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Politics latest: Chancellor declines to rule out 5% council tax rises after spending review

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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Politics at Sam and Anne's: Economy shock overshadows Reeves鈥� big day

Thursday's episode of has now dropped.

Rachel Reeves has this morning said that the UK's shock economic shrink is 'disappointing'. How much will this overshadow yesterday's major spending announcement?

The chancellor has now planted Labour's fiscal flag in the sand - and spending mistakes from here on in certainly cannot be blamed on their predecessors. 

How will Labour react to a potential internal revolt over disability benefit cuts? And how will the party manage the politics around expected tax rises in the autumn?

You can listen to the full episode below or wherever you get your podcasts.

Shrinking economy is due to the 'mismanagement of the economy', Stride says

The economy shrinking in April "speaks to the mismanagement of the economy", the shadow chancellor says. 

Mel Stride tells Sky News that Labour are "building a very fragile economy" and that this is the "root of the problem".

He says GDP falling by 0.3% in April - more than economists expected - is "very disappointing".

Stride adds: "The government has come in, put a lot of taxes on businesses, which has destroyed growth, gone out, spent a lot of money which has been inflationary.

"We've seen interest rates higher for longer. And of course, it's all adding to this national debt, upon which the servicing costs alone are 拢100 billion a year."

He points out that this is twice what the UK spends on defence.

Stride also reflects that the OBR has halved its forecast for growth this year. 

"That, as I say, is driven by the choices that this government has made to tax businesses, tax jobs, wealth creation, the things that expand the economy and to focus on spending and borrowing a lot of money", he says.

Stride believes the UK economy is now "in a very precarious situation" and thinks the government "should not be adding fuel to the fire with massive borrowing".

Reeves' big three mistakes

He says that he thinks the government has made three key mistakes.

The shadow chancellor says the chancellor "shouldn't have loaded up taxes on businesses and gone on a borrowing and spending splurge".

His second issue is that he believes the government should have "concentrated on productivity", setting efficiency targets when they gave pay rises to workers. 

"Thirdly, they should have gripped welfare spending. And that's what they've singularly failed to do", he added.

Shrinking economy 'should be a wake-up call' for Rachel Reeves, say Lib Dems

The Liberal Democrats have said GDP shrinking more than expected in April shows the government needs to "listen" and change course.

Reacting to the data, Daisy Cooper said: "Today's figures should be a wake-up call for the government which has so far refused to listen to the small businesses struggling to cope with the jobs tax, worried that our high streets will be completely hollowed out and that our hospitality sector is hanging by a thread."

The jobs tax refers to the chancellor's decision to hike employer national insurance contributions (NICs).

Reeves has called the 0.3% fall in GDP "disappointing", though she conceded she wasn't entirely surprised by the decrease because of global uncertainty, such as the imposition of tariffs by the US.

Cooper, who is the party's Treasury spokesperson, added that the government "must stop cowering in the corner" due to the tariffs, and should instead create "an economic coalition of the willing" with European and Commonwealth nations.

She also repeated the Lib Dems calls for the hike to NICs to be reversed and for a bespoke EU-UK customs union.

Reeves says further spending may be funded by rises in council tax

The chancellor says further spending could be funded by increases to council tax, but that "councils don't have to".

Sky News' Wilfred Frost asks if councils will have to hike taxes by the maximum amount for the next three years following the chancellor's spending review. 

Reeves responds that: "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 reiterates 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 concludes.

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.