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.
World
Bodies of four hostages returned to Israel – and why finding others will be ‘massive challenge’
The families of 24 dead hostages are still waiting to have their bodies returned from Gaza.
Only four bodies were transferred by Hamas to Israel on Monday. It remains to be seen when the remains of the remaining hostages will be handed over.
Here’s what we know about the four hostages whose bodies have been returned, while the families of others who have been declared dead await word from Israeli authorities on the fate of their loved ones.
Gaza latest: ‘Six killed’ as Israeli troops open fire on ‘suspects’
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Jubilation as hostage families reunited
Who are the four hostages whose bodies have been found?
The bodies of Yossi Sharabi, Guy Illouz, Daniel Peretz and Bipin Joshi have been returned to Israel.
The Israeli military has officially identified the bodies of Mr Illouz and Mr Joshi.
The two men were both in their 20s when Hamas took then during the October 7 2023 attack on Israel that sparked the war.
Mr Illouz, who is from Israel, was taken from the Nova music festival, while Mr Joshi, a student from Nepal, was taken from a bomb shelter.
Israel said Mr Illouz died from his wounds while being held captive without proper medical treatment, while Mr Joshi was murdered in captivity during the first months of the war.
Palestinians walk past the rubble of destroyed buildings in Gaza City. Pic: Reuters
What about the remaining hostages’ bodies?
Hamas has said recovering the remaining bodies could take time, as not all burial sites are known. Israeli authorities have said some of those remains may not be located.
The Red Cross said it will take time to hand over the remains of hostages and detainees killed in the war, calling it a “massive challenge” considering the difficulties of finding bodies amid Gaza’s rubble.
“That’s an even bigger challenge than having the people alive being released. That’s a massive challenge,” said Christian Cardon, spokesperson for the International Committee of the Red Cross.
He said it could take days or weeks – and there was a possibility some may never be found.
An international task force will work to locate the bodies of the deceased hostages who are not returned within 72 hours, said Gal Hirsch, Israel’s coordinator for the hostages and the missing.
What has been the response of hostages’ families?
The Israeli Hostages Families Forum has called for the suspension of the ceasefire agreement, saying “Hamas’s violation of the agreement must be met with a very serious response”.
“We demand all 28 hostages back. We will not give up on anyone, until the last hostage is returned,” it added.
Under US President Donald Trump’s ceasefire agreement, all the hostages – including the deceased – should be returned as part of the first phase of the ceasefire.
Read more:
Inside rooms where hostages will spend first nights of freedom
Songs of celebration in Tel Aviv as crowds greet hostages
Twin brothers Gali and Ziv Berman embraced after their release. Pic: IDF
Released Israeli hostage Omri Miran is reunited with his wife Lishay Miran-Lav. Pic: IDF
Release of living hostages brings pause to two years of war
On Monday, Hamas released all 20 living hostages, bringing a pause to two years of war that has levelled much of Gaza and killed tens of thousands of Palestinians.
Crowds in Khan Younis in southern Gaza cheer freed Palestinian prisoners released by Israel. Pics: Reuters
Tens of thousands of Israelis watched the hostage transfer at public screenings across the country. Tap on their pictures to read more about the hostages:
The hostages were exchanged for more than 1,900 Palestinian prisoners – including 250 serving life sentences for convictions for attacks on Israelis, as well as 1,700 Gazans detained during the war.
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Who are the released Palestinian prisoners?
Issues remain with ceasefire plan
The exchange of hostages and prisoners has raised hopes it marks the end of the bloody conflict between Israel and Hamas.
A second phase of the plan, which all sides have yet to agree on, could see Israeli troops withdraw from Gaza.
However, issues remain, such as whether Hamas will disarm, and who will govern Gaza.
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Trump addresses Knesset – key moments
Trump calls for new era of peace in Middle East
Mr Trump travelled to the region to celebrate the deal.
He received a rapturous welcome and multiple standing ovations as he addressed Israel’s parliament, though at one point he was heckled by two left-wing politicians who were ejected from the chamber after they interrupted his speech.
