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Politics latest: Chancellor declines to rule out tax rises and insists spending review 'fully funded'

Rachel Reeves has told Sky News her spending plans are "fully funded" but declined to rule out tax rises. She also admitted the latest GDP figures are "disappointing". Watch and follow live coverage throughout the day in the Politics Hub.

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Chancellor declines to rule out further taxes but says spending review was 'fully funded'

Rachel Reeves says that she "recognises not everybody in all parts of the country" are feeling the economic benefits of the Labour government yet. 

It follows the chancellor being asked when people can expect to feel better off, following her spending review. 

She responds that the economy has grown by 0.7% over the last three months.  

Sky News' Wilfred Frost then asks if she will have to raise taxes to meet targets she set out in the spending review, such as raising defence spending to 2.6% by April 2027. 

She says that: "Everything that I set out yesterday was fully costed and fully funded."

Reeves explains that the "envelope" for public spending was set in her budget last autumn and that she hasn't "spent a penny more or penny less than I said I was going to".

She adds: "That envelope was set, and what I did yesterday was allocate that with a real focus on the priorities of the British people, on health, security and economic growth."

Chancellor says the world is 'uncertain' and declines to rule out further tax rises

Addressing suggestions that she may have to raise tax directly, the chancellor says: "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 adds: "There was nothing that I did in the spending review yesterday that required further taxes, because everything that I set out yesterday was fully costed and fully funded."

But crucially, the chancellor does not rule out raising taxes in the future. 

Reeves says that "the world is very uncertain at the moment" and reiterates that she will not "write budgets for the future".

The chancellor also tries to draw a line under Labour's first year in government, saying that she took "difficult decisions" but now the economy is more stable, the government can focus on growth.

Shrinking economy is 'disappointing', admits chancellor

Rachel Reeves is on Sky News facing questions from Wilfred Frost after unveiling her spending plans yesterday.

In a blow to the chancellor this morning a day after she pledged to boost growth, the ONS published data showing GDP shrank by 0.3% in April, more than economists expected. 

Rachel Reeves says the fall is "disappointing", but adds they are "perhaps not entirely unexpected".

The chancellor said April was a "challenging month" due to "huge uncertainty about tariffs" imposed by Donald Trump.

Pushed if the fall in GDP is partly due to the tax hikes she introduced in April, Reeves says she didn't put taxes up "on ordinary working people".

The chancellor says: "Everyone knew that those tax changes were coming in April.

"But April was a difficult month and, since then, of course, we've managed to secure three trade deals with the US, with India, with the EU. And that is all part of this government's plan, to support our economy, to support businesses exporting and to create more good jobs, paying decent wages in all parts of the country."

She says she also "spread" investment across the country in her spending review.

Reeves adds: "I know that growth has been a problem for a long time. And now, the last decade or so, we have had sluggish growth. It's not possible to turn things around straightaway."

Watch live: Rachel Reeves speaking to Sky News

The chancellor is speaking to Sky News following the unveiling of her spending review. 

Rachel Reeves is in Derby, where she is visiting a hospital with the Health Secretary, Wes Streeting.

The chancellor made health the crown jewel of her spending review, announcing 拢29bn per year in extra cash for the NHS - she is now hoping to capitalise on that.

Watch and follow live in the stream above, and we'll bring you her comments right here on the Politics Hub.

Tories say shrinking economy shows the 'consequences of Reeves' economic vandalism'

The Conservatives say "things will only get worse", following new figures out this morning showing the economy shrank more than expected in April.

Mel Stride has reacted to the new data, warning that "hardworking people will pray the price".

The shadow chancellor said: "Before the election Labour promised 'growth, growth, growth' but today鈥檚 fall in GDP lays bare the disappointing consequences of Rachel Reeves鈥� economic vandalism. 

"Yesterday, the chancellor should have taken corrective action to fix the problems she has caused.

"But instead her spending review has all but confirmed what many feared: more taxes are coming."

He added that Labour has hiked taxes, overseen rises in unemployment and now seen growth fall.

Stride concluded: "With more taxes coming, things will only get worse and hardworking people will pay the price."

UK economy shrinks by more than expected

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

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

Economists expected a 0.1% contraction in April, following growth of 0.2% in March.

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

What is GDP and why do we care about it? 

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.

Reeves set to speak to Sky News, as she confirms 拢6bn NHS funding following spending review

 The chancellor is set to speak to Sky News, following the spending review.

Rachel Reeves is on a visit to a hospital in Derby, where she has confirmed some 拢6bn will be spent on speeding up testing and treatment in the NHS.

It follows Rachel Reeves unveiling her spending review, which made health the number one priority - with 拢29bn of extra cash per year promised for the NHS.

This investment, confirmed today, will help pay for new scanners, ambulances and urgent treatment centres aimed at providing an extra four million appointments in England over the next five years.

