Listen on * Spotify * Apple Music * Amazon Music He’s not even European — yet Donald Trump has topped POLITICO’s annual P28 ranking of the most powerful people who will shape Europe in 2026. EU Confidential host Sarah Wheaton takes you inside the gala in Brussels — where commissioners, MEPs, diplomats, lobbyists and journalists packed into a glittering room, even as the mood underneath the sparkle felt unusually tense. At the event, Ursula von der Leyen sat down with Carrie Budoff Brown, POLITICO’s executive editor, for an exclusive on-stage conversation — offering one of her first public reactions to Trump’s sharp criticism of EU leaders as “weak,” and Washington’s dramatic new security strategy, which seeks to undermine them. Be sure to check out the full 2026 ranking here. Plus, we bring you Sarah’s conversation with Balázs Orbán, the Hungarian prime minister’s political director, who offers a perspective far outside the Brussels mainstream — on Ukraine, on Europe’s political direction, and on where he believes the EU keeps going wrong. And finally, we have a taste of Anne McElvoy’s interview with Nick Thomas-Symonds, the U.K.’s minister for European relations (for more, head to: Politics at Sam and Anne’s ). And if you haven’t yet, listen to the exclusive interview our colleague Dasha Burns did with Donald Trump on our sister podcast The Conversation.

LONDON — When a job for life beckons, principles have a way of disappearing. Keir Starmer has given 25 close allies an early Christmas present, appointing them to Britain’s unelected House of Lords. They’ll don some ermine, bag a grand title, claim £371 a day just for showing up and swan around the Palace of Westminster for the rest of their lives — or at least until their 80th birthday. The PM’s former Director of Communications Matthew Doyle, Chancellor Rachel Reeves’ ex-Chief of Staff Katie Martin and Iceland Foods Founder Richard Walker are among the lucky Labour-supporting individuals given a spot in Britain’s unelected legislating chamber — all without having to make their case to British voters. The opposition Tories and Lib Dems (no strangers to filling the upper chamber when they were in power) got a paltry three and five spots respectively, while the insurgent Reform UK and Greens missed out completely. Pushing back at the criticism, which comes as Labour vows a host of changes to the upper chamber, a party official said: “⁠The Tories stuffed the House of Lords, creating a serious imbalance that has allowed them to frustrate our plans to make working families better off. “This needs to be corrected to deliver on our mandate from the British people. We will continue to progress our program of reform, which includes removing the right of hereditary peers to sit and vote in the Lords.” POLITICO runs through five times the party laid into the red benches. 2020: BRING THE HOUSE DOWN Starmer was unapologetically radical during the Labour leadership contest to replace Jeremy Corbyn. He made 10 striking pledges as he courted the party’s left-wing membership. One included a promise to “devolve power, wealth and opportunity” by introducing a federal system which would “abolish the House of Lords and replace it with an elected chamber.” 2022: KEIR THE FIXER The Labour leader still backed Lords abolition for a chunk of his time in opposition — though he knew existing Labour peers might have a view or two about that. Starmer charmed his unelected legislators in November 2022 by praising the “vital role” they played, but insisted he was focused on “restoring trust in politics” after ex-PM Boris Johnson rewarded “lackeys and donors” with peerages. Sound familiar?  “We need to show how we will do things differently. Reforming our second chamber has to be a part of that,” the Labour leader said. 2022: STRONG CONSTITUTION The following month, Labour’s plans got a hard launch. In a dazzling (well, for Starmer) press conference, he promised the “biggest ever transfer of power from Westminster to the British people.” Strong stuff. Starmer got party bigwig and ex-PM Gordon Brown to pen a report backing constitutional change — including the abolition of the House of Lords. Starmer said an unelected chamber was “indefensible” and an elected house would be created “with a strong mission.” A timeframe was not forthcoming. 2023: SLOW AND STEADY Angela Smith has led Labour in the Lords since 2015, but still recognizes reform is needed. The shadow Lords leader insisted Labour wouldn’t flood the chamber with its own people if in power. Angela Smith has led Labour in the Lords since 2015, but still recognizes reform is needed. | Wiktor Szymanowicz/Future Publishing via Getty Images  “No. Ain’t gonna happen,” she told the House magazine just months before the general election. “The idea that Keir Starmer is on day one going to have a list of 100 people to put here is cloud cuckoo.”  She said it wasn’t all about winning votes: “I don’t want this to be a numbers game, like ‘yah boo, we’ve got more than you, we’re gonna win, we’re gonna smash this through’. That’s not what the House of Lords does.” She may feel differently now the government suffers defeats on its legislation under her watch. 2024: WRITTEN IN SAND Labour’s election-winning manifesto retreated from the halcyon rebel days of opposition, but it was still punchy. “Reform is long overdue and essential,” it argued, claiming “too many peers do not play a proper role in our democracy.” The manifesto also promised a minimum participation requirement, mandatory retirement age and strengthened processes for removing disgraced members. “We will reform the appointments process to ensure the quality of new appointments and will seek to improve the national and regional balance of the second chamber,” it said. No. 10 insisted Thursday it will progress with House of Lords reform — though … declined to give a timeline.

