Expect a steady the ship budget with promises of jam tomorrow from Chancellor Jeremy Hunt | Beth Rigby
After the debacle of Liz Truss’s September mini-budget, with all its mega ramifications, and an autumn statement eight weeks later that performed an about-turn so big that the country’s tax burden hit a 70-year-high, Wednesday’s budget will be all about stability and sticking to the plan.
“No big bangs in this budget,” is how one senior government insider put it to me last week. “It’s got to be a growth budget.
“We’re fighting to be competitive again with Labour. If we can get to next summer and the economy is ticking up, and we can narrow the gap to five to eight points behind in the polls, there’s a chance in an election campaign we can shift the dial.”
Tax cuts, I’m told, will have to wait.
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What the chancellor and prime minister want to project this week is the sense that they are getting the economy back on track, and working towards Rishi Sunak’s pledges to halve inflation, get debt down and get the UK economy growing again.
Do that, argue his allies, and the tax cuts will come – just in time for a general election.
But there is pressure, and lots of it, from voters and from the Tory backbenchers to do more on tax cuts and cost-of-living now, not tomorrow.
And that pressure is all the more palpable after the chancellor received a £30bn windfall in the public finances last month, after it emerged that in the year to January, the public sector had borrowed less than forecast in November by the UK’s official fiscal watchdog.
Floating voters we spoke to in a focus group in one Tory shire seat last week told us that struggling with the cost-of-living and a buckling NHS were top of their concerns, and they expressed scepticism that the government was up to the job.
One voter in the Wycombe constituency in Buckinghamshire described the government as “stale”, with another telling us: “The current crisis emphasises that our government is fairly broken.”
On the cost-of-living, our group of floating voters spoke of their anxiety around energy bills, food prices and childcare.
Charlotte, a working mum, told us she had to change her working hours because she couldn’t afford childcare costs.
“I can’t afford to work full time anymore,” she told us. “It’s not feasible for our family, so I’ve had to rope my mum in to do childcare.
“I wouldn’t say we’re a low earning family. That’s just the way it is now.”
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Voters talk about their priorities with our political editor Beth Rigby.
Food bills were also a concern, with voters saying they’d switched to cheaper supermarkets and cut back in the face of galloping food price inflation.
Ashley, who in the past has voted Conservative but is now undecided, told us he’d switched his weekly shop from Tesco and M&S to Aldi, while energy bills were a problem all round.
“I’ve voted Conservative a long time,” the father-of-two told us. “And then I got a bit tired of, you know, Boris and the promises.
“We need to have some results and I want to see some improvement, not the deflection bit around immigration, [but] some real positive on the cost of living. For me, that’s the most key…it’s what’s important to people.”
Short and long term plans
The Treasury is alive to the pressure, with insiders telling me there will be two parts to Mr Hunt’s budget on Wednesday: a short-term support plan to provide immediate relief on the cost-of-living crisis and then the long-term plan for growth.
On the first part of that, the government is expected to extend the £2,500 energy price guarantee for another three months from April (where there had been a planned rise to £3,000) to give people support on their bills.
The chancellor is also under pressure to again freeze fuel taxes in this budget, at a cost of £6bn.
When it comes to childcare, the chancellor is expected to change rules so that parents on Universal Credit are given more money for childcare and given the funding upfront.
The Treasury is also believed to be planning a cash injection of hundreds of millions into increasing the availability of the 30 hours of free childcare to three to four-year-olds.
Mr Hunt also plans to loosen staff-to-child ratios for two-year-olds, which could make the cost of childcare a little cheaper.
But anything really big bang on childcare, such as extending 30 hours of free childcare to one-and two-year-olds, is unlikely – that policy would cost around £6bn.
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These are some predictions for the budget.
And when it comes to the most obvious way of helping people manage their bills – wage packets – the government is standing firm, with Treasury insiders insisting there will be no above inflation pay sector awards.
Neither is the chancellor expected to offer voters any cuts to personal taxes.
“We haven’t got £30bn to cut taxes,” is how one government insider put it to me, in a nod to the boost from revised public finances.
“What we’ve got to do is get people back into work, be that through better childcare support or incentives to get those in their 50s back into work.
“That is where we have to focus policy, and that could amount to say £5bn and that comes out of the [£30bn] headroom.”
Because beyond the short-term support measures, the focus for this budget will be on trying to get the economy moving and getting people back to work post-pandemic, with a package of measures to try to shift parents, the sick, disabled and older workers back into jobs.
To that end, the chancellor is expected to raise the lifetime allowance for pension savings from £1m to an expected £1.8m – a record level – in order to try to incentivise doctors and other professionals out of retirement and back into work.
He could also lift the annual tax-free allowance for pensions from £40,000 to £60,000.
It’s a package that could cost £2bn a year and would be much welcomed by higher earners, but also opens the chancellor up to criticism that he is giving a tax break to the rich while offering nothing to basic rate taxpayers.
Read more:
What to look out for in Hunt’s first budget
And when it comes to the other group of voters the chancellor and PM need to placate, his backbenchers, there is disquiet over the high level of tax burden, with many Tory MPs keen for tax cuts.
