Labour should raise national insurance in the budget in the autumn, Ed Balls, the former shadow chancellor, has said.

Balls made the comment in the latest episode of his Political Currency podcast, which he co-hosts with the former Tory chancellor George Osborne. Although Balls now works as a broadcaster and podcaster, he is still seen as one of the leading economic thinkers in Labour politics, having worked for years as Gordon Brown’s chief adviser, served in cabinet, and then held the Treasury brief in Ed Miliband’s shadow cabinet.

Discussing how the government could raise the revenue it needs, in particular to fill the £6bn financial hole caused by two recent U-turns, Balls said he thought the government should raise national insurance. He said:

I would do employees’ national insurance, and I would also do a penny on corporation tax - or 2p - and at the same time do an enterprise, capital gains tax-style cut for people growing their businesses.

Balls said he did not think the government would raise income tax, and he said he could not see how the government would “get out of this now” without raising one of the two other big tax levers available to the Treasury, national insurance and VAT.

In its manifesto Labour promised not to raise income tax, national insurance or VAT – the main taxes imposed on workers. Rachel Reeves, the chancellor, did raise employer national insurance, but she argued that this did not breach the manifesto pledge because it is paid by firms, not their workers.

Raising employee national insurance would be a definite breach of the manifesto. At PMQs on Wednesday Keir Starmer said he would stick to the manifesto tax commitments.

Balls argued this was the wrong approach. He said:

It’s much better to be open and level with people and ask everybody to make a contribution, because we need to have strong public finances and to invest in public services, and I would say, to bring child poverty down as well. But you can’t do that while sticking with manifesto commitments which box you in too hard…

[Reeves and Starmer have] got to open up about what’s happened and what they’re now going to do, and blaming their backbenchers, or trying to say that they’re sticking to the letter of a manifesto commitment they’re actually breaking, is the wrong strategy.

Balls has argued that the pre-election tax pledges went too far in ruling out tax increases a Labour government might find essential. In his podcast he said the government should have warned the public earlier this year that some of those pledges would have to be broken. He said:

They never prepared the ground for the degree of the squeeze on the public finances, which was coming over the years ahead … They could have opened the books [after the election] and said, there is a huge problem in our public services, which is going to require us to be honest with you about the scale of what needs to be done on taxation.

They could have used the Trump presidency and the tariff shock and the big downgrades to global growth to say, ‘look, we suddenly have greater pressures on our defence spending, but the economy is going to slow this year because of the tariff shock, and therefore we need now to reconsider our fiscal position.’

But having used none of those opportunities, they’re now in a position where, in July, looking forward to the budget, the framing is that they’re going to have to raise taxes to sort out a fiscal gap not caused by long term growth, or failure to make big, long term fiscal decisions by the previous government or Donald Trump – but because of their U-turns, and that is a bad place for them to be.

Balls has often used his podcast to to make relatively critical comments about the the government’s economic strategy. Quite what impact this has had on relations between his wife, Yvette Cooper, the home secretary, and her Treasury colleagues remains something of a mystery.

Keir Starmer has been urged to intensify efforts to reform welfare by the former Labour cabinet minister Alan Milburn.

In a speech today, Miliburn said Britain “cannot afford the government to give up on welfare reform” because of the rising cost of sickness and disability benefits.

He also praised Liz Kendall’s leadership at the Department for Work and Pensions as “radical and courageous”.

Kendall had to oversee a massive U-turn last week when the government dropped plans to restrict eligibility for Pip (the personal independent payment – a disability payment) only 90 minutes before a vote that the government might otherwise have lost because so many Labour MPs opposed the proposals.

Miliburn, who was an arch-Blairite health secretary in the last Labour government and who is now advising Wes Streeting as a non-executive director at the Department of Health and Social Care, said:

Public spending [in sickness and disability benefits] is projected to rocket by £21bn over the next five years. This is not sustainable, fiscally, socially or economically. While efforts to reform welfare have stalled following the events in parliament last week the government will need to discover a second wind.

Miliburn said the review of Pip now being led by Stephen Timms, the disability minister, “must not duck the challenge of reform”. He went on:

The more it is framed as a means of enabling people to fulfil their aspirations to work rather than simply as a means of saving public money, the more likely it is to succeed.