The chancellor hopes the funding will reduce waiting lists and reach Labour鈥檚 "milestone" of ensuring the health service carries out 92% of routine operations within 18 weeks.

Reeves said: "Part of our record investment will deliver 4m tests, scans and procedures, so hardworking people can get the health care they and their families need. 

"There is no strong economy without a strong NHS, and we'll deliver on our Plan for Change to end the hospital backlog, improve living standards and get more money in people鈥檚 pockets."

The new 拢6 billion investment will come from the capital settlement for the NHS and will also help to speed up diagnoses with scans and treatment available in places such as shopping centres and high streets.

A further 拢30 billion will also be invested over the next five years in day-to-day maintenance and repair of the NHS estate. Of this, more than 拢5bn will be spent specifically on repairing the most serious and critical infrastructure.

It follows the spending review yesterday, which set out day-to-day spending across government for the next three years, as well as plans for capital investment over the next four years.

The NHS and defence were seen as big winners from the review, as both will see higher than average increases in public spending. 

But this means other departments, such as the Home Office and the Foreign Office, saw their budgets squeezed.

Good morning and welcome to the Politics Hub this Thursday, 12 June.

In Westminster, the story very much remains the chancellor's spending review this morning. We heard an awful lot about it yesterday and received quite a bit of reaction - but there's plenty more of that still to come. 

Rachel Reeves is on a visit to a hospital this morning, where she will be talking up her big injection of 拢29bn in the NHS, and what it means for patients. 

The chancellor will be joined by Health Secretary Wes Streeting on the visit, where they will announce that the extra money will lead to up to 4m additional NHS tests and procedures over the next five years, as well as new scanners, more ambulances and urgent treatment centres to support emergency care teams.

If that all sounds a little too rosy for Reeves, then don't worry - because the ONS is set to release its GDP estimate for April, and economists are predicting it will show a 0.1% contraction following growth of 0.2% in March. Expect the chancellor to blame global economic turbulence. 

Elsewhere, both the IFS and think tank the Resolution Foundation will reveal their full and considered responses to the spending review this morning. 

But it's not just the chancellor in action. Streeting will be speaking during the hospital visit at around 9am, before popping up again at the NHS ConfedExpo 2025 in Manchester around lunchtime.

Also keeping busy today is the foreign secretary, who is attending the Lord Mayor鈥檚 Summer Banquet this evening, where he will make a speech. 

Meanwhile, the defence secretary is formally opening BAE Systems' new 拢25m artillery production facility in Sheffield and the prisons minister Lord Timpson is addressing members at a conference on the justice system in London. 

And in opposition corner, Kemi Badenoch is speaking to the Peel Hunt FTSE250+ conference mid-morning, and will no doubt be sharing her criticisms of the spending review. 

Coming up on Sky News this morning:

  • Daisy Cooper, the Liberal Democrat deputy leader and Treasury spokesperson;
  • Rachel Reeves, the chancellor.

We'll bring you all the updates in the world of politics as they happen, right here on the Politics Hub.

Good night

That's it for another busy day in Westminster.

Join us again tomorrow.

Potential constitutional crisis avoided as Lords back down on AI

Another story that may have passed you by, is the House of Lords potentially blocking the government's Data Bill.

This had led to warnings of a constitutional crisis, with the unelected upper house blocking legislation passed by the democratically elected house.

Peers had wanted greater protections for creatives from AI and big tech companies.

Negotiations on a way forward had not proved successful, despite the government promising that legislation on AI will be introduced at a later point.

One peer who had opposed the government, but has now withdrawn their amendments, said: "I want to show the other place that we can act with dignity in this chamber and make our point peers have done on so many occasions and by such huge majorities.

"But, on that note, I have decided on this occasion that enough probably is enough. I think we鈥檝e made our point."

'Understandable' US is looking to review AUKUS

Another development that may have slipped past you while the spending review was underway came from the United States.

Reuters, among other, have been told that the Trump administration is carrying a review of the landmark AUKUS agreement.

This is a deal between Australia, the UK and the US announced under Boris Johnson and Joe Biden.

It is supposed to help Australia acquire nuclear-powered submarines, as well as other defence partnerships.

While some have reported concerns in Canberra and London due to the decision, on the record the UK government seems a bit more sanguine.

They have pointed out the Labour government did a review when they came to power.

A Foreign Office spokesperson said: "AUKUS is a landmark security and defence partnership with two of our closest allies.

"It is one of the most strategically important partnerships in decades, supporting peace and security in the Indo-Pacific and Euro-Atlantic, while also delivering jobs and economic growth in communities across all three nations.

"It is understandable that a new administration would want to review its approach to such a major partnership, just as the UK did last year. 

"The UK will continue to work closely with the US and Australia at all levels to maximise the benefits and opportunities which AUKUS presents for our three nations."

A US official told Reuters that the idea is to ensure the "initiative of the previous administration is aligned with the president's America first agenda".