“This is a historic dawn of a new Middle East,” Mr Trump told the Knesset.
“Generations from now this will be remembered as the moment that everything began to change, and change very much for the better.”
Donald Trump gives a speech during the world leaders’ summit on ending the Gaza war. Pic: Reuters
Mr Trump later travelled to the Egyptian Red Sea resort town of Sharm el-Sheikh, where he called for a new era of peace in the Middle East, saying the region has “a once-in-a-lifetime chance to put the old feuds and bitter hatreds behind us”.
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Speaking to world leaders attending the summit, he urged them “to declare that our future will not be ruled by the fights of generations past”.
The war began when Hamas stormed into Israel on October 7 2023, killing around 1,200 people and taking 251 hostage.
Israel invaded Gaza in retaliation, with airstrikes and ground assaults devastating much of the enclave and killing more than 67,000, according to the Hamas-run health ministry.
Its figures do not differentiate between civilians and combatants but it says around half of those killed were women and children.
Two things can be true at the same time – an adage so apt for the past day.
This was the Trump show. There’s no question about that. It was a show called by him, pulled off for him, attended by leaders who had no other choice and all because he craves the ego boost.
Gaza deal signed – as it happened
But the day was also an unquestionable and game-changing geopolitical achievement.
World leaders, including Trump and Egypt’s President Abdel Fattah al-Sisi, pose for a family photo. Pic: Reuters
Trump stopped the war, he stopped the killing, he forced Hamas to release all the hostages, he demanded Israel to free prisoners held without any judicial process, he enabled aid to be delivered to Gaza, and he committed everyone to a roadmap, of sorts, ahead.
He did all that and more.
He also made the Israel-Palestine conflict, which the world has ignored for decades, a cause that European and Middle Eastern nations are now committed to invest in. No one, it seems, can ignore Trump.
Love him or loathe him, those are remarkable achievements.
‘Focus of a goldfish’
The key question now is – will he stay the course?
One person central to the negotiations which have led us to this point said to me last week that Trump has the “focus of a goldfish”.
Benjamin Netanyahu applauds while Trump addresses the Knesset, Israel’s parliament. Pic: Reuters
It’s true that he tends to have a short attention span. If things are not going his way, and it looks likely that he won’t turn out to be the winner, he quickly moves on and blames someone else.
So, is there a danger of that with this? Let’s check in on it all six months from now (I am willing to be proved wrong – the Trump-show is truly hard to chart), but my judgement right now is that he will stay the course with this one for several reasons.
First, precisely because of the show he has created around this. Surely, he won’t want it all to fall apart now?
He has invested so much personal reputation in all this, I’d argue that even he wouldn’t want to drop it, even when the going gets tough – which it will.
Second, the Abraham Accords. They represented his signature foreign policy achievement in his first term – the normalisation of relations between Israel and the Muslim world.
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Trump’s peace summit: As it happened
Back in his first presidency, he tried to push the accords through without solving the Palestinian question. It didn’t work.
This time, he’s grasped the nettle. Now he wants to bring it all together in a grand bargain. He’s doing it for peace but also, of course, for the business opportunities – to help “make America great again”.
Peace – and prosperity – in the Middle East is good for America. It’s also good for Trump Inc. He and his family are going to get even richer from a prosperous Middle East.
Read more:
Trump hails ‘peace in the Middle East’
His team ripped up golden rule to pull off peace plan
Then there is the Nobel Peace Prize. He didn’t win it this year. He was never going to – nominations had to be in by January.
But next year he really could win – especially if he solves the Ukraine challenge too.
If he could bring his coexistence and unity vibe to his own country – rather than stoking the division – he may stand an even greater chance of winning.
One of the most high-profile and influential Palestinian politicians has told Sky News that Donald Trump is now “calling the shots” for Israel – and warned it “doesn’t make sense” to have a Western-led government ruling Gaza or the return of a “British mandate” under Sir Tony Blair.
Nasser al-Qudwa, 72, insisted Hamas should be involved in the territory’s future and that a new structure is needed that would allow a single authority to govern both the West Bank and Gaza.
