The chancellor’s update on the economy next week is not going to be an emergency budget in its truest sense. But it will be a moment when the sirens flash red.
It’s not an emergency budget because the chancellor, as our listeners will know from our interview with Rachel Reeves onElectoral Dysfunctiona couple of weeks ago, is not going to make tax changes (such a move would tip it into budget territory because it would turn the spring statement into a major fiscal event).
But it looks set to be a red siren moment for a chancellor. Having staked her reputation on growing the economy and no return to austerity, she is going to have to announce a downgrade to growth forecasts and could also unveil the biggest spending squeeze on Whitehall in years.
The welfare cuts this week were just the starter – the opposition are going to have a field day.
Watch out in the next few days for a “re-education” as the Treasury tries to frame the arguments Reeves will get in at the despatch box on Wednesday.
You’ll hear about how the “world has changed”, with global uncertainly knocking growth and forcing countries to invest more in defence.
This is all part of the chancellor seeking to distance sluggish growth from her own budget decisions last October (the Conservatives will shout back jobs tax – their rebranding of the Reeves’ £25bn hike in employers’ national insurance contributions).
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You will also be hearing more about the need to go “further and faster” on the economy (the bonfire of quangos, planning rules, regulations and drive for ‘efficiency savings’).
But whatever arguments she makes ahead of time won’t dent the sharp inhalation of breath as growth is downgraded and the chancellor outlines what’s likely to be billions in cuts to the departmental budgets in an effort to plug the black hole in the public finances that has emerged from slower growth and rising debt repayments.
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1:29
What to expect from the spring statement
Economists expect the deteriorating outlook to eat up the £9.9bn of headroom she had in order to meet her own fiscal rules in the October budget.
The Resolution Foundation think-tank estimates that the current account balance has shifted from that £9.9bn surplus to a deficit of around £4.4bn. Many Labour MPs think Reeves should just loosen her fiscal rules (she has legislated that day-to-day spending must be funded from tax receipts, not debt, by 2029/30), but she told me on our Electoral Dysfunction podcast that is something she will not do.
Neither, I hear, is she prepared to just let the public finances sit in the red. But getting back to black is going to involve a massive spending squeeze.
So watch for reductions in Whitehall departmental budgets later in the parliament.
Departmental spending is set to rise by an average of 1.3% from 2026-27 onwards. If the chancellor reduces that, she could save billions. But the headlines will scream cuts, especially for those departments which don’t have protected budgets and which could face real terms reductions.
It’s going to be difficult and the government is braced for cries of austerity 2.0, which is frustrating officials who are quick to point out that the government has poured billions more into public spending after executing the biggest tax and spend budget in a generation.
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3:06
Benefits cuts explained
“This is not a return to austerity, which was about real terms cuts,” said one figure. “We will be finding savings and squeezing spending but the overall level of spending will still be going up.”
But it is tense. As she looks for savings, the chancellor has asked cabinet ministers to identify 5% efficiency savings from their departments and also identify 20% of the lowest priority spending. In private, ministers are protesting about cuts.
Labour peer Harriet Harman told the Electoral Dysfunctionpodcast that identifying such big levels of savings is going to cause consternation.
“As somebody who was told to do 2% and felt even that was incredibly difficult, then I should imagine that it is causing consternation.
“It is a very, very difficult exercise. But, you know, at the end of the day, we’re in difficult circumstances.
“We’ve made a promise to the electorate about how are we going to run the economy, and that’s what we’re going to do.
“And Labour MPs, I think, you know, are very resolved on this. They know the situation’s difficult. They know the government has got a set of principles that they’re applying to it, and they’ll be supportive of the government on this.
“So one thing we have got is political stability on this. There won’t be any, you know, screeching handbrake U-turns. There won’t be massive revolts and there won’t be cabinet splits either.”
The government hopes protest will be dialled down as it dials up talk about ‘reform’ and how the government can rewire Whitehall in a way that money is trained on the frontline and services can be maintained even as budgets are whittled back.
The biggest symbol of that so far being the prime minister’s announcement last week that he was abolishing NHS England and folding the oversight of the NHS back into the Health department – which the government says could save up to £500m a year.
But even if Harriet Harman is right on the would-be rebels and ministers have their arguments honed, a major downgrade of growth forecasts and a spending squeeze from a government that told voters it would be doing the exact opposite in the run-up to the election is set to be a very difficult day indeed.
A body representing more than 90 airlines using Heathrow Airport has threatened to take legal action if a settlement over the costs they incurred from Friday’s day-long closure is not reached.
The chief executive of Heathrow Airline Operators’ Committee Nigel Wicking told Sky News he hoped the matter could be “amicably settled at some point in time” but said, “if we don’t get good enough recourse and repayment in terms of the costs, then yes, there might be a case for legal action”.
