Jeremy Hunt’s autumn statement had all the hallmarks of a Labour budget | Beth Rigby
If you’re feeling a bit disorientated by the chancellor’s autumn statement, you’re not alone.
In just eight weeks, the government has shifted from wanting to roll out the biggest tax cuts in 50 years to taking the country’s tax burden to its highest level since the Second World War.
Liz Truss and her chancellor Kwasi Kwarteng wanted to slash taxes – announcing £45bn of unfunded tax cuts in September – only for their replacements Rishi Sunak and Jeremy Hunt to swing the pendulum the other way, with an autumn statement targeting £55bn of fiscal consolidation, plus tax rises of £25bn and spending cuts at £30bn.
We’ve lurched from the zeal of Ms Truss’s low tax, small state, trickle-down economics to the pragmatism of Mr Sunak, who claims he’s instinctively a fiscal Conservative but on Thursday oversaw an autumn statement that borrowed much from the opposition front bench.
There were windfall taxes on energy companies (raising £5.6bn by 2027/8), a freeze on National Insurance thresholds for extra money for employers (£5.8bn), a cut to the 45p rate of tax threshold to £125,000 (£855m), changes to capital gains and dividends tax (£1.4bn), and a reversal of Kwarteng’s stamp duty cuts (£1.6bn).
Tax rises paid for by business and the wealthy had all the hallmarks of a Labour budget.
On spending, too, the Tories are prioritising extra money for the NHS (£6.6bn) and for schools (£4.6bn) over the next two years, paid for in part from the overseas aid budget.
And while public services will feel the squeeze in the coming year as inflation gallops ahead of allocated spending, most of the £30bn of spending cuts will be kicked into the next parliament, when the Tories might not even be in power, with day-to-day departmental spending £21.5bn less in 2027/8 than under previous plans.
“They’ve shot Labour’s fox,” is how one senior economist put it to me, as Mr Hunt borrowed some of Sir Keir Starmer’s tax plans, put more money into public services and saved the spending cut pain until after the general election.
Mr Hunt also threw the gauntlet down to Labour as to how they’d pay for improved public services.
But the political skill of Thursday’s statement can’t detract from the hard reality of what people are about to face as the UK tips into recession and energy bills and inflation remain high.
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Pledge to increase NHS budget
UK households are set to suffer a 7.1% fall in living standards over the next two years.
It’s the largest decline in six decades and will take household disposable incomes back to levels not seen since 2013. A decade of growth wiped out.
That, coupled with below inflationary pay rises for public sector workers and tight budgets as inflation outpaces funding settlements for much of our public services, is going to hurt voters and no doubt test their relationship with a Conservative Party already more than 20 points behind in the polls.
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Millions to pay more in tax
A YouGov poll in The Times says 45 per cent of voters blame higher borrowing levels on the Conservative government, despite Mr Hunt’s best attempts to blame it on global factors.
And then there is the Tory party itself.
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Energy price cap to rise again in 2023
Mr Sunak was pilloried back in the summer by his then-leadership rival Ms Truss as the Conservative chancellor who lifted the country’s tax burden to a 70-year high. On Thursday, he went further, lifting it to a near 80-year high.
The signs of discontent rippled through the backbenches on Thursday. Richard Drax made the point, shared by many of his colleagues, that raising taxes risks stifling growth.
Bill Cash complained about the cost of HS2 and Therese Villiers asked the chancellor to cut taxes quickly if current forecasts about economic recovery and inflation proved to be overly pessimistic.
This an autumn statement from a chancellor and prime minister insisting it’s time to “face the storm”.
On Thursday, both will be relieved that the announcement didn’t unsettle the markets, but the economic outlook is nothing but grim for the public and the government. The coming months could be very bumpy indeed.
Outgoing US President Joe Biden is set to meet his Chinese counterpart Xi Jinping today for what is likely to be his last time as US president.
The two leaders are expected to hold talks on the sidelines of a meeting of Asia-Pacific leaders in the Peruvian capital, Lima.
It comes against the backdrop of increasing tension in the US-China relationship with a potential trade war looming under a Trump presidency, several China hawks tapped for US cabinet positions and China’s growing status among global south countries as an emerging leader of an alternative world order.
