UK chancellor Rachel Reeves seeks to close £40bn fiscal gap

Today’s agenda: Elon Musk’s Trump donation; Boeing’s struggles; US ultimatum on Israel; Saudi Arabia tightens purse; and Venice’s farm-to-table movement

Good morning. We start with news that UK chancellor Rachel Reeves has identified a £40bn funding gap ahead of her Budget in two weeks — far more than previously expected.

Why is the gap much larger? The figure represents the funding that Reeves needs to protect key government departments from real-terms spending cuts, cover the enduring impact of an annual £22bn overspend and build up a fiscal buffer for the remainder of the parliament.

How will it be funded? The Financial Times has been told by officials close to the Budget process that the Treasury is seeking ways of closing the shortfall, with tax rises set to form the centrepiece of the chancellor’s response.

Reeves needs to raise taxes or find savings — including through welfare cuts — to meet a new “golden rule” that balances day-to-day spending with tax revenues. She has in recent weeks been warning that “difficult decisions” lie ahead on tax, spending and welfare. Read the full report.

Step into the chancellor’s shoes and see if you can run the UK economy with the FT’s new Budget game.

Here’s what else I’m keeping tabs on today:

• Economic data: The UK and Italy have September consumer inflation data.

• Results: Abbott, Alcoa, Equifax, Kinder Morgan, Morgan Stanley, Prologis, United Airlines, US Bancorp and Whitbread report.

Five more top stories

1. Elon Musk has given nearly $75mn to help Donald Trump’s bid to win back the White House. The Tesla and X owner made several multimillion-dollar donations during the third quarter to his political action committee, according to a federal filing released yesterday, giving the group a huge budget to support Trump’s re-election bid.

2. Boeing has announced plans to raise up to $25bn in new capital and agreed a $10bn credit facility. The move comes a week after S&P Global Ratings warned of a possible downgrade of Boeing’s bonds to junk status in the face of a crippling strike by its largest labour union. Read more on Boeing’s latest response to its troubles.

3. The US has told Israel it needs to take “urgent and sustained actions” to improve the dire humanitarian situation in Gaza or military aid from Washington could be at risk, in a rare public ultimatum to Benjamin Netanyahu’s government and a sign of rising frustration at the war’s civilian toll. Here’s what the US is demanding.

4. Exclusive: Brussels plans to expand its powers over merger deals in order to stop “killer acquisitions” that pose risks to start-ups in Europe and beyond, according to people familiar with the discussions. It would be the first overhaul of the EU’s rule book on mergers and acquisitions in decades, but some officials are expressing concerns about the planned reforms.

5. Italian Prime Minister Giorgia Meloni has said her government is planning to raise €3.5bn from banks and insurance companies as it seeks to plug a €9bn budget gap. Following a cabinet meeting last night, Meloni wrote on X that the extra funds would be used to finance the public health system and improve services for those in need. Here’s why financial companies are in the crosshairs.

The Big Read

A frenzy of activity led by Saudi Arabia’s Public Investment Fund has transformed the once conservative kingdom into one of the world’s largest construction sites and a magnet for international consultants and contractors. But after almost a decade of the frenetic pace, Riyadh is beginning to scale down on the spending spree as a sense of realism and pragmatism takes hold.

We’re also reading . . . 

• NHS: The Labour government has promised to bring the service into the digital age, but doctors say the basic infrastructure first needs to be brought up to a minimum standard.

• Cheapflation: Prices of inexpensive goods have risen faster than more expensive varieties. Governments and businesses are now trying to figure out who to blame, writes Brooke Masters.

• US politics: The brazenness of the country’s politicians in the face of scandals is a defining feature of the era. Ed Luce asks: has America lost its shame?

• Four investment mistakes to avoid: In his new column, Jonathan Guthrie takes a look at good and bad financial thinking.

Chart of the day

The International Energy Agency has said that a huge increase in the use of air conditioning, driven by rising incomes in the developing world and higher temperatures from climate change, will have one of the biggest and most unpredictable impacts on the world’s electricity grids in the coming decade.

Take a break from the news

On the island of Sant’Erasmo in the Venetian lagoon, a pioneering co-operative founded by local chefs has established a kitchen garden to create jobs and save the unique flavours of fruits and vegetables used in dishes at risk of disappearing. Here’s where to partake in the city’s farm-to-table revolution.

Additional contributions from Gordon Smith and Benjamin Wilhelm