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A recession is on the horizon and the chancellor “is in a terrible bind” as low growth and high-interest payments on debt mean little room for manoeuvre, according to a respected think tank.

The UK economy is stuck between the possibility of low growth and persistently high inflation, the Institute for Fiscal Studies (IFS) said in its green budget report.

As a result, there is no capacity to cut taxes or increase spending, it said.

Policy makers risk recession if unfunded tax cuts are introduced, as they could cause more inflation and lead the Bank of England to bring borrowing costs up by hiking interest rates or keeping them higher for longer.

Interest rates were brought to 5.25% after 14 consecutive rises in an effort to tame the rate of price rises.

Heightened borrowing costs and lower company profits have led bank Citi (who produced economic forecasting for the report) to expect a “moderate recession” through the first half of next year.

A recession is two back-to-back three-month periods where there is a negative amount of economic growth.

At the same time the government is set to have the largest budget surplus “in a generation” as the amount of tax coming into state coffers will be greater than government outgoings.

State borrowing will be £20bn less than predicted by the independent official forecasters, the Office of Budget Responsibility (OBR).

Rising wages mean more tax is being taken in. Previous analysis from the IFS said the UK’s tax burden is the largest since the Second World War.

Despite overall borrowing estimated to be lower than first thought, the amount of money in interest payments on public debt will grow, the report said.

Echoing statements made by Jeremy Hunt to Sky News last week, the report said £30bn more in interest payments could be paid this year than expected.

Pressure will mount on the government to increase public spending more than current plans but from March 2025 there are likely to be effective cuts in the budgets of government departments and falling spending on public services, the report added.

The publication comes ahead of the chancellor’s autumn statement on 22 November.

The rate of price rises in the UK has remained high with the consumer price index (CPI) measure of inflation at 6.7% in August, more than triple the goal of the UK central bank, the Bank of England.

It’s not just the chancellor who faces pressure. Prime Minister Rishi Sunak has staked some of his political success on a growing economy by making it one of his five priorities.

Latest figures show the rate of economic growth – gross domestic product (GDP) – was 0.2% in August this year after a contraction of 0.5% in July.

“Contrary to previous reporting, the UK’s growth projections have recently been dramatically upgraded with the IMF confirming that the UK will grow faster than Germany, France and Italy in the long term, as well as being the fastest major European economy to recover from the pandemic,” a spokesperson for the Treasury said.

“We must stick to our plan that we are delivering to halve inflation, which will help unlock sustainable growth, support families with the cost of living and get debt falling.”

In response, the Labour shadow chief secretary, Darren Jones said: “Successive failures by Conservatives ministers have left us with low growth, high tax and national debt at the highest level in generations. Britain cannot afford another five more years of the Conservatives.”

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Reform took advantage of the PM’s holiday – and it’s clear he’s now changed strategy

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Immigration was the first thing on the government’s agenda to kick off the first week back from recess, and they wanted you to know it.

The home secretary gave an update to the House, announcing a shakeup of family reunion rules for asylum seekers, even before some backbenchers had made it back to parliament from their break.

Facing criticism for being on the back foot after a summer of protest outside asylum hotels, they were keen to defend their record and get back on track – but is it too late?

It’s a clear nod to the political void Reform UK has seized on while the prime minister has been on holiday.

Last week, Nigel Farage unveiled his party’s mass deportation policy – though the issue of women and children still seems to be worked out.

But perhaps none of that matters as voters overwhelmingly believe Reform cares about this issue – and as Chris Philp, the shadow home secretary, pointed out on Monday, voters have lost confidence in the government somewhat to solve what many see as an immigration crisis on their doorstep.

So it’s clear the strategy has changed from the government.

Read more:
Starmer’s ‘Mr Fixit’ is likely to be a recipe for conflict
Tories call for investigation into Angela Rayner

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‘Substantial reforms are needed now’

Gone are the bold slogans of “smashing the gangs” and instead, detail and policy was given on Monday. It was nothing new, but more substance on what the government has done and where they want to move to. Even controversially, reassessing their relationship with the European Convention on Human Rights (ECHR).

The biggest update though, was on their one-in-one-out policy agreement with France, which will now set to start returns later this month.

It’s finally hit home for the government that the public want proof not just rhetoric, and they want to know crucially when they will start to see change.

But the fightback, the reset, whatever the government wants to call it, will only make a difference once that finally starts to work.

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Police ask for help with unsolved murder more than 50 years ago

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Police ask for help with unsolved murder more than 50 years ago

Police are asking for help with an unsolved case, 52 years after the murder of a schoolboy in Belfast.

Brian McDermott was 10 when he disappeared from Ormeau Park on Sunday 2 September 1973. His remains were recovered from the River Lagan almost a week later.

Detectives from the Police Service of Northern Ireland’s Legacy Investigation Branch have given a timeline of events as part of their appeal.