President Donald Trump’s latest round of Europe-bashing has the U.S.’s allies across the Atlantic revisiting a perennial question: Why does Trump hate Europe so much? Trump’s disdain for America’s one-time partners has been on prominent display in the past week — first in Trump’s newly released national security strategy, which suggested that Europe was suffering from civilizational decline, and then in Trump’s exclusive interview with POLITICO, where he chided the “decaying” continent’s leaders as “weak.” In Europe, Trump’s criticisms were met with more familiar consternation — and calls to speed up plans for a future where the continent cannot rely on American security support. But where does Trump’s animosity for Europe actually come from? To find out, I reached out to a scholar who’d been recommended to me by sources in MAGA world as someone who actually understands their foreign policy thinking (even if he doesn’t agree with it). “He does seem to divide the world into strength and weakness, and he pays attention to strength, and he kind of ignores weakness,” said Jeremy Shapiro, the research director at the European Council on Foreign Relations and an expert on Trump’s strained relations with the continent. “And he has long characterized the Europeans as weak.” Shapiro explained that Trump has long blamed Europe’s weakness on its low levels of military spending and its dependence on American security might. But his critique seems to have taken on a new vehemence during his second term thanks to input from new advisers like Vice President JD Vance, who have successfully cast Europe as a liberal bulwark in a global culture war between MAGA-style “nationalists” and so-called globalists. Like many young conservatives, Shapiro explained, Vance has come to believe that “it was these bastions of liberal power in the culture and in the government that stymied the first Trump term, so you needed to attack the universities, the think tanks, the foundations, the finance industry, and, of course, the deep state.” In the eyes of MAGA, he said, “Europe is one of these liberal bastions.” This conversation was edited for length and clarity. Trump’s recent posture toward Europe brings to mind the old adage that the opposite of love isn’t hate, it’s indifference. Do you think Trump hates Europe, or does he just think it’s irrelevant? My main impression is that he’s pretty indifferent toward it. There are moments when specific European countries or the EU really pisses him off and he expresses something that seems close to hatred, but mostly he doesn’t seem very focused on it. Why do you think that is? He does seem to divide the world into strength and weakness, and he pays attention to strength, and he kind of ignores weakness. And he has long characterized the Europeans as weak for a bunch of different reasons having to do with what seems to him to be a decadence in their society, their immigration, their social welfare states, their lack of apparent military vigor. All of those things seem to put them in the weak category, and in Trump’s world, if you’re in the weak category, he doesn’t pay much attention to you. What about more prosaic things like the trade imbalance and NATO spending? Do those contribute to his disdain, or does it originate from a more guttural place? I get the impression that it is more at a guttural level. It always seemed to me that the NATO spending debate was just a stick with which to beat the NATO allies. He has long understood that that’s something that they felt a little bit guilty about, and that’s something that American presidents had beat them about for a while, so he just sort of took it to an 11. The trade deficit is something that’s more serious for him. He’s paid quite a bit of attention to that in every country, so it’s in the trade area where he takes Europeans most seriously. But because they’re so weak and so dependent on the United States for security, he hasn’t had to deal with their trade problems in the same way. He’s able to threaten them on security, and they have folded pretty quickly. Does some of his animosity originate from his pre-presidency when he did business in Europe? He likes to blame Europeans for nixing some of his business transactions, like a golf course in Ireland. How serious do you think that is? I think that’s been important in forming his opinion of the EU rather than of Europe as a whole. He never seems to refer to the EU without referring to the fact that they blocked his golf course in Ireland. It wasn’t even the EU that blocked it, actually — it was an Irish local government authority — but it conforms to the general MAGA view of the EU as overly bureaucratic, anti-development and basically as an extension of the American liberal approach to development and regulation, which Trump certainly does hate. That’s part of what led Trump and his movement more generally to put the EU in the category of supporters of liberal America. In that sense, the fight against the EU in particular — but also against the other liberal regimes in Europe — became an extension of their domestic political battle with liberals in America. That effort to pull Europe as a whole into the American culture war by positioning it as a repository of all the liberal pieties that MAGA has come to hate — that seems kind of new. That is new for the second term, yeah. Where do you think that’s coming from? It definitely seems to be coming from [Vice President] JD Vance and the sort of philosophers who support him — the Patrick Deneens and Yoram Hazonys. Those types of people see liberal Europe as quite decadent and as part of the overall liberal problem in the world. You can also trace some of it back to Steve Bannon, who has definitely been talking about