This week China was focused on events in the southern city of Zhuhai.
First there was a car ramming attack at Zhuhai’s sports stadium which left 25 people dead. A shocking event that was heavily censored in China.
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What happened at Zhuhai sports centre?
Less than an hour’s drive away the country was holding its premier air show.
It was a military enthusiast’s dream, and not even intermittent rain could keep the crowds of tens of thousands of people away from relishing in the roar of jets in the skies above Zhuhai.
China’s fighter jet fleet
One of the main drawcards was China’s newest stealth fighter the J-35A. It will join the country’s J-20 in service for the People’s Liberation Army Air Force (PLAAF).
A J-35A stealth aircraft flies during the exhibition. Pic: Reuters
The J-10C was China’s aerobatics star of the show. There were daily displays of its prowess in sky-high manoeuvres and formations that impressed onlookers, leaving a streak of colours across the cloudy rain-clogged sky.
China’s aerobatic team
China’s military modernsiation programme is continuing apace
It boasts the largest navy in the world and the largest armed forces by active-duty personnel.
The People’s Liberation Army (PLA) Airforce is developing fast too.
Dr Nicole Leveringhaus, a China security expert from King’s College London, says: “China started with very little. It was devastated by wars on many fronts in the 30s and 40s. Its defence industry was depleted. In 70-plus years it’s built itself up and now we’re seeing the results.
“It’s an impressive feat to go from a bloated land-based peasant guerrilla army to what it has to today.”
Chinese pride and nationalism on display
Enjoying the air show spectacle, military fan Liu Liansong said: “I think the air show is great. It is a firm manifestation of the air force’s development from scratch. We as Chinese people feel very proud.”
Inside the air show
The air show included massive exhibition halls of military hardware, from drones to robotics, firearms and mock missiles. Merely getting from one end of the venue to the other through densely packed crowds was a mission.
Russia in the air
The other crowd puller this week was Russia’s aerobatic air force unit, performing daily theatrics at dizzying speeds.
It is another sign of the deepening ties between China and Russia.
Russia’s aerobatic team shows off for the crowd
One Russian tourist and recreational pilot, Yulia, told Sky News: “Both sides are looking for good communication in business, aviation and in many spheres including tourism.”
The secretary of Russia’s security council and former defence minister Sergei Shoigu also visited the air show, viewing both Chinese and Russian-made jets.
In Beijing, secretary Shoigu was quoted by Russian state media as saying: “I see the most important task as countering the policy of ‘dual containment’ of Russia and China pursued by the United States and its satellites.”
One of Russia’s jets up close
The West is increasingly frustrated by China’s support of Russia. The US has sanctioned two Chinese companies, accusing them of being involved in the production of Russian aerial drones used on the battlefield.
China insists it is not supplying weapons to Russia.
One of the companies, Xiamen Limbach Aircraft Engine Co, had a small stand in one of the exhibition halls. Its representatives declined Sky News’ request for an interview.
Tariff war brewing
Despite the raw military might on display in Zhuhai, in China there is uncertainty and unease about what an impending Donald Trump presidency will mean for global trade.
President-elect Trump has threatened blanket tariffs of up to 60% on Chinese products exported to the US.
This would be a serious blow to China’s target GDP growth and comes at a time when the country’s economy faces deep-set challenges.
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At the other end of the country, in Beijing analysts are weighing up the impact of possible tariffs and the Chinese government’s options to respond.
Senior Asia analyst Chim Lee, from The Economist Intelligence Unit, is not optimistic that a US-China agreement to minimise the damage can be reached.
Senior Asia analyst Chim Lee
“I think both sides have recognised that the era of making deals is passed,” Mr Lee said.
“We’re going to see China starting with some targeted measures, tariffs it feels more comfortable to impose,” he explained. “But there are also areas where China is starting to be a bit more aggressive.”
This action could include export controls on China’s production of critical minerals and retaliatory tariffs on US agriculture exports.
Trade competition, military posturing and complicated geo-political alliances have set the stage for a challenging next phase in US-China relations.
New pictures show the moment of impact as an Israeli missile hit a Beirut apartment block and exploded.
The block was one of five buildings destroyed by airstrikes on Friday alone.
