Tax cuts will have to wait in steady the ship budget 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.”
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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, a key battleground in the next election, the chancellor is expected to change the rules so that parents on Universal Credit are given more childcare and given the funding upfront.
The Treasury is also believed to be planning a hundreds of millions cash injection into expanding access to 30 hours of free access to the over threes.
The chancellor also plans to loosen staff to child ratios for two-year-olds, which could make the cost of childcare a little cheaper.
He is also planning to extend the provision of up to 30 hours a week to one and two-year-olds which could form a central plank in his pitch of helping with the cost of living and getting parents into work.
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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.
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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.
World
Fire rips through arms depot deep inside Russia after huge Ukrainian drone attack – as Zelenskyy prepares to meet Trump
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.
An explosion after the drone strike on the arms depot in Krasnodar
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.
Flames rise after the strike on the Tver region on Wednesday. Pic: Reuters
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.
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.
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A mushroom cloud rises after the drone strike on Toropets in the Tver region. Pic: Reuters
Zelenskyy prepares for US trip
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.
Volodymr Zelenskyy with Donald Trump in 2020. Pic: Reuters
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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‘I think the missing people are dead’
Follow the latest updates on the Middle East
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.
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.
The Palestinian militant group Hamas has described the killing of Aqil as a “crime” and a “folly”, adding Israel will “pay the price”.
Read more: Israeli airstrike on Beirut causes more shock to a country already rocked to its core
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.
Inside a school, that was sheltering displaced people, after it was hit by an Israeli strike this morning. Pic: Reuters
The street outside the school. Pic: Reuters
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.
Follow the latest updates on the Middle East
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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.
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