this stuff for a while. There does seem to be a real preoccupation with the idea that Europe is suffering from some sort of civilizational decline or civilization collapse. For instance, in both the new national security strategy and in his remarks to POLITICO this week, Trump has suggested that Europe is “decaying.” What do you make of that? This is a bit of a projection, right? If you look at the numbers in terms of immigration and diversity, the United States is further ahead in that decay — if you want to call it that — than Europe. There was this view that emerged among MAGA elites in the interregnum that it wasn’t enough to win the presidency in order to successfully change America. You had to attack all of the bastions of liberal power. It was these bastions of liberal power in the culture and in the government that stymied the first Trump term, so you needed to attack the universities, the think tanks, the foundations, the finance industry and, of course, the deep state, which is the first target. It was only through attacking these liberal bastions and conquering them to your cause that you could have a truly transformative effect. One of the things that they seem to have picked up while contemplating this theory is that Europe is one of these liberal bastions. Europe is a support for liberals in the United States, in part because Europe is the place where Americans get their sense of how the world views them. It’s ironic that that image of a decadent Europe coexists with the rise of far-right parties across the continent. Obviously, the Trump administration has supported those parties and allied with them, but at least in France and Germany, the momentum seems to be behind these parties at the moment. That presents them with an avenue to destroy liberal Europe’s support for liberal America by essentially transforming Europe into an illiberal regime. That is the vector of attack on liberal Europe. There has been this idea that’s developed amongst the populist parties in Europe since Brexit that they’re not really trying to leave the EU or destroy the EU; they’re trying to remake the EU in their nationalist and sovereigntist image. That’s perfect for what the Trump people are trying to do, which is not destroy the EU fully, but destroy the EU as a support for liberal ideas in the world and the United States. You mentioned the vice president, who has become a very prominent mouthpiece for this adversarial approach to Europe — most obviously in his speech at Munich earlier this year. Do you think he’s just following Trump’s guttural dislike of Europe or is he advancing his own independent anti-European agenda? A little of both. I think that Vance, like any good vice president, is very careful not to get crosswise with his boss and not contradict him in any way. So the fact that Trump isn’t opposed to this and that he can support it to a degree is very, very important. But I think that a lot of these ideas come from Vance independently, at least in detail. What he’s doing is nudging Trump along this road. He’s thinking about what will appeal to Trump, and he’s mostly been getting it right. But I think that especially when it comes to this sort of culture war stuff with Europe, he’s more of a source than a follower. During this latest round of Trump’s Euro-bashing, did anything stand out to you as new or novel? Or was it all of a piece with what you had heard before? It was novel relative to a year ago, but not relative to February and since then. But it’s a new mechanism of describing it — through a national security strategy document and through interviews with the president. The same arguments have achieved a sort of higher status, I would say, in the last week or so. You could sit around in Europe — as I did — and argue about the degree to which this really was what the Trump administration was doing, or whether this was just a faction — and you can still have that argument, because the Trump administration is generally quite inconsistent and incoherent when it comes to this kind of thing — but I think it’s undoubtedly achieved a greater status in the last week or two. How do you think Europe should deal with Trump’s recurring animosity towards the continent? It seems they’ve settled on a strategy of flattery, but do you think that’s effective in the long run? No, I think that’s the exact opposite of effective. If you recall what I said at the beginning, Trump abhors weakness, and flattery is the sort of ultimate manifestation of weakness. Every time the Europeans show up and flatter Trump, it enables them to have a good meeting with him, but it conveys the impression to him that they are weak, and so it increases his policy demands against them. We’ve seen that over and over again. The Europeans showed up and thought they had changed his Ukraine position, they had a great meeting, he said good things about them, they went home and a few weeks later, he had a totally different Ukraine position that they’re now having to deal with. The flattery has achieved the sense in the Trump administration that they can do anything they want to the Europeans, and they’ll basically swallow it. They haven’t done what some other countries have done, like the Chinese or the Brazilians, or even the Canadians to some degree, which is to stand up to Trump and show him that he has to deal with them as strong actors. And that’s a shame, because the Europeans — while they obviously have an asymmetric dependence on the United States, and they have some weaknesses — are a lot stronger than a lot of other countries, especially if they were working together. I think they have some capacity to do that, but they haven’t really managed it as of yet. Maybe this will be a wake-up call to do that.

