The politician and former chancellor chooses five favourite books. He will be speaking about his book “Can We Be Great Again?” at the St Andrew’s Book Festival in London on 25 November.

Peak Human

Johan Norberg, 2025

If you’re worried that Western civilisation and democracy is in decline, this is for you – in fact, it’s the best book I have read this year. Johan Norberg looks at civilisations from Athens to the Anglosphere, and traces the reasons for their rise and fall. His conclusion: all is not lost.

Super Agers

Eric Topol, 2025

Eric Topol is my favourite American doctor, and has given me superb advice on many occasions. His latest book looks scientifically at all the diseases that cause ageing, from heart disease to cancer to dementia – and exactly what the latest clinical trials say works and does not work. For someone like me who is turning 60 next year, it was unputdownable!

Broken Threads

Mishal Husain, 2024

Not every broadcaster can write – but Mishal Husain certainly can. This is a beautiful account of the impact of partition in India on both branches of her family, setting their painstakingly researched stories against the backdrop of deep historical currents.

How Countries Go Broke

Ray Dalio, 2025

A book about something no one wants to talk about, but should: our looming debt crisis. In surprisingly readable prose, Ray Dalio explains why we should all be terrified of what is around the corner. As someone who has made his billions building up the world’s largest hedge fund, he knows his stuff.

The Optimist

Keach Hagey, 2025

Finally, a book on the forthcoming AI revolution. A biography of Sam Altman, founder of OpenAI, the company that gave us ChatGPT, which has become something of an addiction for me (try asking it your life expectancy). Worth reading for a window on where we are going, through the eyes of one of the most powerful people in the world.

Titles in print are available from The Week Bookshop

AstraZeneca's decision to cancel a planned expansion of its vaccine factory near Liverpool has left Chancellor Rachel Reeves feeling less than chipper herself.

"Recriminations flew" after the pharmaceutical giant pulled the plug on the project, said the Financial Times, but "how did it all go so wrong"?

What was the deal for?

In November 2023, AstraZeneca proposed a major expansion of its vaccine plant in Speke, a move that would "bolster" Britain's claim to be a leading centre for life sciences.

Soon afterwards, the company laid out the details of its request for support from the then Tory government: it wanted £100 million in grants to help develop the site.

What went wrong?

Things started to go awry when news of the proposed deal leaked, causing "deep frustration" for chief executive Pascal Soriot. But "the matter was smoothed over" and the chancellor at the time, Jeremy Hunt, got a final government offer of £90 million "over the line".

The relationship "frayed" again when the AstraZeneca board became "angered" by the government's "aggressive negotiations" on drug pricing.

Hunt announced the proposed deal but then Rishi Sunak called a general election and the government "entered campaign mode", leaving the deal and a pending AstraZeneca grant application "hanging in limbo".

After the election, the new Labour government claimed there had been no due diligence done on the deal and it offered a revised subsidy of just £40 million, prompting a "hissy fit" at AstraZeneca. Later, the Treasury put £78 million "on the table".

Within months, the company announced it was scrapping the plan. It told the FT this was partly because of "the timing and reduction of the final offer compared to the previous government's proposal".

The announcement was particularly embarrassing for Reeves because it came just hours after she'd named AstraZeneca as one of Britain's "great companies" in a speech about growth.

What does this all mean?

The company’s decision to abandon the Speke project was "seen as a heavy blow to the government", said The Telegraph. In "substance and timing", AstraZeneca's decision is "a blow to the government's recent zeal for growth", said Sky News.

It's the "second multinational to blame the new government for a withdrawal of investment". In November, Vauxhall owner Stellantis said it would close its Luton van plant, blaming net zero targets.

Mike Storey, a Liberal Democrat peer and former leader of Liverpool City Council, told the BBC it was "absolutely shocking" that the deal had collapsed at a time when "billions" were being spent on the life sciences sector in the Southeast.

Andrew Griffith, the shadow business secretary, said that "in the same week" the government talked about growth, it had apparently "fumbled" a deal with "one of the UK's largest companies".

