This means that the group is better placed to protect margins, minimise excess stock, and deliver more competitive pricing to customers," it was quoted as saying by Retail Gazette. 

Money has contacted Debenhams Group for comment. 

We love hearing from you in the comments section of the Money blog and the government's winter fuel payment U-turn caught your attention last week. 

Chancellor Rachel Reeves confirmed that anyone over state pension age with a yearly income of 拢35,000 or less would get the payment, reversing the unpopular decision last year to make the previously universal support only available to people on pension credit or some other means-tested benefits. 

Here's what some of you had to say on the change...

I want to know why pensioners who earn less than 拢35,000 are entitled to winter fuel payment, yet working people are not? If below 拢35,000 is bad, then give a winter fuel payment to EVERYONE earning that little!
35K

As someone who will now qualify for the winter fuel allowance, having been around 拢5 over the amount to claim it last year, I disagree with the amount you can earn to receive it. Think it should be 拢20,000. Anyone who has 拢35,000 a year doesn't need the money.

Louise Butler

A lot of you asked for clarification on who was now entitled to the payment - particularly whether the 拢35,000 threshold applied to households or individuals. So here's a bit more information: 

If you are a couple both aged under 80, you will receive 拢200 - with each person considered to have received 拢100 each. 

If there is a person aged over 80, the household will receive 拢300 - 拢200 for the person over 80 and 拢100 for the other. 

The person over 80 will repay 拢200 if their income is more than 拢35,000.

A pensioner aged 85 who lives alone will get 拢300, as will a couple of the same age.

MoneySavingExpert says while the payment is per household, the clawback through tax is usually done on an individual basis.

It gave this example: Where there is a 拢200 payment for a two-pensioner household, each is deemed to have received 拢100 each. 

Therefore, if one individual earns 拢40,000 then - as it's above the clawback threshold - their 拢100 will be reclaimed through the tax system.

If the other pensioner earns 拢30,000, as it's below the threshold, they keep their 拢100.

Rachel Reeves has set out the government's departmental budgets this afternoon in her long-awaited spending review. 

While the funding announced today might not bring immediate changes to the money in your pocket, it could have an impact down the line - especially if the chancellor needs to raise cash by increasing taxes. 

Watch her spending pledges below...

We won't know for certain about any tax changes until the autumn budget, which usually takes place in late October or early November (an official date hasn't been set yet). 

But that doesn't mean that experts haven't already been predicting whether taxes will be raised - or benefits cut... 

Tax rises or welfare cuts?

Laith Khalaf, head of investment analysis at AJ Bell, said the expansion of the winter fuel allowance, which you can read more about here, would likely be the biggest driver of any speculation on tax rises. 

"Whether the chancellor will now have to raise more money in this year's budget, and how much that will be, won't be clear until nearer the time," he said. 

"There's a lot of economic data to unfold between now and the budget, and better than expected economic growth, or looser monetary policy, could ride to the rescue. 

"But equally, the fiscal position could deteriorate before the budget, leaving an even bigger black hole to be filled by tax rises or welfare cuts. 

"Rachel Reeves will also have to find some money to continue the freeze on fuel duty, unless she wants to be the first chancellor since 2011 to hike the tax." 

Khalaf said there was a "real risk" that pensions tax reform, especially around tax-free cash and tax relief, could return to the headlines. 

'Tax rises all but inevitable'

Alison Ring, one of the directors at the Institute of Chartered Accountants in England and Wales, was almost certain that tax rises are coming due to bolstered defence and health spending. 

"Tax rises are now all but inevitable... no matter what measures are taken between now and the autumn budget," she said. 

"The government's sticking plaster strategy remains an obstacle to addressing the deep-set challenges facing the country. The perilous state of the country's public finances has left Rachel Reeves with little room for manoeuvre." 

There have been strong suggestions that there will be rises in council tax in the future to boost local authorities' spending power to help deliver "renewal" projects in 350 communities.

What has the government said? 

Speaking to Sky News after the spending review, Darren Jones, the chief secretary to the Treasury, said the argument that tax rises would come in the future is "incoherent". 

"This spending review is allocating the money that we have already raised," he said.

The money had been brought in at the budget last year and the spring statement this year, he claimed.

Other ways the spending review will affect you 

The 拢3 bus fare cap

Bus fares outside London will remain capped at 拢3 until at least March 2027. 

Winter fuel payment

After being cut for millions of pensioners this year, the winter fuel payment will return for around nine million people receiving the state pension. 

The payment of up to 拢300 will go to all pensioners in England and Wales who have an annual taxable income of 拢35,000 or less. 

Free school meals

All children who have parents claiming universal credit will be able to claim free school meals from September next year.