BRUSSELS — Britain’s top Europe minister defended a decision to keep the U.K. out of the EU’s customs union — despite sounding bullish on a speedy reset of ties with the bloc in the first half of 2026. Speaking to POLITICO in Brussels where he was attending talks with Maroš Šefčovič, the EU trade commissioner, Nick Thomas-Symonds said a non-binding British parliamentary vote on Tuesday on rejoining the tariff-free union — pushed by the Liberal Democrats, but supported by more than a dozen Labour MPs — risked reviving bitter arguments about Brexit. Thomas-Symonds described the gambit by the Lib Dems — which had the backing of one of Labour’s most senior backbenchers, Meg Hillier — as “Brexit Redux.” And he accused Ed Davey, the Lib Dem leader, of wanting “to go back to the arguments of the past.” The Lib Dems have drawn support from disillusioned Labour voters, partly inspired by the party’s more forthright position on moving closer to the EU. But Thomas-Symonds defended Labour’s manifesto commitment to remain outside the single market and the customs union. “The strategy that I and the government have been pursuing is based on our mandate from the general election of 2024, that we would not go back to freedom of movement, we would not go back to the customs union or the single market,” the British minister for European Union relations said. Thomas-Symonds said this remained a “forward-looking, ruthlessly pragmatic approach” that is “rooted in the challenges that Britain has in the mid 2020s.” He pointed out that post-Brexit Britain outside of the customs union has signed trade deals with India and the United States, demonstrating the “advantages of the negotiating freedoms Britain has outside the EU.” ‘GET ON WITH IT’ Speaking to POLITICO’s Anne McElvoy for the “Politics at Sam and Anne’s” podcast, out on Thursday, Thomas-Symonds was optimistic that a grand “reset” of U.K.-EU relations would progress more quickly in the new year. The two sides are trying to make headway on a host of areas including a youth mobility scheme and easing post-Brexit restrictions on food and drink exports. “I think if you look at the balance of the package and what I’m talking about in terms of the objective on the food and drink agreement, I think you can see a general timetable across this whole package,” he said. Pressed on whether this could happen in the first half of 2026,  the U.K. minister sounded upbeat: “I think the message from both of us to our teams will be to get on with it.”  The Brussels visit comes after talks over Britain’s potential entry into a major EU defense program known as SAFE broke down amid disagreement over how much money the U.K. would pay for access to the loans-for-arms scheme. The program is aimed at re-arming Europe more speedily to face the threat from Russia. Asked if the collapse of those talks showed the U.K. had miscalculated its ability to gain support in a crucial area of re-connection, Thomas-Symonds replied: “We do always impose a very strict value for money. What we would not do is contribute at a level that isn’t in our national interest.” The issued had “not affected the forward momentum in terms of the rest of the negotiation,” he stressed. YOUTH MOBILITY STANDOFF Thomas-Symonds is a close ally of Prime Minister Keir Starmer and has emboldened the under-fire British leader to foreground his pro-Europe credentials. The minister for European relations suggested his own elevation in the British government — he will now attend Cabinet on a permanent basis — was a sign of Starmer’s intent to focus on closer relations with Europe and tap into regret over a post-Brexit loss of business opportunities to the U.K. Fleshing out the details of a “youth mobility” scheme — which would allow young people from the EU and the U.K. to spend time studying, traveling, or working in each other’s countries — has been an insistent demand of EU countries, notably Germany and the Netherlands. Yet progress has foundered over how to prevent the scheme being regarded  as a back-door for immigration to the U.K. — and how exactly any restrictions on numbers might be set and implemented. Speaking to POLITICO, Thomas-Symonds hinted at British impatience to proceed with the program, while stressing: “It has to be capped, time-limited, and  it’ll be a visa-operated scheme. “Those are really important features, but I sometimes think on this you can end up having very dry discussion about the design when actually this is a real opportunity for young Brits and for young Europeans to live, work, study, enjoy other cultures.” The British government is sensitive to the charge that the main beneficiaries of the scheme will be students or better-off youngsters. “I’m actually really excited about this,” Thomas-Symonds said, citing his own working-class background and adding that he would have benefited from a chance to spend time abroad as a young man “And the thing that strikes me as well is making sure this is accessible to people from all different backgrounds,” he said. Details however still appear contentious: The EU’s position remains that the scheme should not be capped but should have a break clause in the event of a surge in numbers. Berlin in particular has been reluctant to accept the Starmer government’s worries that the arrangement might be seen as adding to U.K. immigration figures, arguing that British students who are outside many previous exchange programs would also be net beneficiaries.  Thomas-Symonds did not deny a stand-off, saying: “When there are ongoing talks about particular issues, I very much respect the confidentiality and trust on the ongoing talks.”  Britain’s most senior foreign minister, Yvette Cooper, on Wednesday backed a hard cap on the number of people coming in under a youth mobility scheme. She told POLITICO in a separate interview that such a scheme needs to be “balanced.” “The UK-EU relationship is really important and is being reset, and we’re seeing cooperation around a whole series of different things,” she said. We also, at the same time, need to make sure that issues around migration are always properly managed and controlled.” A U.K. official later clarified that Cooper is keen to see an overall cap on numbers. BOOZY GIFT As negotiations move from the technical to the political level this week, Thomas-Symonds sketched out plans for a fresh Britain-EU summit in Brussels when the time is right. “In terms of the date, I just want to make sure that we have made sufficient progress, to demonstrate that progress in a summit,” Nick Thomas-Symonds said. “I think that the original [post-Brexit] Trade and Cooperation Agreement did not cover services in the way that it should have done,” he added. “We want to move forward on things like mutual recognition of professional qualifications.” Thomas-Symonds, one of the government’s most ardent pro-Europeans, meanwhile told POLITICO he had forged a good relationship with “Maroš” (Šefčovič) – and had even brought him a Christmas present of a bottle of House of Commons whisky. “So there’s no doubt that there is that trajectory of closer U.K.-EU cooperation,” he quipped. Dan Bloom and Esther Webber contributed reporting.