Brian left his home on Well Street in the lower Woodstock Road area of east Belfast at around 12.30pm and failed to return for his Sunday dinner.

Detectives said he was last seen playing alone in the playground between 1pm and 3pm that afternoon.

His remains were recovered in the water, close to the Belfast Boat Club.

Read more from Sky News:
Union issues warning over schools
Premier League’s record-breaking transfer window

River Lagan, where the remains of schoolboy Brian McDermott were recovered. Pic: PSNI handout/PA
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River Lagan, where the remains of schoolboy Brian McDermott were recovered. Pic: PSNI handout/PA

A PSNI spokesperson said: “We are acutely aware of the pain and suffering that Brian’s family continue to feel, and our thoughts very much remain with the family at this time.

“Despite the passage of time, this murder case has never been closed and I am hopeful that someone may be able to provide information, no matter how small, which may open a new line of inquiry, or add a new dimension to information already available.

“It is also possible that someone who did not volunteer information at the time may be willing to speak with police now. Legacy Investigation Branch Detectives will consider all investigative opportunities as part of the review into Brian’s murder.”

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Premier League flexes its financial muscle in record-breaking transfer window

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Premier League flexes its financial muscle in record-breaking transfer window

The transfer window was a show of strength in a record-breaking summer across the Premier League.

The totaliser crept over £3bn in spending, with more than half of it flowing among the 20 clubs rather than having a redistributing effect across Europe.

The start of new Premier League TV deals – the biggest individual source of income being from Sky News’ parent company Comcast – provides certainty for the next four years, while rival leagues can struggle to sell rights.

And the feared threat from Saudi Arabia has not materialised. It is an attractive and lucrative destination for some players, but not yet the ultimate destination.

But the kingdom has still influenced this transfer window.

Alexander Isak has joined Liverpool. Pic: Reuters
Image:
Alexander Isak has joined Liverpool. Pic: Reuters

Let’s start with Newcastle, four years into their ownership by the Saudi sovereign wealth fund.

Having secured a return to the Champions League, bringing UEFA riches, this was the summer to grow rather than lose talent to rivals.

But the Premier League’s pecking order became clear when Alexander Isak pushed for a move to Liverpool and rejected bids that did not deter his ambitions.

Player power won out.

The 25-year-old striker was able to withdraw himself from the squad, miss the opening three matches of the season, and put out a statement claiming promises had been broken by the Magpies.

Read more: Isak completes £125m Liverpool move

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Will Liverpool’s spend equal success?

Liverpool ‘loading up on talent’

And so he held on until deadline day, biding his time, sitting it out, and standing firm. Newcastle folded, accepting £125m – £20m lower than their apparent valuation.

Breaking the British record fee was Liverpool’s American ownership flexing financial muscle like never before.

The Premier League champions allowed manager Arne Slot to build from a position of strength.

This was the second time they broke the record in this window after bringing in another forward, Florian Wirtz, in a £116m deal.

More than £400m in reinforcements arrived at Anfield in a matter of weeks.

Former Liverpool managing director Christian Purslow told Sky Sports: “Liverpool are making hay while the sun shines, going for it. Really loading up on talent.

“Other clubs should be fearful and respectful of the way [Fenway Sports Group] are running their club.”

Eberechi Eze (centre right), who left Palace for Arsenal this summer, celebrates winning the FA Cup final. Pic: PA
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Eberechi Eze (centre right), who left Palace for Arsenal this summer, celebrates winning the FA Cup final. Pic: PA

The Isak deal weakened their Champions League rivals from the North East after banking £57m from another club owned by the Public Investment Fund when Darwin Nunez was offloaded to Saudi.

And PIF funded Chelsea’s summer spending spree in less obvious ways.

The Blues did negotiate a £44m package with PIF-backed Al Nassr deal for Joao Felix, recouping the fee paid just a year earlier.

But then there was the £90m prize money collected for winning the new FIFA Club World Cup – a competition bankrolled by PIF subsidiaries.

Where does this leave Newcastle? Still spending around £250m.

Florian Wirtz joined Liverpool from Bayer Leverkusen. Pic: AP
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Florian Wirtz joined Liverpool from Bayer Leverkusen. Pic: AP

Players and Liverpool couldn’t get all their way this summer, with Marc Guehi forced to stay at Crystal Palace after the FA Cup winners failed to secure a replacement for the England centre-back.

The late drama was just the latest of the summer transfer window’s twists and turns.

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Both Arsenal and Manchester United also spent more than £200m each. The Gunners spent big in pursuit of a title that’s eluded them since 2004, while the Red Devils are just trying to get back into the Champions League.

It added up to a new record total outlay that comfortably eclipsed the previous Premier League record of £2.46bn from 2023.

The £3bn is more than the rest of Europe combined, showing both where the power is in world football and why the Premier League is the one the world wants to watch.

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