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.
It’s beginning to feel like “Midnight Sun” diplomacy.
In parts of Alaska, the sun doesn’t set in summer, casting light through the night but leaving you disorientated.
Ukraine latest: Zelenskyy reject’s Putin’s proposal
The Trump-Putin summit is pitched as “transparent” but it’s difficult to find any path to peace right now.
White House press secretary Karoline Leavitt has reduced it to a “listening exercise” where Donald Trump will seek a “better understanding” of the situation.
There isn’t much to understand – Russia wants territory, Ukraine isn’t ceding it – but Ms Levitt rejects talk of them “tempering expectations”.
It’s possible to be both hopeful and measured, she says, because Mr Trump wants peace but is only meeting one side on Friday.
It’s the fact that he’s only meeting Vladimir Putin that concerns European leaders, who fear Ukraine could be side-lined by any Trump-Putin pact.
Volodymyr Zelenskyy claims Mr Putin wants the rest of Donetsk and, in effect, the entire Donbas region in eastern Ukraine.
He’s ruled out surrendering that because it would rob him of key defence lines and leave Kyiv vulnerable to future offensives.
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‘Steps have been taken to remedy the situation’ in Pokrovsk
European leaders – including Sir Keir Starmer – will hold online talks with Mr Zelenskyy twice on Wednesday, on either side of a virtual call with Mr Trump and US Vice President JD Vance.
Their concerns may be getting through, hence the White House now framing the summit as a cautious fact-finding exercise and nothing more.
The only thing we really learned from the latest news conference is that the first Trump-Putin meeting in six years will be in Anchorage.
A White House official later confirmed it would be at Joint Base Elmendorf-Richardson, a US military facility.
Read more:
The land Ukraine could be forced to give up
Trump gaffe reveals how central Putin is to his narrative
The US base where the talks will take place. Pic: Reuters
Alaska itself, with its history and geography, is a layered metaphor: a place the Russians sold to the US in the 1800s.
A remote but strategic frontier where the lines of ownership and the rules of negotiation are once again being sketched out.
On a clear day, you can see Russia from Alaska, but without Mr Zelenskyy in the room, it’s difficult to see them conquering any summit.
In the place where the sun never sets, the deal might never start.
World
Explained: The land Ukraine could be forced to give up – and will Russia have to concede anything?
Any agreement between Donald Trump and Vladimir Putin when they meet on Friday could leave Ukraine in an impossible position after three years of brutal, grinding war for survival.
There has been speculation the two leaders could agree a so-called ‘land for peace’ deal which could see Ukraine instructed to give up territory in exchange for an end to the fighting.
That would effectively be an annexation of sovereign Ukrainian territory by Russia by force.
Ukrainian President Volodymyr Zelenskyy said on Tuesday evening that Mr Putin wants the rest of Donetsk – and in effect the entire eastern Donbas region – as part of a ceasefire plan.
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Sky’s Michael Clarke explains in more detail what territories are under possible threat.
But the Ukrainian leader said Kyiv would reject the proposal and explained that such a move would deprive them of defensive lines and open the way for Moscow to conduct further offensives.
Russia currently occupies around 19% of Ukraine, including Crimea and the parts of the Donbas region it seized prior to the full-scale invasion in February 2022.
President Trump has said he hopes to get “prime territory” back for Ukraine, though it’s uncertain what President Putin would agree to.
In this story, Sky News speaks to experts about what the highly-anticipated meeting between the Russian and American presidents could mean for the battlefield.
Donald Trump and Vladimir Putin are set to meet in Alaska. Pic: Reuters
A ceasefire along the frontline?
The range of outcomes for the Trump-Putin meeting is broad, with anything from no progress to a ceasefire possible.
Polish Prime Minister Donald Tusk, for instance, said this week that he has “many fears and a lot of hope” for what could come out of it.
Military analyst Michael Clarke told Sky News that the summit “certainly won’t create peace, but it might create a ceasefire in place if Putin decides to be flexible”.
“So far he hasn’t shown any flexibility at all,” he added.
A ceasefire along the frontline, with minimal withdrawals on both sides, would be “structurally changing” and an “astonishing outcome”, he said.
However he doubts this will happen. Mr Clarke said a favourable outcome could be the two sides agreeing to a ceasefire that would start in two weeks time (for instance) with threats of sanctions from the US if Russia or Ukraine breaks it.
Read more:
What Trump’s Putin gaffe reveals about upcoming meeting
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President Zelenskyy: ‘Path to peace must be determined together’
Will Ukraine be forced to give up territory to Russia?
While President Trump’s attitude to Ukrainian resistance appears possibly more favourable from his recent comments, it’s still possible that Kyiv could be asked to give up territory as part of any agreement with Russia.
Moscow has been focussed on four oblasts (regions) of Ukraine: Luhansk and Donetsk (the Donbas), Zaporizhzhia and Kherson.
President Putin’s forces control almost all of Luhansk, but about 30% of the others remain in Ukrainian hands and are fiercely contested.
“Russian rates of advance have picked up in the last month, but even though they are making ground, it would still take years (three or more) at current rates to capture all this territory,” Matthew Savill, director of military sciences at the RUSI thinktank, told Sky News.