LONDON — Keir Starmer is promising British voters he’ll fix the Brexit-shaped hole in the U.K. economy, but Brussels appears to have quite enough on its plate. Days after Britain’s grim growth prospects were laid bare in the U.K. budget, the country’s PM gave two speeches promising closer ties with the European Union and elevated his EU point person, Nick Thomas-Symonds, to the Cabinet. “We have to keep moving towards a closer relationship with the EU, and we have to be grown-up about that, to accept that that will require trade-offs,” Starmer said on Monday.   But European leaders are already grappling with packed in-trays as they look for an end to Russia’s war in Ukraine and confront their own domestic economic challenges — and skepticism remains as to how much room for maneuver the British PM actually has.  Starmer’s political red lines — no customs union, no single market, and no return to freedom of movement — remain in place, and ministers continue to stress that a return to full EU membership remains off the table. Even Starmer’s existing EU “reset” agenda — which aims to walk back some of the harder edges of Boris Johnson’s Brexit settlement — is not all going to plan. A push to join the EU’s SAFE loans-for-arms scheme crashed last week after the two sides failed to agree on how much money the U.K. would pay. “The same ‘how much should the U.K. contribute?’ question has been slowing down the actual implementation of basically all the reset topics,” said one EU diplomat who was not authorized to speak on the record. Despite plenty of talk in London about closer ties, the forum for putting fresh topics on the agenda would be the EU-U.K. summit that is due next year. But a date has yet to be set for that gathering. “Nobody is talking about the next summit here yet. I’m not saying it isn’t going to happen, it’s just a question of bandwidth,” another EU diplomat said. “For us the focus now is to work through our existing commitments and finalize those deals, start implementing them and then showing that the deals are bringing value. That takes time,” a third diplomat said. LIMITED SCOPE  The problem for Starmer is that his existing plan to rebuild EU ties is unlikely to move the dial on U.K. economic growth. Economists at the Centre for European Reform reckon that the government’s reset package — if delivered in full — is worth somewhere between 0.3 percent and 0.7 per cent of U.K. GDP over a decade.   Meanwhile, academics at the Bank of England and Stanford University calculate that the economic hit from Brexit could be as high as 8 percent of GDP over a similar period. “It is striking how frequently the chancellor and prime minister will now lament the costs of Brexit, without making any suggestions on how to change the status quo,” said Joël Reland, research fellow at the U.K. In A Changing Europe think tank.  “This could be read as a slow creep towards a breach of their red lines, but I suspect it is mostly about domestic political management. They are in a sticky economic situation and Brexit is a convenient thing to blame. I don’t think they’d be brave enough to risk a manifesto breach on Brexit, but I’d be surprised if ‘no single market or customs union’ is in the 2029 manifesto,” Reland said.  One British government official stressed that Labour’s red lines remain in place — but added: “We don’t think we’re at those red lines yet.”  BREAKING THE TABOO  Labour’s previous reluctance to talk about Brexit was born of a fear of upsetting Leave-leaning swing voters whom the party wanted to win over in the last election.  But that started to change over the summer.  Thomas-Symonds, the minister in charge of delivering the reset, went on the attack in a speech hosted by the Spectator, a right-wing magazine. Parties pledging to reverse Starmer’s reset were offering “more red tape, mountains of paperwork, and a bureaucratic burden,” he argued. To the surprise of Downing Street aides, the attacks landed well and drew a line between the government’s agenda and that of Reform UK boss Nigel Farage — the longstanding Brexiteer dominating in the polls — and Conservative Leader Kemi Badenoch.  It emboldened Starmer and his lieutenants. Rachel Reeves, the U.K.’s chief finance minister, used her speech at the Labour Party conference in Liverpool to talk up the benefits of improved cross-border mobility for the economy.   Ahead of last week’s difficult budget stuffed with tax rises, she waded in further, damning the effects of a “chaotic Brexit.” While the new rhetoric has yet to be backed up by a shift in policy, there are signs that some of Starmer’s close allies are starting to think bigger.  Rejoining the EU customs union was reportedly raised as an option by Starmer’s economic advisor ahead of the budget — but was rejected. “There are definitely people who have been pushing at this for a long time,” one person with knowledge of conversations in government said.  “I don’t think that will be that surprising to people, because if your primary goal allegedly is growth then that’s one of the easiest levers you can pull. Most economists would agree — it’s the politics that’s stopping it.”  Pressed on the prospect of Britain’s applying to rejoin the customs union on Wednesday, Health Secretary Wes Streeting did not explicitly rule out the idea but stressed the government’s policy was about “new partnerships and new relationships, not relitigating the past.” If Starmer opts for a risky manifesto-busting push to rejoin the customs union, diplomats say even that is unlikely to be a quick fix for the British PM.  “It would take time. Just consider how slow has been so far the progress on SPS, ETS and Erasmus,” the first diplomat quoted above said. “As of now, the U.K. needs the EU to spur its growth, not the other way around.”