One former cabinet minister told me last week that they wanted to see the £30bn windfall in the public finances used to reverse the planned increase in corporation tax from 19p to 25p in April.
It is a pretty popular refrain.
But Treasury insiders insist the tax hike will go ahead and instead the chancellor will offer business tax breaks to try to encourage growth.
When Mr Sunak was chancellor back in March 2021, he created the £25bn “super-deduction” tax allowance for capital investment – a two-year measure offering 130% tax relief on companies’ purchases of equipment – in order to try to boost investment and growth.
Mr Hunt is coming up with a new set of plans to try to support business and could give firms much more generous capital allowances to incentivise investment.
Watch too for policies and reforms targeting certain industries and sectors, from artificial intelligence to green energy and advanced manufacturing: all of it will be framed as the government’s long-term plan for growth.
Rishi Sunak and Jeremy Hunt will be hoping to reassure people they are making the right choices for the UK economy.
Wednesday will be, if you like, the third act of the prime minister’s performance over the past few weeks to try and win a jaded public back around by trying to convince them he will stick to his plan and deliver on promises.
On the international stage, he has rehabilitated the UK with allies after the bumpy years of Prime Minister Johnson and then Prime Minister Truss, symbolised most strongly in a deal with the EU over post-Brexit trading arrangements in Northern Ireland – where even his foes conceded Mr Sunak had got more than they expected.
At home, the PM has put forward his plan to “stop the boats” – a key priority of many of the voters he needs to keep onside or win back in 2024.
Whether the plan, surrounded in legal and practical controversies, will come off remains to be seen.
But Mr Sunak will at least be able, to quote one of his allies, “build a narrative” that blames the failure of the policy around France and the EU refusing to grant the UK a returns agreement and the international courts blocking his plans.
“At least he can then make the argument it wasn’t his fault,” they said.
Narrow path back
On Wednesday, the focus will be on the PM’s three economic targets – halving inflation, cutting debt and growing the economy – as the chancellor tries to lay down the best conditions he can for the Conservatives’ run into the general election in 2024.
Mr Sunak’s allies tell me they think there is a way back to victory for this government at the ballot box once again, but the “path is very narrow”.
A budget then building the foundations rather than lighting the fireworks, all of this the groundwork for the pre-election showstopper next year.
But with the cost-of-living squeeze so acute, the promise of jam tomorrow is unlikely to satisfy the public, particularly if those being given some of the spoils this time around look to be business and the wealthy.
Mr Hunt may be charged with steadying the ship, but he’ll have to be skilful on Wednesday not to lose more ground.
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.
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Watch Yalda Hakim’s interview with Lebanon’s energy minister
The Israeli military said it had targeted and killed a senior Hezbollah military commander. They named him as Ibrahim Aqil – a man with a $7m US bounty on his head.
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 Hezbollah stronghold 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.
Damage caused by an Israeli air attack on a southern suburb of Beirut. Pic: AP
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.
The Israeli Prime Minister Benjamin Netanyahu issued a very short statement on X, saying: “Our goals are clear and our actions speak for themselves.”
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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‘Things are escalating by the minute’
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 head of the country’s disaster management committee, Nasser Yassin
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”.
The information minister Ziad Makary
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.
Read more from Sky News:
Iran mulls next move as fears of war grow
Israel’s history of secret operations
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.
World
Why Western allies calculate there is hope for avoiding all-out war between Israel and Iran-backed Hezbollah
Even after exploding pagers, thousands of casualties and the killing of a top Hezbollah commander in an Israeli airstrike, the UK and other allies are still hoping that all-out war between Israel and the Iran-backed militant group in Lebanon can be avoided.
But events are unfolding at a dizzying pace – far faster than governments can react – and each new attack raises the chance of escalation into wider, regional confrontation.
A big unknown is how Iran will respond.
Hezbollah is regarded as its most powerful proxy – and Tehran directly suffered from the pager bombs with its own ambassador to Lebanon being injured.
Adding to the pressure, the Iranian regime has yet to carry out any major retaliation for the killing by Israel of a top Hamas leader – Ismail Haniyeh – in Tehran in July.
Ismail Haniyeh. Pic: AP
Iran launched a barrage of drones and missiles against Israel in April in response to an attack on an Iranian consular building in Damascus. Israeli air defences, bolstered by the US, the UK and other allies, ensured that strike failed.
Tehran will not want to fall short a second time – or else risk looking weak.
Doing nothing is also not an option.
The same is true for Hezbollah.
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Hezbollah: ‘Enemy crossed all red lines’
But a calculation by Western allies when considering the timing and scope for Hezbollah’s next move appears to be that the group’s ability to retaliate in any meaningful way for the damage it has suffered is in disarray, following the targeting of thousands of its fighters’ pagers and walkie-talkies.
Israel is accused of turning the devices into remotely detonated bombs in an unprecedented attack on Tuesday and Wednesday that left dozens of people dead and thousands wounded across Lebanon, including an undisclosed number of Hezbollah members. Israel has neither confirmed nor denied its involvement.
The blasts also devastated the group’s communication channels making it much harder to muster a speedy response – though Hassan Nasrallah, the leader, has vowed retribution.