It is time for a radically new approach where there is an expectation that those who can work should do so - and they should be offered more help to enable them to get a job.

Miliburn was speaking at an event to mark the first anniversary of the publication of a report by the Pathways to Work commmission, a body set up by Barnsley council and led by Miliburn to investigate means of getting more “economically inactive” people into work.

One of its main findings was that 70% of people classed “economically inactive” say they would like to work if they could find a job aligned with their skills and interests.

The EU has said it will assess Keir Starmer and Emmanuel Macron’s migrant return deal to see whether it is compatible “with the spirit and the letter of the law”, Rowena Mason and Kiran Stacey report.

This is what Markus Lammert, the European commission’s spokesperson told reporters about the deal at a briefing.

We are aware of the announcements by the UK and France. The rising number of migrants smuggled across the channel is alarming, and it merits a robust response to deter dangerous journeys at one of the union’s external borders.

Now, on the specific envisaged cooperation between France and the United Kingdom, the commission will assess the concrete modalities of this cooperation. We continue to work with France and the UK as well as other EU member states to support solutions that are compatible with the spirit and the letter of EU law.

So what we have now is an announcement and a political agreement, in principle, to have a pilot agreement. Once we know more about the substance and the form of that, we can tell you more about it, but we will look at this together with the UK and France. We will be working with all parties involved.

Downing Street has defended the government’s stance on the Birmingham bin strike. Asked about the Unite union’s criticism of Angela Rayner’s department, and its failure to support the striking workers, a No 10 spokesperson said the government’s priority had “always” been the interests of the city’s residents.

The spokesperson said:

As you know, Unite’s industrial action caused disruption to waste collection.

We have worked intensively with the council to tackle the backlog and clean up the streets for the residents for public health.

We remain in close contact with the council and continue to monitor the situation as we support its recovery and transformation.

I think it’s important to look back to the context of this dispute: Unite is in dispute against Birmingham city council’s decision to reform unfair staff structures, which were a major cause of unequal pay claims and left the council liable to hundreds of millions of pounds in claims, and that was a key factor cited in the council section 114 notice in 2023, declaring bankruptcy.

The former prime minister Liz Truss, the historian David Starkey and the former Wales secretary John Redwood are reportedly among 34 signatories to a letter alleging the British Museum is part of a “covert” campaign to return the Parthenon marbles to Greece, Jamie Grierson and David Batty report.

Commenting on this story, the Economist’s Alex Hern says on Bluesky that if this group really does wants to influence government policy, they might not have chosen the best spokespeople for their cause.

It’s so obvious that the british right have no clue how to lobby a labour government lmao

when a right-wing group has a policy goal, the only thing they know how to do is yell “it’s bad that labour isn’t doing what I want!” Which is a perfectly reasonable way to fight a long-term partisan battle that ends up electing right wing MPs but a terrible way to change government policy

The Unite union has voted to re-examine its relationship with the Labour party in the light of the government’s failure to support its members in the Birmingham bin strike.

It has also said it was suspending Angela Rayner’s membership, given her role as minister in charge of the department that oversees local government. The union is in dispute with Birmingham city council over proposals to reorganise waste disposal services in the city, and Unite has repeatedly said the government should step in and force the Labour-led council to settle.

Rayner was an official for Unison before becoming an MP, but she also has had Unite membership, the union says. But Labour sources claim Rayner in fact resigned her membership some months ago, meaning she cannot be suspended now.

The membership issue would have no practical impact anyway, but Unite is the biggest union affiliated to Labour, and it has been one of the party’s main donors for many years. If it were to cut links, then Labour would suffer financially.

At today’s conference in Brighton, the union passed a motion condemning the council for its treatment of the bin workers and saying that Rayner, the Labour leader of Birmingham council John Cotton and other city councillors should be suspended from union membership for “bringing the union into disrepute”. It also proposed an investigation that could lead to them being expelled.

It also said that, if the council went ahead with plans to make workers redundant, “Unite should discuss our relationship with Labour”.