Gaza deal signed – as it happened
It comes after Donald Trump hailed the signing of a peace deal in Egypt on Monday – the first phase of a plan to end the two-year Gaza war, which included the return of all 20 living Israeli hostages.
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Peace deal signed – but will it hold?
But there is much in the president’s 20-point proposal for Gaza still to be made real, chiefly a “board of peace” to oversee the creation of a transitional authority. It would be chaired by Mr Trump, who has floated a role for former UK prime minister Sir Tony and does not want a role for Hamas.
Al-Qudwa is strongly tipped for a return to the front line of politics, either within the existing Palestinian Authority or a new framework for Gaza.
Nasser al-Qudwa. Pic: Reuters
Since leaving his role as foreign minister for the Palestinian Authority in 2006, he has served in a variety of roles, including as a diplomat at the United Nations and as head of the Yasser Arafat Foundation.
Al-Qudwa is the nephew of Arafat, ex-chairman of the Palestine Liberation Organisation, who died in 2004 aged 75.
Yasser Arafat at the White House in 1993. Pic: AP
Trump’s proposal ‘doesn’t make sense’
Al-Qudwa has just been welcomed back into the central committee of Fatah, which runs the Palestinian Authority, the governing body of the West Bank.
Asked how he feels about the prospect of an international body ruling Gaza, including both Mr Trump and Sir Tony, he told Sky News: “The Palestinian people do not deserve to be put under international trusteeship or guardianship.
“And definitely it does not deserve to be put on the British mandate again.
“The whole notion that you are bringing a Western land to build a lot in Gaza after all these sacrifices and all this bloodshed, it doesn’t make sense.”
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Blair asked about Gaza peace board
Netanyahu ‘not calling the shots’
Al-Qudwa is a strong advocate for a two-state solution and says the only way to stem the anger of Palestinian youths “is to give them a better life”.
Asked if he was confident Israel would observe the ceasefire and move into the second phase of the Trump plan, Al-Qudwa said: “I don’t trust anybody.
“But, to be frank with you, I don’t think it’s the Israeli leader that’s calling the shots.
“I think it’s Mr Donald Trump. And he has promised that repeatedly.
“It’s going to be difficult because the second phase is going to be more difficult. But I do hope that it’s going to happen because we need it to.”
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Trump asks Israel’s president to pardon Netanyahu
A role for Hamas
Al-Qudwa wants a new unitary governing body for the West Bank and Gaza “that is organically linked… to ensure the territorial integrity and the unity of the Palestinian people”.
He said under his model, Hamas would be invited to be part of the political landscape. It would be a different form of Hamas – a political party rather than an organisation with a military wing.
“It would be a different Hamas,” said al-Qudwa. “What is missing from the debate is the serious, comprehensive positions. I spoke about ending the role of Hamas in Gaza, ending the control of Hamas over Gaza in all its forms, political, administrative, as well as security, which means the official body needs to have control over weapons.
“And then I think it’s very right to transform into a political party and then participate in the Palestinian political life, including elections under Palestinian law enforcement.”
Donald Trump and Palestinian Authority President Mahmoud Abbas. Pic: Reuters
Despite being closely linked to a future role in Gaza, al-Qudwa, who was born in Khan Younis in the south of the strip, said you would have to be “crazy” to want to work in the territory now.
He cast doubt over the plan to have elections within a year of the war coming to an end, saying it was impossible to imagine how you could hold such a logistically demanding event in a ruined country like Gaza.
Israel’s war in Gaza, launched following the killing of 1,200 people and capture of 251 more by Hamas during its October 7 attacks, has seen more than 67,000 Gazans killed, according to Palestinian health officials. Its figures don’t differentiate between civilians and combatants but says around half of the victims are women and children.
But al-Qudwa pointedly refused to deny speculation about his future ambitions.
Asked if he would be interested in becoming the next president of the Palestinian Authority, after Mahmoud Abbas, al-Qudwa simply smiled.
“There is no vacancy,” he said.
“That’s not a no,” I suggested. “It’s also not a yes,” he replied.
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