What are Reeves’s big budget numbers?

Labour have repeatedly said they are facing down a £22 billion blackhole. Now, they are saying they need another £25 billion to fund spending increases. ITV News Political Editor Robert Peston breaks the numbers down as government departments continue to squabble over funding ahead of Rachel Reeves's first budget

Here are the big spending and tax numbers for the October 30 budget, that have been signed off by the Chancellor - so that the Office of Budget Responsibility can carry out its statutory responsibility to forecast their impact on the economy and government borrowing.

To be clear, my estimates will be wrong by a few billion pounds. But the sums Reeves needs to find to rescue creaking public services are so big that what follows paints the important big picture, even with that margin of error.

Let’s start with the all-important foundational number, the so-called “envelope” for the increase in all government spending in 2025-26.

It had been set by the previous chancellor Jeremy Hunt at 1% real, that is adjusted for inflation.

Rachel Reeves has decided - many would say way later than necessary - that this total is too frugal, because all the 1% increment would be swallowed by health, defence and schools. That would mean there would have to be swinging cuts to justice, transport, local government and all the so-called “unprotected” departments.

So, I am told the re-set envelope is a 2% to 3% real increase - which is another way of saying Rachel Reeves has to find up to £50bn from additional taxation and any new borrowing that would not breach her fiscal rules.

The biggest additional revenue raiser would be around £15bn - possibly even a bit more - from imposing national insurance on employers’ contributions to the pension pots of their employees.

This is to take back 75% of what Hunt handed to employees in national insurance cuts for them in his last two budgets.

The argument will rage all the way to the next election whether this would breach Labour’s manifesto promises on which taxes it wouldn’t raise.

I don’t have the energy to go through the theology of all that again. Suffice to say though that this is a substantial tax rise that will inevitably feed through to employment levels and living standards.

Subscribe free to our weekly newsletter for exclusive and original coverage from ITV News. Direct to your inbox every Friday morning.

Just because employers pay it rather than employees does not make it a free lunch for employees.

There’s a further £9bn to be raised from the taxes Labour announced it would increase or impose in that manifesto. These are the windfall tax on oil and gas producers, VAT on private schools, the levy on the “carry” or profit share of private equity partners, plus assorted measures to crack down on tax avoidance and to force wealthy foreigners with homes in London - the notorious non-doms - to cough up more.

Finally there will be a few billion pounds raised from increasing the basic rate of capital gains tax from 20% to around 24%.

Reeves looked at putting it higher but HMRC has calculated 24% is more-or-less the profit-maximizing rate, and that wealthy people would find ways to avoid paying it if the rate were much higher than 24%.

Even with all those tax rises, settlements for spending departments are still going to feel tight, for pretty much all departments apart from health - whose rehabilitation will be one of the centrepieces of the budget.

The deputy prime minister Angela Rayner is particularly anxious - or so I understand - that local government funding will not contain an adequate buffer for the large number of local authorities currently facing bankruptcy.

It is thought however that the way Rachel Reeves is rewriting her debt fiscal rule, to effectively exclude borrowing that funds productive investment, will free up substantial sums for new social housing.

Long and short is some departments are still haggling over the odd few hundred million pounds. But the billions have been locked down.

The foundations of the budget have been laid. There are just 13 more days till the full edifice is unveiled, when we will be able to judge whether it’s a solid structure designed properly for national renewal or whether its botched and jerry-built, and will need to be continually patched and propped up.

Have you heard our podcast Talking Politics? Tom, Robert and Anushka dig into the biggest issues dominating the political agenda in every episode…