LONDON — The British government is considering a ban on cryptocurrency donations to political parties — in a move that could set off alarm bells in Nigel Farage’s Reform UK. Farage’s populist party — surging ahead in U.K. opinion polls — opened the door to digital asset donations earlier this year as part of a promised “crypto revolution” in Britain, and has already accepted its first donations in the digital assets. A clampdown by the British government was absent from a policy paper outlining its upcoming Elections Bill, which is being billed as a plan to shore up British democracy. But officials are now considering measures to outlaw the use of crypto to fund U.K. politicians, according to three people familiar with recent discussions on the bill. The government did not deny that the move was under consideration, saying it would “set out further details in our Elections Bill.” Reform UK became the first British political party to accept crypto donations earlier this year. Farage told Reuters in October that his party had received “a couple” of donations in the form of crypto assets after the Electoral Commission — which regulates U.K. political donations — confirmed it had been notified of the first crypto donation in British politics. Reform has set up its own crypto donations portal and promised “enhanced” controls to avoid any misuse. Reform has set up its own crypto donations portal and promised “enhanced” controls to avoid any misuse. | Dan Kitwood/Getty Images Farage, who holds some long-term crypto assets, has told the sector he is the “only hope” for Britain’s crypto business as he seeks to emulate his long-term ally U.S. President Donald Trump’s wide embrace of digital currencies. Farage has stressed he was “way before Trump” in publicly backing cryptocurrencies. HARD TO TRACK Despite the absence of a clampdown from initial public plans for the government’s elections bill — which included measures ranging from lowering the voting age to 16 to strengthened powers for the electoral commission — the British government, which is trailing Reform in the polls, has been under pressure to adopt a ban on the practice. Among those who have floated a clampdown are then-Cabinet Office Minister Pat McFadden, Business Select Committee Chair Liam Byrne, and Phil Brickell, the Labour MP who chairs the All-Party Parliamentary Group (APPG) on Anti-Corruption and Fair Tax. Transparency experts have warned that the source of cryptocurrency donations can be difficult to track. That raises concerns that foreign donations to political parties and candidates — banned in almost all circumstances under British law — as well as the proceeds of crime and money laundering could slip through the net. Labour’s elections bill is also expected to place new requirements on political parties and their donors. It is set to include a clampdown on donations from shell companies and unincorporated associations, and could force parties to record and keep a risk assessment of donations that could pose a risk of foreign interference. Crypto is an emerging battleground of foreign interference, with Russia and its intelligence services increasingly embracing digital currencies to evade sanctions and finance destabilization — such as in Moldovan elections — after being cut off from the global banking system following Moscow’s full-scale invasion of Ukraine. Russian involvement in British politics has come under fresh scrutiny in recent months after Nathan Gill — the former head of Reform in Wales who was also an MEP in Farage’s Brexit Party — was jailed last month for over 10 years after being paid to make pro-Russian statements in the European Parliament. Farage has strongly distanced himself from Gill, describing the former MEP as a “bad apple” who had betrayed him. Nevertheless, Labour has since gone on the offensive, with Prime Minister Keir Starmer urging Farage to launch an internal investigation into Gill’s activities. According to a spokesperson for the Ministry of Housing, Communities and Local Government, which has responsibility for the bill, “The political finance system we inherited has left our democracy vulnerable to foreign interference.  “Our tough new rules on political donations, as set out in our Elections Strategy, will protect U.K. elections while making sure parties can continue to fund themselves.”

LONDON — Britons must accept the trade-offs of a closer relationship with the European Union, the U.K. prime minister said Monday. At a speech in central London, Keir Starmer said Brexit had “significantly hurt our economy,” warning “frictions” with the bloc must be reduced to enable “economic renewal” in the U.K. It comes days after talks between London and Brussels to allow Britain to participate in the EU’s €150 billion Security Action for Europe loans-for-weapons program broke down, amid a disagreement over how much the U.K. would have to pay to participate. In his Monday morning speech, Starmer gave a staunch defense of last week’s budget, insisting he does have a long-term economic plan for the U.K. “The most important things that we can do for growth and business is first, drive inflation down and second, to retain market confidence that allows for recall economic stability,” he said. But the U.K. must “confront the reality” that the deal struck with Brussels post-Brexit “significantly hurt our economy, he said. “For economic renewal we have to keep reducing frictions. We have to keep moving towards a closer relationship with the EU, and we have to be grown-up about that, to accept that that will require trade-offs.” He later cited a proposed SPS deal, which aims to remove the need for border checks on plant and animal products, and talks on an emission trading scheme as examples of where the U.K. is making progress. Starmer’s speech came as the embattled British prime minister tried to defend last week’s tax-hiking government budget. He insisted the choices made the tax-and-spend statement had been “fair, necessary and fundamentally good for growth,” but acknowledged publicly for the first time that ministers had considered — and then backed away from — a manifesto-busting rise in the headline rate of income tax.

