Jeremy Hunt said the British economy is “proving the doubters wrong” and will avoid recession, as he delivered his first full budget speech to Parliament.
The chancellor said the government’s plan for the economy was “working” as he announced what he called a “budget for growth”.
He said forecasts from the Office for Budget Responsibility (OBR) showed the UK would avoid recession – two-quarters of negative growth – in 2023, despite previous predictions.
But the economy will still contract overall this year by 0.2%, and the OBR has warned living standards are still expected to fall by the largest amount since records began – although the decline is not as bad as had been forecast in November.
The OBR forecasts also said inflation in the UK would fall from 10.7% in the final quarter of last year to 2.9% by the end of 2023.
Mr Hunt said it showed Rishi Sunak’s goal of halving inflation this year would be met, but he added: “We remain vigilant and will not hesitate to take whatever steps are necessary for economic stability”.
However, Labour leader Sir Keir Starmer said the chancellor’s “boasts” about lower inflation were “ridiculous”, adding: “The idea that it’s a tax cut, British people can see through that.
“They see their tax burden at its highest level for 70 years and they know it’s not the government that’s lowering inflation.
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“It’s working people, earning less, enjoying less. It’s their sacrifice that is helping to bring inflation down and they deserve better than another cheap trick from the government of gimmicks, making them pay whilst trying to claim the credit.”
A number of other plans were unveiled by Mr Hunt, including:
• Bringing charges for prepayment meters in line with direct debit charges, impacting over four million households and saving them an average of £45 per year
• Making duty on draught products in pubs up to 11p lower than supermarkets
• Maintaining the freeze in fuel duty
The chancellor also said £11bn will be added to the defence budget over the next five years – following an announcement earlier this week – saying it would be nearly 2.25% of GDP by 2025. The government’s ambition is for it to reach 2.5%, he added.
And after reports he would increase the pensions lifetime allowance to £1.8m in an attempt to encourage doctors and other high earners back to work, Mr Hunt decided to scrap the limit entirely, as well as increasing the pensions annual tax-free allowance from £40,000 to £60,000.
He told the Commons: “In the face of enormous challenges I report today on a British economy which is proving the doubters wrong.
“In the autumn we took difficult decisions to deliver stability and sound money. Since mid-October, 10-year gilt rates have fallen, debt servicing costs are down, mortgage rates are lower and inflation has peaked.
“The International Monetary Fund says our approach means the UK economy is on the right track.”
But Sir Keir said the only permanent tax cut in the budget was for “the richest 1%”, adding: “How can that possibly be a priority for this government?”
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‘This a failure you can measure not just in the figures but in the empty pockets of working people,’ says the Labour leader.
The Labour leader continued: “Again we see a failure to grip the long-term challenges. No determination to create growth that unlocks the potential of the many – working people being made to pay for Tory choices and Tory mistakes.”
But Mr Hunt went further on this measure, saying the care would be available from September 2024 when a child reaches nine months, as well as promising to increase funding for nurseries and pay those on Universal Credit upfront for the childcare they need to get.
However, he also confirmed the ratio for how many children each staff member looks after can be raised from one per four to one per five – though he said it was optional for both providers and parents.
There were more announcements to fit with Mr Hunt’s “three E’s” philosophy – enterprise, employment and education.
They included:
• Incentive payments of up to £1,200 for childminders who sign up to the profession
• Enhanced credit for small and medium businesses, and creative firms
• An extension to relief for theatres, orchestras and museums
• Tax relief on energy efficient measures in firms
• £900m investment into supercomputing
The chancellor also confirmed widely reported plans to abolish the Work Capability Assessment for disabled people to “separate benefit entitlement from an individual’s ability to work”.
Mr Hunt promised a new programme called Universal Support, describing it as “a new, voluntary employment scheme for disabled people where the government will spend up to £4,000 per person to help them find appropriate jobs and put in place the support they need”.
And he said there would be a £400m fund to help those who are forced to leave work because of a health condition to get support in the workplace.
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Chancellor Jeremy Hunt MP has announced that the energy price guarantee will remain at £2,500 until the end of June.
Mr Hunt confirmed he would keep the incoming rise in corporation tax – from 19% to 25% – despite anger from some of his own backbenchers.
But in a bid to keep businesses happy, he introduced a new benefit where every pound a company invests in equipment can be deducted in full and immediately from taxable profits – “a corporation tax cut worth an average of £9bn a year for every year it is in place”.
In what appeared to echo recent Labour policy, the chancellor announced continued state-financed investment in nuclear power and the launch of Great British Nuclear, saying the public body will “bring down costs and provide opportunities across the nuclear supply chain to help provide up to one quarter of our electricity by 2050”.
And he said nuclear energy would be reclassified as “environmentally sustainable” to give it the same access to investment incentives as renewables.
Today’s statement was Mr Hunt’s first full budget as chancellor – having been brought in by Liz Truss to reverse a number of measures from her disastrous mini-budget last October and kept on by Rishi Sunak after he took over as prime minister.