Sharon Graham, the Unite general secretary, said:

Unite is crystal clear it will call out bad employers regardless of the colour of their rosette. Angela Rayner has had every opportunity to intervene and resolve this dispute but has instead backed a rogue council that has peddled lies and smeared its workers fighting huge pay cuts.

The disgraceful actions of the government and a so-called Labour council, is essentially fire and rehire and makes a joke of the Employment Relations Act promises.

People up and down the country are asking whose side is the Labour government on and coming up with the answer not workers.

The dispute has been running for six months. Here is a Guardian story from March on the issues that caused the walkout.

One of the joys, or perils, of being prime minister is that every summer you get invited to Scotland for a sleepover with the royal family. They tend to view these trips with mixed feelings. The king is seen as a great host, as was his mother, but some PMs grumble that Balmoral is freezing cold, and stuffy, and the rituals of a Scottish country home can feel a bit odd if you are not used to that sort of thing.

Donald Trump hasn’t been made a king yet, but obviously he would like to be one and he too has invited the PM to Scotland this summer. According to Reuters, Trump will be visiting Scotland later this month, reportedly to check up on his golf courses, and he has invited Starmer to join him. “Starmer has accepted,” Reuters says.

Rupert Lowe, the independent MP originally elected as a Reform UK candidate, is being investigated by the parliamentary commissioner for standards over an alleged breach of Commons rules. Daniel Greenberg, the commissioner, says on his website the case relates to an alleged failure to declare an interest properly, but has given no further details. However, the BBC reports that the complaint relates to money raised by Lowe to fund his proposed independent inquiry into rape gangs.

In a statement today, the rape gang inquiry says that money from a crowfunder did not arrive in the inquiry’s account until 23 June and it claims Lowe has 28 days from that point to register the money in his declaration of interests. “All appropriate checks have been made for Rupert’s parliamentary declaration,” it says.

Cash Isas will be left untouched at next week’s Mansion House speech, in a move that has been welcomed by savings experts, PA Media reports. PA says:

Speculation had been mounting that plans to cut the annual tax-free cash Isa allowance could be announced in chancellor Rachel Reeves’s Mansion House speech on 15 July.

But the PA news agency understands that Reeves will instead focus on new plans to provide consumers with the information and support they need to invest.

The government is expected to continue talking to industry members and others about the options for reform, with a broad consensus that the UK’s savings and investment culture needs to be encouraged.

Harriet Guevara, chief savings officer at Nottingham Building Society, said: “This is positive news for savers and for lenders. We’ve consistently made the case, alongside others across the mutual and building society sector, for maintaining the full allowance, and welcome any decision to consult further with industry rather than rush through damaging reform that would disincentivise saving.”

This news will come as no surprise to readers of the Economist’s Bagehot column on UK politics. In a recent article about the power of middle-class lobbying, Bagehot said:

When Labour looks to raise money, broad-based tax rises are ruled out. That means niche attacks on the middle classes are in. Pension pots are a tempting target. The Treasury gazes longingly at ISAs, the tax-free saving accounts that are a tremendous bung to middle-class people. Middle England feels about ISAs the same way rural America feels about guns.

The government will prioritise people with a connection with the UK when deciding which asylum seekers to accept from France, in return for small boat arrivals being returned, Yvette Cooper said this morning.

Asked how the government would select the 50 or so migrants from France expected to be brought to the UK every week under the scheme, the home secretary told LBC:

In terms of people applying to come to the UK, we’ve said that priority will be given to people who have a connection to the UK, people who are most likely to be genuine refugees or have been targeted by the smuggling gangs as well.

But this is a pilot, and we will develop it over time, but that principle, that fundamental change is really important.

Yvette Cooper has confirmed that the returns agreement with France will involve some small boat arrivals being detained prior to removal.

Speaking on the Today programme, she said:

We will be detaining people certainly as the pilot is introduced and as the programme becomes operationalised.

Asked to clarify who would be detained, she added: “Those will be operational decisions and we will update people on those as we roll the programme out.”

In her interviews this morning Yvette Cooper, the home secretary, declined to say how many people arriving in the UK on small boats would be returned to France under the deal announced yesterday.

It has been widely reported that the pilot will start with 50 people a week being returned – although this figure has not been officially confirmed.