“I would hope not. But in some of these situations that’s the only course once you’ve gone through everything else”, he added.
Heathrow, Europe’s largest airport, was closed from the early hours of Friday morning after a fire at a major electricity substation hit electricity supplies.
No planes were allowed to take off or land, causing flight diversions. About 1,300 flights were impacted with roughly 250,000 passengers affected.
Some flights resumed on Friday evening but airlines faced difficulties and passengers were disrupted due to airline crew being in different parts of the world.
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Mr Wicking also called for an independent investigation of what happened and why recovery took so long.
“Airlines have a regulatory duty to take care of their passengers,” he said. “But in this particular case, we do feel that it was another party that caused the situation.”
Energy secretary Ed Miliband said he was working with energy regulator Ofgem and commissioned the National Energy System Operator to investigate the fire at the substation incident.
‘Appalling’ communication
The head of the airline group representing companies such as British Airways and Virgin Atlantic was also critical of Heathrow’s communication.
He said it was “appalling” that airlines had to wait until midnight on Friday to confirm terminal two would open on Saturday.
The situation was “not justifiable given the amount of money that has been spent on Heathrow over the years and the fact that it is the most expensive airport in the world”.
The hit to airlines
Airlines and suppliers alone could face costs of “at least” £20m for the day of halted operations, said travel expert Paul Charles, a former Virgin Atlantic communications director and chief executive of travel consultancy The PC Agency.
The figure includes an estimate of expenses for passengers, crew accommodation, additional transport, fuel and other costs for the aircraft themselves.
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2:56
Heathrow re-opens: govt orders probe
Analysts at investment bank Jefferies said compensation for delays could knock 1% to 3% off profits at BA and Aer Lingus parent company IAG.
But the outage could be considered a force majeure event, meaning passengers would not be entitled to compensation, according to the head of the Spanish airlines association Javier Gandara.
Heathrow response
Heathrow has been contacted for comment.
Its CEO Thomas Woldbye said in a post on LinkedIn today he was “proud” of how the airport responded to the outage.
He said: “So, was I proud of the situation we found ourselves in? Of course not.
“But I am incredibly grateful for, and proud of, what was achieved to get us out of the situation in such a short amount of time by teams of people we all rely on across the entire airport eco-system, but who rarely get the credit they deserve.”
Mr Woldbye previously said a backup transformer failed during the power outage, meaning systems had to be closed in line with safety procedures so power supplies could be restructured from two remaining substations.
Transport Secretary Heidi Alexandersaid the airport took the decision to suspend flights because it needed to reboot systems after switching to a different power supply.
Three men have been found guilty of plotting to murder a member of the Securitas heist gang that stole £54m in Britain’s biggest-ever cash robbery.
Paul Allen, 46, was left paralysed from the chest down after he was shot twice as he stood in the kitchen of his home in Woodford, east London, on 11 July 2019.
The former cage fighter lived in the large detached rented house with his partner and three young children after being released from an 18-year prison sentence over the 2006 raid of a cash depot in Tonbridge, Kent.
Image: Staff held at gunpoint. Pic: PA
Much of the £54m loaded into a 7.5-tonne lorry – after the gang kidnapped the Securitas manager and his family and tied up staff at gunpoint – has never been recovered.
After the robbery, Allen fled to Morocco with his friend and heist mastermind Lee Murray, a former cage fighter, before being extradited back to the UK.
Image: Stewart Ahearne, Louis Ahearne, Daniel Kelly. Pics: Met Police/Kent Police/PA
Attack likened Hollywood blockbuster
Louis Ahearne, 36, his brother Stewart Ahearne, 46, and Daniel Kelly, 46, denied conspiring to murder him between 26 June and 12 July 2019 but were found guilty after an Old Bailey trial.
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Prosecutors said the background to the shooting was that Allen – who did not give evidence in the trial – was a “sophisticated” career criminal, but did not suggest a motive for the murder plot.
Metropolitan Police detective superintendent Matt Webb described the Ahearnes and Kelly as “hardened organised criminals”, who “acted together in a well-planned and orchestrated manner to shoot their victim”.
“This attack may look like the plot to a Hollywood blockbuster but the reality is something quite different,” he said.
“This was horrific criminality. The court heard how this was a clear and defined attempt to take a man’s life with those responsible making significant efforts to ensure this was successful.”
Image: Paul Allen was in the kitchen when he was shot. Pic: Met Police
Swiss museum heist
The month before the shooting, the Ahearne brothers and Kelly carried out a heist of the Museum of Far Eastern Arts in Geneva, where they stole more than $3.5m (£2.78m) worth of Ming dynasty antiques, the court heard.