It came against a backdrop of mass industrial action, with hundreds of thousands of workers today staging what is believed to be the biggest walkout since the current wave of unrest began.
Teachers, university lecturers, civil servants, junior doctors, London Underground drivers and BBC journalists are among those taking to picket lines around the country amid widespread anger over pay, job security, pensions and conditions.
Labour’s shadow chancellor, Rachel Reeves, said ahead of the budget that it was “an opportunity for the government to get us off their path of managed decline”.
She added, if her party were in power, their focus would be on securing the highest growth in the G7.
“Our plan will help us lead the pack again, by creating good jobs and productivity growth across every part of our country, so everyone, not just a few, feel better off,” she added.
Our politics, business and finance reporters will be hosting a Q&A after the budget statement. To submit a question, click here.
A fire has ripped through a Russian missile depot in the Tver region deep inside the country after it was targeted in a Ukrainian drone attack, the defence ministry in Moscow has said.
Footage shows a second Ukrainian drone attack on the southwestern Russian region of Krasnodar also triggered a fire and caused a series of explosions.
Russia’s defence ministry has claimed its forces shot down 101 Ukrainian drones over Russian territory and occupied Crimea during the overnight attacks.
The drone strikes were carried out as Ukrainian leader Volodymyr Zelenskky said he is hoping to meet Donald Trump next week when he travels to the US – where he will present US President Joe Biden with a “victory plan” in relation to the war.
Meanwhile, Ukraine’s foreign minister said Russia appears to be planning strikes on Ukrainian nuclear facilities before the winter.
Posts on local Telegram channels said a Ukrainian drone attack struck an arms depot near the town of Toropets, in Russia’s Tver region – which is about 380 kilometres (240 miles) northwest of Moscow and about 500 kilometres (300 miles) from the Ukrainian border on Saturday.
Russian authorities closed a 100-kilometre (62-mile) stretch of a highway and evacuated passengers from a nearby rail station.
The depot appeared to be just miles from a Russian weapons arsenal storing missiles, bombs and ammunition in Tver that was struck by Ukrainian drones early Wednesday, injuring 13 people and also causing a huge fire.
Meanwhile, at least 1,200 people were evacuated from Russia’s southwestern Krasnodar region after an ammunition depot and missile arsenal were struck in the second drone attack overnight, the local governor has said.
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Most of those evacuated were staying with friends and relatives, Veniamin Kondratyev, the governor of Krasnodar region, said on the Telegram messaging app.
There were no immediate reports of casualties in either Tver or Krasnodar.
Ukraine warning of attacks on nuclear sites
It comes as Kyiv is urging the International Atomic Energy Agency (IAEA) and Ukraine’s allies to establish permanent monitoring missions at the country’s nuclear plants as it warns they could be targeted in Russian attacks.
“In particular, it concerns open distribution devices at (nuclear power plants and) transmission substations, critical for the safe operation of nuclear energy,” foreign minister Andriy Sybiha wrote on X.
Meanwhile, the Ukrainian leader has said he plans to meet Republican presidential candidate Mr Trump on either Thursday or Friday next week.
During the trip, Mr Zelenskyy will present Mr Biden with a so-called victory plan as he hopes to bring about an end to the conflict.
The Ukrainian president has said the plan will include long-range striking capabilities and other weapons long sought by Kyiv, and will serve as the basis for any future negotiation with Russia.
He is also expected to push Washington to lift restrictions on long-range missile strikes inside Russia.
Mr Zelenskyy will attend sessions of the UN Security Council and General Assembly and also plans to meet vice president Kamala Harris, the Democratic candidate in this year’s US election, in separate meetings on 26 September.
The developments come as three sources have told Reuters that Iran did not include mobile launchers with the close-range ballistic missiles that Washington has accused Tehran of delivering to Russia for use against Ukraine.
The sources – a European diplomat, a European intelligence official and a US official – said it was not clear why Iran did not supply launchers with the Fath-360 missiles, raising questions about when and if the weapons will be operational.
At least 44 people have been killed in Israeli strikes on Lebanon and Gaza in the last 24 hours.
A strike on the Lebanese capital Beirut killed at least 31 people including three children and seven women, the country’s health minister Firas Abiad said.
Fifteen of the 68 wounded in the attack remain in hospital.
Ali Harake, the head of the rescue team searching through the rubble, told Sky News his team is still looking for between 17 and 18 missing people – though he fears none have survived.
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It is understood two apartment blocks in a densely populated southern neighbourhood collapsed in the strike – the deadliest attack on Beirut in decades.
Top Hezbollah commanders are believed to have been meeting in the basement of one of the buildings.
More on Hezbollah
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Hezbollah has confirmed two of its senior commanders, Ibrahim Aqil and Ahmed Wahbi, died in the strike while an Israeli military spokesperson said that at least 16 Hezbollah militants were killed.
Wahbi oversaw the military operations of the Radwan special forces – a commando unit that seeks to infiltrate and carry out attacks in Israel – until early 2024. Aqil was also a top commander for the Iran-backed group.