LONDON — Britain’s global diplomatic footprint could be significantly scaled back as it tries to work out which embassies and buildings to sell off from a sprawling £2.5 billion overseas estate. U.K. budget documents released this week show the Foreign Office is “rationalising” its collection of some 6,500 properties to find “assets to release” — while hundreds of its buildings have fallen into serious disrepair. This will include selling off buildings such as embassies and diplomatic accommodation which are deemed no longer necessary as part of the Foreign Commonwealth and Development Office’s “FCDO2030” overhaul of its work, staffing and footprint in the U.K. and beyond. The budget makes specific mention of finding savings in “high-cost locations such as New York” — which could include a £12 million luxury apartment in the city bought for diplomats in 2019 to help negotiate trade deals with the United States following Brexit. The Foreign Office at the time said it secured the “best deal possible” for the seven-bedroom flat, which occupies the whole 38th floor of 50 United Nations Plaza and has a library, six bathrooms and a powder room. Earlier this year U.K. spending watchdogs the National Audit Office (NAO) and parliament’s own Public Accounts Committee (PAC) raised significant concerns over the state of Britain’s creaking overseas diplomatic estate. Around 933 of its properties (around 15 percent of the total) have been assessed as not being sound or operationally safe. FCDO estimates that it would cost £450 million to clear its maintenance backlog. PAC noted that after selling off large assets, such as its embassy compounds in Bangkok and Tokyo, FCDO “has no remaining large assets that are viable to sell.” It is the latest in a series of cutbacks to Britain’s soft power clout. The government has already come under fire for slashing its international aid budget, which also helps fund the BBC World Service. Olivia O’Sullivan, director of the UK in the World program at the Chatham House think tank, said it was “unsurprising” that the government is looking at its overseas estate to meet the “significant cutbacks” at the FCDO. “The government needs to balance the need for cost-savings with the benefits of having some high-impact spaces it can use for hosting and projecting power and presence,” she added. The Foreign Office is meanwhile undergoing major restructuring. Union officials this week told parliament’s International Development Select Committee that the FCDO is in the process of offering redundancy to its U.K.-based staff — which could result in up to 30 percent cuts to its headcount. Overseas, the department is also reviewing the size and location of its global footprint which encompasses over 250 posts in over 150 countries worldwide. The government was contacted for comment.

LONDON — Chancellor Rachel Reeves has insisted that the government’s new trade deals will boost growth, after the Office for Budget Responsibility (OBR) snubbed a request to count them in its growth forecast. In its pre-budget forecast on Wednesday, the OBR acknowledged that new trade deals “have the potential to increase U.K. trade and GDP,” including the government’s Brexit “reset” deal with the EU and its free trade agreement with India. But the budget watchdog indicated that neither of the deals had met the criteria to be included in its forecast. As elements of the U.K.-EU reset deal were still under negotiation, the OBR said there was “not sufficient detail to assess their potential fiscal and economic impacts.” In the case of the India deal, the OBR said it could be seen to increase GDP by 0.13 percent, in line with the government’s impact assessment, but only once ratified. When it came to the U.S. trade pact — which saw the U.K. hit with 10 percent baseline tariffs on most goods — the OBR noted that some “details of the future trading arrangement are yet to be negotiated and confirmed.” The assessments came as a disappointment for Reeves, who had pinned her hopes on trade as a booster for growth. In an interview with the BBC on Thursday, the chancellor said she was “confident that the growth policies that we’re pursuing will grow our economy,” pointing to trade deals with the EU, India and U.S., as well as planning and pensions reforms. “Why do I say that?” Reeves added. “Because the OBR said in the spring our economy would grow by 1 percent this year. They revised it up yesterday to 1.5 percent. The IMF, the OECD, the Bank of England, also revised up their growth forecasts for this year.” “So I’ve defied the forecast this year, and I’m determined to defy them next year and the year after, because it is absolutely the case that the best way to fund our public services and keep taxes down is to grow the economy.” GLOBAL HEADWINDS While the U.K.-EU reset deal and India deal are not included in the OBR’s current forecast, it does offers some hope for the future. “The result of the UK-EU strategic partnership and the Youth Mobility Scheme are still being negotiated and therefore there is not sufficient detail to assess their potential fiscal and economic impacts,” it said. “We will consider whether any such impacts should be included in the forecast once the full details of the agreements have been finalised, published and agreed by both the EU and UK. This is the standard approach we have taken to assessing the fiscal and economic impacts of trade deals and other international agreements.” The assessments came as a disappointment for Reeves, who had pinned her hopes on trade as a booster for growth. | Neil Hall/EPA Once the U.K.-India free trade agreement is ratified by both countries, the OBR said it could increase real GDP by amounts rising to 0.13 percent by 2040, in line with the government’s impact assessment. But Reeves has less reasons to be cheerful about the state of trade overall, with global trade growth expected to slow from 3.7 percent in 2024 to 2.3 percent in 2026 in line with the IMF’s forecast. Speaking at a Resolution Foundation event on Thursday, OBR chair Richard Hughes said tariffs and global trade restrictions had played a part in their decision to downgrade productivity. “There are some new global headwinds in the global economy since our forecast in March — U.S. tariffs going up and also just wider global trade restrictions being put in place,” Hughes warned. “Trade wars are very bad things for everybody, especially an open economy like the U.K., which relies a lot on trade as a driver for growth so and for the first time that I’ve seen in my career, the IMF is actually forecasting over the next five years trade falling as a share of GDP.”