They flew to Hong Kong, where they sold a porcelain bowl at an auction house before the Ming vase was recovered by an undercover officer posing as a buyer at a central London hotel.
The Ahearne brothers were jailed in Switzerland over the raid, while three men, including ex-West Ham academy footballer Kaine Wright were jailed in the UK over their roles in the plot to sell the £2m antique.
Image: Gang stole Chinese Ming Dynasty vase. Pic: Met Police/PA
Image: A cup stolen from a Geneva museum. Pic: Met Police/PA
Wright and Kelly are also wanted in Japan over the robbery of a Tokyo jewellery store in 2015 in which a security guard was punched in the face.
They and another man are alleged to have posed as customers before smashing the glass showcases and stealing jewellery valued at 106,272,000 yen – about £630,000, according to details revealed in a lengthy extradition battle.
The day before Mr Allen’s shooting, Kelly and Louis Ahearne used a Renault Captur rented by Stewart Ahearne in a burglary on a gated community in Kent, the court heard.
The pair, along with another man, posed as police officers, even fixing a blue flashing light to the car, to gain access to the grounds, then broke into an apartment to steal money, handbags and designer trainers.
They were each sentenced to five years in jail for the crime in 2020.
The same rented vehicle used was used as the “mission car” as the Ahearne brothers and Kelly travelled from their home turf in Woolwich, southeast London, prosecutors said.
The court heard they had fitted a tracking device to Allen’s family Mercedes to follow his movements.
Image: Paul Allen rented a home in east London. Pic: PA
Image: A bullet casing found in the back garden. Pic: Met Police
‘He’s been shot’
He was stood in the kitchen just after 11pm as at least six bullets were fired from a Glock handgun from the fence line of his back garden, two of which hit him in the hand and throat.
His partner Jade Bovingdon, was heard screaming, “He’s been shot, he’s been shot.”
A private security guard provided first aid and armed police took over before paramedics arrived.
Allen was taken to hospital for emergency treatment and underwent an operation to remove a bullet lodged in his spinal cord. He now uses a wheelchair.
Five shell casings were recovered close to a summer house, while DNA on swabs taken from a nearby fence panel was matched to Kelly and Louis Ahearne, jurors were told.
The Ahearne brothers made no comment when they were arrested but Kelly said in a prepared statement he had only heard about the shooting of Allen three days later.
“Upon release, I would even like to see how he is,” he said. “I have got no issues with him; I’ve known him for 25 years, and we have been friends the whole time.”
A British tourist has been left seriously injured after a suspected gas explosion destroyed a three-storey B&B in Rome.
Grant Paterson, 54, from East Kilbride in South Lanarkshire, has reportedly been left severely burned after the explosion in the Monteverde area of the Italian city on Sunday morning.
Mr Paterson was pulled out of the ruins by firefighters and is currently undergoing treatment at Sant’Eugenio Hospital.
Sky News was told by officials Mr Paterson has suffered third degree burns to at least 70% of his body and is in a critical condition.
A witness at the scene said Mr Paterson was screaming under the collapsed building before being saved by the emergency crew.
A neighbour reported the explosion made his house windows shake, while another witness thought it had been a bomb or an earthquake.
The Foreign, Commonwealth and Development Office (FCDO) said it is supporting Mr Paterson’s family and is in contact with the local authorities.
It is understood Mr Paterson arrived in Rome on 17 March and was due to return home on Monday.
Social media posts show he had visited famous tourist hot spots such as the Colosseum and the Pantheon before the incident.
He wrote he had arrived in Rome, adding: “Accommodation is beautiful.
“This should be a good week… if I don’t get killed in some ungodly way.”
The B&B, named Mamma Roma, was on Via Vitellia in the busy neighbourhood of Monteverde, in the southwest part of Rome.
Flying debris from the explosion, which occurred around 8.40am, damaged several cars and part of the wall of Villa Doria Pamphili – a seventeenth-century villa which also serves as the representative seat of the Italian government.
More than a dozen people were evacuated and are currently unable to return to their homes.
Rome Mayor Roberto Gualtieri told Sky News efforts are being made to find a solution.
Rome’s Public Prosecutors’ Offices has opened a probe into the case. At the moment it is a suspected gas leak.
The mayor earlier visited the scene and told reporters he had ordered a full investigation into the explosion.
Mr Gualtieri said: “The important thing is that fortunately there are no victims, although unfortunately one person was seriously injured.
“Most likely he is a guest of a hospitality facility, of Scottish origin.
“We don’t know his exact condition, but he suffered burns, and this also suggests that it was an explosion caused by gas, which also causes flames.
“It was a very loud explosion, a building collapsed and the wall of Villa Pamphili was also damaged.”