He says it “wouldn’t be surprising” if Russia tried to acquire the rest of the Donbas as part of negotiations – something that is “highly unattractive” for Ukraine that could leave them vulnerable in future.
This would include surrendering some of the ‘fortress belt’ – a network of four settlements including Kramatorsk and Sloviansk – that has held back Russian forces for 11 years.
Michael Clarke said this might well satisfy President Putin “for now”, but many believe that he would return for the rest of Ukraine – possibly after President Trump leaves office.
It’s unclear if President Volodymyr Zelenskyy could accept such a painful concession – or indeed, survive it politically – or if the wider Ukrainian public would support it in return for a pause in the fighting.
Would Russia have to return any territory to Ukraine?
The White House appears to have been briefing that it might, though the situation is very unclear.
Mr Savill added: “The Ukrainians might want to even up the situation in the north, by removing Russian incursions into Sumy and near Kharkiv, but of greater importance would be getting the Zaporizhzhia Nuclear Power Plant back under Ukrainian control, given how much it would contribute to Ukrainian power needs.”
It’s also possible that Russia could be willing to withdraw from the areas of Kherson region that it controls.
It’s “plausible” they could get the power plant back, Mr Clarke said, but Russia would likely insist on maintaining access to Crimea by land.
This would mean that cities Mariupol and Melitopol – would remain in Russian hands, with all that that entails for the people living there.
There are increasing reports of violence and intimidation by Israeli settlers in occupied Palestinian territory.
Sky News chief correspondent Stuart Ramsay has been inside the West Bank, where he’s found settlers feeling emboldened since the October 7 attack by Hamas on Israel.
With the government largely supporting them, they act with impunity and are in many ways enabled by Israel security forces.
But what are the settlements, and why are they controversial?
What are settlements?
A settlement is an Israeli-built village, town, or city in occupied Palestinian territory – either in the West Bank or East Jerusalem.
The largest, Modi’in Illit, is thought to house around 82,000 settlers, according to Peace Now.
There is also a growing movement of Israelis wanting to build settlements in Gaza.
Settlements are illegal under international law and have been condemned by the UN. They are, however, authorised by the Israeli government.
As well as official, government-approved settlements, there are also Israeli outposts.
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Israeli settlers attack Palestinian villages
These are established without government approval and are considered illegal by Israeli authorities. But reports suggest the government often turns a blind eye to their creation.
Israel began building settlements shortly after the 1967 Six-Day War.
The Etzion Bloc in Hebron, which was established that year, now houses around 40,000 people.
Read more:
Israel-Hamas war: A glossary of terms
Israeli-Palestinian conflict: A century of war, heartbreak, hope
What is the two-state solution?
According to the Israel Policy Forum, the settlement programme is intended to protect Israel’s security, with settlers acting as the first line of defence “against an invasion”.
The Israeli public appears divided on the effectiveness of the settlements, however.
A Palestinian man walks next to a wall covered with sprayed Hebrew slogans. Pic: Reuters
A 2024 Pew Research Centre poll found that 40% of Israelis believe settlements help Israeli security, 35% say they hurt it, and 21% think they make no difference.
Why are they controversial?
Israeli settlements are built on land that is internationally recognised as Palestinian territory.
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The activists trying to stop Israeli settlers
Sky News has spoken to multiple Palestinians who say they were forced out of their homes by Israeli settlers, despite having lived there for generations.
“They gradually invade the community and expand. The goal is to terrorise people, to make them flee,” Rachel Abramovitz, a member of the group Looking The Occupation In The Eye, told Sky News in May.
Settlers who have spoken to Sky News say they have a holy right to occupy the land.
American-born Israeli settler Daniel Winston told Sky’s chief correspondent Stuart Ramsay: “God’s real, and he wrote the Bible, and the Bible says, ‘I made this land, and I want you to be here’.”
Settlers make up around 5% of Israel’s population and 15% of the West Bank’s population, according to data from Peace Now.
How have things escalated since 7 October 2023?
Since the Hamas-led attacks on 7 October 2023 and Israel’s subsequent military bombardment of Gaza, more than 100 Israeli outposts have been established, according to Peace Now.
In May, Prime Minister Benjamin Netanyahu’s government approved 22 new settlements, including the legalisation of outposts that had previously been built without authorisation.
Settler violence against Palestinians has also increased, according to the UN, with an average of 118 incidents each month – up from 108 in 2023, which was already a record year.
The UK government has sanctioned two members of Mr Netanyahu’s cabinet, Itamar Ben-Gvir and Bezalel Smotrich, for “repeated incitements of violence against Palestinian civilians” – notably in the West Bank.
The UN’s latest report on Israeli settlements notes that in October 2024, there were 162 settler attacks on Palestinian olive harvesters, many of them in the presence of IDF soldiers.
Of the 174 settler violence incidents studied by the UN, 109 were not reported to Israeli authorities.
Most Palestinian victims said they didn’t report the attacks due to a lack of trust in the Israeli system; some said they feared retaliation by settlers or the authorities if they did.
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