A second factor behind the West’s hope for calm heads is a belief that neither Israel nor Hezbollah nor Iran want a full-blown war.
Read more:
UK fears Britons might need evacuating from Lebanon
Top Hezbollah commander ‘killed in Israeli strike’
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Lebanon minister: ‘Israel has committed war crimes’
Israel does not yet appear to have the scale of troops on its northern border that would be needed for a large-scale ground offensive – though a ground attack is only one option.
Only striking from the air is another.
On Thursday, Israel Defence Forces launched their most intense barrage of airstrikes into southern Lebanon since the start of this latest round of hostilities almost a year ago.
The Israeli government has said it wants to enable tens of thousands of its citizens to return to their homes close to the border with Lebanon in the north from where they were forced to flee in the wake of increased Hezbollah rocket attacks.
At the same time, Nasrallah has promised to prevent this from happening, which puts the two sides on a direct collision course.
It means the risk of escalation remains high.
Against such uncertainty, David Lammy, the British foreign secretary, chaired a meeting of the government’s emergency COBRA committee on Friday.
He discussed the crisis and the UK’s ability to deal with what would be a hugely complex and risky evacuation operation of British nationals from Lebanon should the situation deteriorate significantly.
The previous evening, he had called for an immediate ceasefire by both sides following a meeting in Paris with his American, French, German and Italian counterparts.
But less than 24 hours later, Israel said it had killed Ibrahim Aqil, one of Hezbollah’s most senior commanders, in a strike on a southern suburb of Beirut – another significant blow to the group and yet one more reason for Hezbollah and Iran to want to retaliate.
World
Lebanese minister accuses Israel of ‘committing war crimes’ in a ‘blatant way’ after ‘terror’ of pager blasts
A Lebanese government minister has accused Israel of committing war crimes “in a blatant way and without immediate condemnation”, in an interview with Sky News.
Walid Fayad, the country’s energy minister, also said Lebanon was “losing faith” in the UN and international laws.
He called this week’s pager attacks a move “from targeted terror to distributed and blind terror”.
Communication devices used by Hezbollah members, such as pagers and walkie-talkies, exploded on Tuesday and Wednesday, killing at least 37 people and injuring thousands.
The blasts increased fears of an all-out war in the Middle East.
Lebanon and Hezbollah say Israel was behind the pager attacks. Israel has neither denied nor confirmed its involvement.
Follow live Middle East updates
Hezbollah fighters carry the coffins of fallen comrades who were killed after their handheld pagers exploded. Pic: AP
“What I am shocked not to see is an immediate, overwhelming condemnation by all countries of the world,” Mr Fayad told The World With Yalda Hakim.
“What we have seen in front of our own eyes is civilian people in the supermarkets or going about their business in the city of Beirut and anywhere else in Lebanon dying or getting injured.”
Mr Fayad added: “This attack was perpetrated deliberately in a clear contradiction with and disobedience to all humanitarian international laws or UN resolutions with respect to Israel and Lebanon. What we are seeing is very alarming because the world is silent on a very large scale.”
He said Lebanon is losing faith “with the international laws, with the ability of the UN to enforce any law and order at world scale and at regional scale”.
He continued: “We would be certainly asking for the implementation of UN resolutions and for the implementation of the latest security council decision asking Israel to stop its attacks on the Palestinians and on the Lebanese.”
Lebanon’s energy minister Walid Fayad
Reflecting on the approaching anniversary of the 7 October attack on Israel, in which Hamas killed 1,200 people and took around 250 hostages, Mr Fayad said: “We are looking at one year of useless conflict where Israel is not making any accomplishments with these conflicts other than total destruction for the Palestinian people and not only the people themselves, but also the infrastructure.”
Since Israel’s military response began last October, more than 41,000 Palestinians have been killed in Gaza, according to the Hamas-run health ministry there. The ministry’s count does not differentiate between fighters and civilians.
A population of more than 2.3 million people has also been displaced by the conflict in Gaza.
Read more from Sky News:
Attack on Hezbollah is warning to governments
Hezbollah chief’s message means devastation will continue
Middle East is ‘closest to regional war since 1970s’
Mr Fayad also criticised President Joe Biden and Antony Blinken, the US secretary of state, saying that “sometimes they can be driven by national priorities”.
He said: “You have a situation in the US where it’s currently the election race time, and there are lobbies that are very strong in the US and where any change in the establishment’s policy or stance might have a bearing.”
Keep up with all the latest news from the UK and around the world by following Sky News
Mr Fayad urged world leaders to prevent “escalation into a much broader conflict” on the Israel-Lebanon border.
“World leaders happen to have a lot of leverage whether in the supply of ammunition or in the supply of financial support to the state of Israel,” he added.
“It is in their hands to use this leverage to put a stop to these atrocities and to start going in the right direction, a direction that allows… peace and stability in the region rather than complete chaos and risking everybody’s lives and escalation into a much broader conflict.”
Despite the minister’s calls for de-escalation, Israel said it hit Beirut in a “targeted” strike on Friday afternoon after Hezbollah fired 140 rockets into Israel.
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