Cooper did not challenge the claim that 50 a week would be the starting piont, but she stressed that the “ultimate numbers” were not fixed. She told LBC:

We’re not actually fixing the ultimate numbers, either in the first phase of the pilot or in subsequent phases of the pilot, and so we need to get this started, and we need to build this over time.

She also insisted that the government wanted to increase the numbers over time. She told the Today programme:

It is a pilot, and we’ve been clear about that, and we obviously want to extend and develop this.

She also told LBC that the government was deliberately being coy about process because it did not want to help the people smugglers. She explained:

We don’t want the smuggler gangs to find different ways around this, and they will respond to whatever information we put out about this pilot. They will respond and they will twist details, and they will use that in order to make more money, because that’s how they work.

Yesterday Keir Starmer and Emmanuel Macron published a leaders’ declaration that implied the returns agreement would need EU sign-off. They were not very clear about this, but the Times led its main story on this on the suggestion that the EU might block the deal.

As Kiran Stacey reports, in her interviews this morning Yvette Cooper, the home secretary, said that European commissioners had been “very supportive” of the plan and that she did not expect them to block it.

Good morning. Keir Starmer notched up a notable achievement yesterday – by agreeing a pilot returns agreement with France, something never managed by his immediate Conservative predecessors. But, as Kiran Stacey and Jessica Elgot report in their analysis, there was some Tory precedent for the policy. When Robert Jenrick was immigration minister, he tried, and failed, to get Rishi Sunak to negotiate a deal of this kind.

Yesterday Jenrick, who is now shadow justice secretary and seen as a likely replacement for Kemi Badenoch before the next election, told GB News that the Starmer scheme “hasn’t got a cat in hell’s chance of working” because the numbers involved were too small. The key Tory papers, like the Daily Mail, the Daily Express and Daily Telegraph, are fiercely critical. But, nevertheless, this is a win for Starmerism. The PM regularly argues that calm, sensible cooperation with allies can pay off, and now he has that the returns deal with Emmanuel Macron can achieve this.

In politics good news never lasts for long and the headline lines this morning is about the economy shrinking in May. Graeme Wearden has the details on his businesss live blog.

This is a setback because Starmer and Rachel Reeves, the chancellor, have made boosting growth their number one priority. Graeme is covering the reaction to this.

I will be focusing on the reaction to the returns deal. Yvette Cooper, the home secretary, has been doing an interview round this morning. She dismissed claims that the EU would try to block the arrangement, but she was less forthcoming about how many migrants might actually be returned to France, saying the numbers had not been fixed. And she declined to say whether Macron was right to say at the press conference with Starmer yesterday when he said Brexit had made it harder for the UK to deal with illegal migration.

In comments that have infuriated the pro-Brexit papers, Macron said:

Many people explained that Brexit would make it more possible to fight effectively against illegal migration But since Brexit the UK has no illegal migration agreement with the EU … That creates an incentive to make the crossing, the precise opposite of what Brexit promised.

The British people were sold a lie, which was that [migration] was a problem with Europe. With your government, we’re pragmatic, and for the first time in nine years we are providing a response.

Asked on Sky News if Macron had a point, Cooper replied:

I think what I’ve seen happen is that the way that the criminal smuggler gangs operate is that they will weaponise anything that is happening. And so what we saw in the run-up to Brexit being implemented was we saw criminal gangs promising people that they had to cross quickly, and they had to pay money to the smuggler gangs quickly in order to be able to cross in time before Brexit happened.

As soon as Brexit happened, they then said ‘Oh, well, now you’ve got to pay us money, because this means you can’t be returned because the Dublin Agreement isn’t in place’.

So the thing about the criminal smuggler gangs is whatever arrangements are in place, they will use them in order to make money, but that’s why we have to be fundamentally undermining their model.

I will post more from the Cooper interviews soon.

Here is the agenda for the day.

9.30am: MPs debate backbench bills, starting with Linsey Farnsworth’s unauthorised entry to football matches bill.

11.30am: Downing Street holds a lobby briefing.

Lunchtime: Keir Starmer is hosting a cabinet awayday, reportedly at Chequers.

And Kemi Badenoch is on a visit in her constituency, North West Essex, today.

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