Thursday's "night of political drama" will begin when the exit poll is published at 10pm, said Tim Glanfield in The Sunday Times. 

This poll is only a sample of voters from 150 constituencies across the UK, but usually provides a pretty accurate picture of how each party has performed. 

The first of 650 constituencies to declare will be Sunderland, a safe Labour seat where a result is due by 11.30pm. By 2am, about 50 more will have been declared – many also safe Labour seats in northern urban areas.

The seats to keep an eye on

Watch the bellweather seat of Nuneaton: the party that wins here has gone on to govern after every election except one since 1983. In Rochdale, we'll see if George Galloway holds the seat he won in February's by-election.

"The excitement will really ramp up" from 3am, when several Tory "big beasts" will discover their fates, said Dominic Penna and Rachel Slater in The Daily Telegraph. They include Chancellor Jeremy Hunt, who is at risk of losing to the Lib Dems – as are ministers Alex Chalk and Gillian Keegan. Others, such as Grant Shapps, Iain Duncan Smith, Jacob Rees-Mogg, and leadership hopeful Penny Mordaunt are at risk of losing to Labour.

The final election results

Sunak's constituency will be declared at about 4am – some polls suggest that even he could slump to a historic defeat.

There are pitfalls for Labour too, said Robert Ford in The Observer. Jeremy Corbyn is challenging his old party in Islington North, a seat he has held for 40 years; shadow culture secretary Thangam Debbonaire's Bristol Central seat is a target for the Greens. Both of those results will be in by 4am, when we'll also find out whether Reform UK's Nigel Farage has won in Clacton, to become an MP at his eighth attempt, said Jamie Grierson in The Guardian.

By 7am, any remaining seats will have been declared – and whoever is set to lead the next government will be preparing to address the nation.

The economy is "returning to full health for the first time since the pandemic", Chancellor Jeremy Hunt declared last week as latest figures revealed the fastest rate of economic growth in two years. 

According to the Office for National Statistics (ONS), the UK economy grew by 0.6% in the first quarter of 2024, outstripping forecasts by the Bank of England and representing the strongest growth for any G7 country, with the eurozone lagging behind on 0.3% and the US on 0.4%.

But while the UK has emerged from the mild recession that began at the end of last year, triumphant noises from the government have been met with "a mixture of resignation, laughter and annoyance" from a public still feeling the pinch from the cost-of-living crisis and high inflation, said BBC economics editor Faisal Islam.

What did the commentators say?

Paraphrasing Australia's former prime minister Paul Keating, ONS chief economist Grant Fitzner said latest data shows the UK economy is "going gangbusters".

In one sense, he is right, said Ed Conway, economics and data editor at Sky News. An economic growth rate of 0.6% is near enough to what economists used to call "trend growth" and "signifies the economy growing at more or less 'normal' rates".

"And normality is precisely the thing the government wants us to believe we've returned to."

Adding to the positive growth figures, inflation is expected to hit the Bank of England's target of 2% this month. Hopes are growing that interest rates could start to fall as soon as next month, after BoE governor Andrew Bailey said that "we're now getting back to more normal times". UK wage growth has also remained strong in the first quarter of the year – rising by 2.4% – even as the employment rate continues to rise.

All this suggests Britain has "turned a corner", said Reaction, "but there is an important caveat". When measured per head, GDP is still 0.7% lower than a year ago. This "arguably more accurate measure of the country's economic well-being – which takes account of the UK's considerable population growth – helps to explain why many Brits won't be feeling much better off despite this seemingly sunny economic news".

It is also a question of context, said Conway, because while this latest set of GDP figures is "undoubtedly positive, the numbers that came before are undoubtedly grim".

GDP per head is considerably lower, in real terms, than in 2022, before Liz Truss's disastrous mini-budget, and than before the pandemic hit and the country last went to the polls in 2019.

What next?