When Goldman Sachs boss David Solomon met with Chancellor Rachel Reeves in October, he was given a list of prepared talking points by colleagues to discuss with Britain’s top finance minister. With only one thing on his mind, he ripped up the notes and warned her: Don’t hike bank taxes in the budget. Six weeks on, after Reeves delivered her second fiscal statement on Nov. 26 with no such tax increases, he needn’t have worried too much. Taxing Britain’s mammoth lenders could have raised £8 billion for the exchequer, a huge amount which would have gone a long way to plug the £30 billion hole Reeves needed to fill to stabilize the U.K.’s finances. But while some in the ruling Labour Party would have loved to see financial institutions taxed more, Reeves was never actually going to pull the trigger. Publicly and privately, the lobbying efforts by banks were intense. The CEOs of Lloyds, HSBC, and NatWest all spoke out openly against the suggestion, while other leaders, such as Solomon, issued their warnings behind closed doors. Banks couldn’t rule out a tax hike, particularly after a leaked memo revealed that former Deputy Prime Minister Angela Rayner had urged Reeves to raise the bank surcharge, an extra tax paid by banks on top of corporation tax. Certain think tanks, too, called on Reeves to go big on fat cats. But behind closed doors, as the budget approached, City figures weren’t so concerned. Many cautioned against believing stories that a bank tax was imminent, while others said they simply hadn’t been told either way — therefore weren’t expecting a surprise in the budget. Ultimately, they believed their lobbying was hugely successful toward a government intent on achieving growth and fearful of sending wealth out of the country. One senior bank executive, granted anonymity to speak freely, said bank chiefs “care about two things: How easy is it to hire and fire people in the U.K, and how much tax do we pay in this country?” For banks, their winning arguments were twofold: One, lenders pay £43.3 billion in tax every year at a 46.4 percent tax rate, higher than any other global financial center, according to data from lobby group UK Finance. Two, Reeves has been on a mission of financial deregulation since her party entered No. 10 last year. Banks argued that giving with one hand, by loosening rules, but taking away with the other, by hiking taxes, was contradictory and wouldn’t achieve the growth she so desperately wants. “Reeves has been consistent with her messaging during her tenure,” said Benjamin Toms, bank analyst at RBC Capital Markets. “The government wants to stimulate growth, and Reeves realizes that U.K. banks are the conduit for that growth.” MOVING MARKETS The message appeared to get through to Reeves, even though she declined to publicly rule out hiking bank taxes. That left rumors to intensify over the summer. Two think tanks, Positive Money and IPPR, issued reports backing a tax hike, with both recommending a windfall-style levy on bank profits. The former delivered a petition with 68,749 signatures calling for the move to the chancellor earlier this week. The IPPR report, published at the end of August, was the most impactful, knocking £8 billion off the share prices of FTSE 100 banks the day it was published, with NatWest losing £2.5 billion alone in market cap. The Treasury worked hard to separate itself from the report, with a spokesperson saying afterward that “the chancellor has been clear that the financial services sector is at the heart of our plans to grow the economy,” but it wasn’t enough to quell rumors. “Ultimately, negative press around banks slamming a bank tax and its effect on growth is considered more damaging to the economy than the taxes collected from the banks would bring in,” said Niklas Kammer, equity analyst at Morningstar. Later, it emerged that Reeves “ripped into” members of the think tank after the report was published, per one person in the room at the time. She told the IPPR to think before they publish a report next time, in front of dozens of attendees at a meeting in No. 11 Downing Street in September. While it seemed that gossip around a surcharge hike quietened down after the summer, it was immediately thrust back into the spotlight after the chancellor’s decision to rule out any income tax hikes in the budget, as Reeves began searching around for sources of income to pad her fiscal headroom. Lobbying efforts intensified after the news on income tax broke, causing banks to panic that the move would be back on the table and warn that they’d move business elsewhere. “We suggested in our conversation with government that if the surcharge was to go up, we might be able to move things to the EU,” added the bank executive. After Brexit, banks have been forced to move more of their operations to the continent, buying new offices and hiring further staff, leaving greater possibilities to shift operations away from the U.K. “It’s much easier to move at the margins now than it would have been just five years ago,” they said. But the possibility of raising taxes on banks in Britain was officially ruled out after reports circulated in the days leading up to the budget that Reeves would let them off the hook — if they praise the chancellor’s decisions. Will Howlett, financials analyst at Quilter Cheviot, said it would be a “stretch” to see banks showering the budget with praise given the other tax rises that Reeves did pursue in the fiscal event, along with the cuts to cash ISA limits. But Toms said it was likely “more accurate” that the government was requesting banks not criticize the budget rather than actively praise it. For banks reeling from a huge win, staying quiet won’t be too hard.