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The Palestinian militant group Hamas has described the killing of Aqil as a “crime” and a “folly”, adding Israel will “pay the price”.
Meanwhile, at least 13 people have been killed in Israeli strikes on Gaza City, according to a local report.
The strikes are believed to have hit several schools sheltering displaced people in the southern part of the city.
The strikes come after Hezbollah launched one of its most intense bombardments of northern Israel in nearly a year of fighting, largely targeting Israeli military sites.
Israel’s Iron Dome missile defence system intercepted most of the Katyusha rockets.
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Hezbollah said its latest wave of rocket attacks was a response to past Israeli strikes on southern Lebanon.
It came days after mass explosions of Hezbollah pagers and walkie-talkies killed at least 37 people, including two children. Some 2,900 others were wounded in the assault which has been widely attributed to Israel.
The Israeli airstrike in the southern suburbs of Beirut came as the Lebanese caretaker government was having an emergency meeting to discuss the previous two days of pager and radio explosions.
It caused yet more shock in a nation which considers itself battle-hardened after years of strife, disaster and wars.
But Lebanon has been truly rocked to its core by the string of attacks over the past few days.
“These are war crimes,” one Lebanese minister told us.
He’s been on the US most wanted list for more than forty years after being accused of being involved in the bombing of the US embassy and US marine barracks in 1983 which killed hundreds.
But the Hezbollahstronghold of Dahieh is a heavily populated crowded residential area and packed with shops, markets, and high-rise apartments.
The strike appeared to have flattened an entire block, flipping cars and leaving other vehicles covered in a heavy blanket of thick dust and rubble.
Several people could be seen in video footage filmed by neighbours, trapped under piles of rubble.
The Lebanese health authority keeps on updating the number of people killed in the strike, with the latest figures reaching 14.
There are more than 60 injured, with some of those believed to be in critical condition. Children are said to be among the dead, missing and injured.
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Aftermath of IDF strike on Lebanon
‘Our actions speak for themselves’
The Israeli military immediately claimed success – saying that, along with Aqil, the strike had wiped out about 10 of his elite Radwan Force.
According to an IDF spokesman, who did not provide any evidence, Aqil’s team had been planning an attack into northern Israel similar to the Hamas attack on 7 October.
Both the prime minister and defence minister have vowed to restore security to the north of Israel so the 60,000 residents who have fled the cross-border attacks can return to their homes.
An estimated 120,000 Lebanese have also been forced out of their homes along the border.
The airstrike in the capital is the second in Beirut in two months – both, according to the IDF, targeted at senior Hezbollah commanders.
According to sources being quoted in Lebanese media, the Hezbollah group of senior leaders was meeting in an underground basement of a large housing block when the missile penetrated.
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It is unlikely to be seen as a justifiable precision attack – or a “targeted strike”, as described by the Israeli military – if the Lebanese government ministers’ reactions are anything to go by.
We spoke to several as they arrived for their emergency cabinet meeting in the hour before the attack.
They were already incensed by the back-to-back coordinated booby trap explosions of communication devices across the country. Israel has yet to confirm or deny its involvement in the blasts.
Speaking about the pager and radio explosions across Lebanon earlier this week, the country’s environment minister and head of its disaster management committee Nasser Yassin said: “It’s genocidal, it’s indiscriminate and a violation of international humanitarian law and every other law.
“We have an insane leadership on the southern end of our borders who don’t want to be indicted by the International Court of Justice.”
The information minister Ziad Makary called the explosions of communication devices “a new crime… it’s a war crime and not something that would pass easily trying to kill three thousand or four thousand civilians as we see them”.
And Amin Salam, the economy minister, warned: “Things are escalating by the minute.
“There’s more tension, more provocation. We have been doing our best to get to a peaceful solution but the escalation is unprecedented.
“It’s an act of terror, regardless of who was targeted.”
Most intense border fighting in nearly a year
The airstrike in Beirut came after a marked increase in cross-border exchanges – the most intense in nearly a year.
The Israeli military said Hezbollah had spent the early part of the day firing nearly 200 rockets across the border into Israel.
Many of them were intercepted by the Iron Dome defence system.
This followed the Israeli bombing of more than 50 targets in the south of Lebanon overnight – which the IDF said hit launchers and weapons stores.
The Israeli military is suffering losses too – there were two funerals today for Israeli soldiers killed on their northern border – but it’s Hezbollah which seems to be paying a far heavier price right now.
Hezbollah unilaterally entered this latest war on 8 October, much to the frustration of Lebanon’s caretaker government, and a day after the Hamas attack on southern Israel.
Hezbollah have repeatedly said their actions are in support of Gaza and have continued to insist they will only stop once there’s a ceasefire.
But right now, the fighting group allied to Iran – and designated a terror group by the US and UK – appears to be very much on the backfoot after three attacks in four days.
Meanwhile, Israel is ploughing on despite the cries of indignation and condemnation from the international community.
Additional reporting from Beirut with camera Jake Britton, specialist producer Chris Cunningham and Lebanon producers Jihad Jineid and Sami Zein.