Israel launched airstrikes in the southern suburbs of Beirut in a fourth consecutive day of intense attacks.
There were no immediate reports of casualties.
An Associated Press photographer captured a sequence of images showing an Israeli bomb approaching and hitting a multi-storey apartment building in Beirut’s Tayouneh area.
Richard Weir, a senior crisis, conflict and arms researcher at Human Rights Watch, reviewed the close-up photos to determine what type of weapon was used.
“The bomb and components visible in the photographs, including the strake, wire harness cover, and tail fin section, are consistent with a Mk-84 series 2,000-pound class general purpose bomb equipped with Boeing’s joint directed attack munition tail kit,” he told AP.
Pics: AP
Smoke covers a building that collapses following the strike. Pic: AP
Deadly strikes as bombardment stepped up
Israel stepped up its bombardment this week – an escalation that has coincided with signs of movement in US-led diplomacy towards a ceasefire.
The Israeli military said its fighter jets attacked munitions warehouses, a headquarters and other Hezbollah infrastructure. It issued a warning on social media identifying buildings ahead of the strikes.
Meanwhile, an Israeli airstrike killed five members of the same family in a home in Ain Qana in the southern province of Nabatiyeh, Lebanon’s state media said.
The report said a mother, father and their three children were killed but didn’t provide their ages.
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Three other Israeli strikes killed six people and wounded 32 in different parts of Tyre province on Friday, also in south Lebanon, the report said.
Video footage also showed a building being struck and turning into a cloud of rubble and debris that billowed into Horsh Beirut, the city’s main park.
Residents check the site of the airstrike in Tayouneh, Beirut. Pic: AP
More than 3,200 people have been killed in Lebanon during 13 months of fighting between Israel and Hezbollah – most of them since mid-September.
About 27% of those killed were women and children, according to Lebanon’s health ministry.
Israel dramatically escalated its bombardment of Lebanon from September, vowing to cripple Hezbollah and end its barrages in Israel.
Friday’s strikes come as Lebanon’s caretaker prime minister has asked Iran to help secure a ceasefire in the war between Israel and Hezbollah.
The prime minister appeared to urge Ali Larijani, a top adviser to Iran’s supreme leader, Ali Khamenei, to convince the militant group to agree to a deal that could require it to pull back from the Israel-Lebanon border.
Iran is a main backer of Hezbollah and for decades has been funding and arming the Lebanese militant group.
On Thursday, Eli Cohen, Israel’s energy minister and a member of its security cabinet, said that prospects for a ceasefire with Lebanon were the most promising since the conflict began.
The Washington Post reported Israel’s Prime Minister Benjamin Netanyahu was rushing to advance a Lebanon ceasefire to deliver an early foreign policy win to his ally, US President-elect Donald Trump.
“Super high-IQ revolutionaries” who are willing to work 80+ hours a week are being urged to join Elon Musk’s new cost-cutting department in Donald Trump’s incoming US government.
The X and Tesla owner will co-lead the Department Of Government Efficiency (DOGE) with former Republican presidential candidate Vivek Ramaswamy.
And in a post on X, the official DOGE account put out a call to arms for people to sign up and help “dismantle government bureaucracy”.
The post said: “We are very grateful to the thousands of Americans who have expressed interest in helping us at DOGE.
“We don’t need more part-time idea generators.
“We need super high-IQ small-government revolutionaries willing to work 80+ hours per week on unglamorous cost-cutting.
“If that’s you, DM this account with your CV. Elon & Vivek will review the top 1% of applicants.”
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Elon Musk speaking at an event held at Donald Trump’s Mar-a-Lago estate. Pic: AP Photo/Alex Brandon
In a reply to an interested party, Mr Musk suggested the lucky applicants would be working for free.
“Indeed, this will be tedious work, make lost of enemies & compensation is zero,” the world’s richest man wrote.
“What a great deal!”
When announcing the new department, President-elect Donald Trump said Mr Musk and Mr Ramaswamy “will pave the way for my administration to dismantle government bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure federal agencies”.
Mr Musk has previously made clear his desire to see cuts to “government waste” and in a post on his X platform suggested he could axe as many as three-quarters of the more than 400 federal departments in the US, writing: “99 is enough.”
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