Rishi Sunak's "hopes of pulling off the greatest comeback in British political history rely on him being able to convince voters that the economy is turning a corner and that Britain’s economic prospects are improving" said The Times. "Labour's economic narrative relies on the polar opposite – hammering home the idea that the Tories have trashed the economy over the past 14 years and left them significantly worse off."

Shadow chancellor Rachel Reeves appeared to anticipate this changing economic narrative in a speech last week in which she said the Tories were "gaslighting" the British people by claiming things were getting better when many families were still struggling.

"They do not speak to the economic reality," she said. "All they hear is a government that is deluded and out of touch with realities on the ground."

Recent polling bears this out. Only 15% of voters surveyed by The Times thought the economy was in a better place than it was 12 months ago, while 53% said it had got worse.

In truth, the "narrative doesn't comfortably, convincingly suit either party", said Kate Andrews in The Telegraph.

Sunak will be "aware that any attempt to over-sell this will open his party up to political attack" while many voters will feel it is "too little, too late". As for Labour, while there is "no guarantee that the UK will continue on its upward swing", even bad economic news puts the party on "shaky territory".

Keir Starmer has branded Jeremy Hunt's budget "the last desperate act of a party that has failed" and accused the Tories of "giving with one hand and taking even more with the other".

Responding to the Spring Budget, in which the chancellor announced a 2p cut to National Insurance contributions, the Labour leader said the government was leaving "Britain in recession", with the "national credit card maxed out" and the "highest tax burden for 70 years". 

But Hunt also adopted two key Labour policies to help fund the NI cut – scrapping the 'non-dom' tax status and extending the windfall tax on oil and gas companies – that Starmer had hoped would go towards his spending commitments ahead of the next general election, which is expected this year.

What did the commentators say?

Starmer issued a "withering" response to Hunt's abolition of the 'non-dom' tax regime, said the Financial Times. He told the Commons yesterday that the chancellor's "desperate" decision to "finally accept Labour's argument" on the issue showed the government was "totally bereft of ideas".

But Hunt's move creates a "headache" for Starmer and his party. Labour had allocated the £2 billion it said the plan would raise to NHS reform and primary school breakfast clubs. Hunt also "borrowed from the Labour playbook" by extending the windfall tax on oil and gas companies by a year. Labour had planned to extend the tax by a year and restructure it to raise funding for its green prosperity plan. "The main opposition party must now explain how it will pay for these policies if it wins the election expected this year," said the paper.

Hunt's budget, full of voter-friendly tax cuts, was "carefully designed to woo floating voters at this year's general election", said Esther Webber on Politico. But the longer term impact of the spending plans on Britain's creaking public finances and services is "less clear". And Hunt's attempts to balance the books have required "baking in cuts to public service budgets" beyond March 2025.

Of course, Treasury ministers have "always looked for ways to hobble their successors – especially in the run-up to an election", said Webber. "But trying to paint Labour into a corner is not without downsides." There is a "real-world risk to the public sector", and whoever wins the election may "only partially be able to meet the demands of creaking services across multiple fronts".

Labour will fear that this week's "scorched earth budget" means the party "could be taking on a poisoned chalice – and one which may reduce its chances of spending more than a single term in office".

What next?

Despite the criticism that Labour has levelled at the budget, the party said it supported the 2p cut to National Insurance and the fuel duty freeze announced by Hunt. 

Speaking to BBC Radio 4's "Today", shadow chancellor Rachel Reeves said that Labour now plans to fund its plans through savings to future government spending, rather than through a tax rise.

"We will go through every pound spent, every tax raised, and make sure we can continue to fund those commitments," she told the programme, emphasising that the party's election manifesto would be "fully costed and fully funded".

But Reeves offered few further details, saying that her party would need to go through government plans in an "orderly way" before committing to new spending pledges.

There was plenty in Chancellor Jeremy Hunt's Spring Budget this week to woo voters ahead of an expected general election later this year, but what difference will it actually make to your finances?

Hunt's latest fiscal update was labelled a "Budget for long-term growth" by the Government. And it included several key policies focused on growing the economy after it entered a recession at the end of last year.

Headline announcements included a 2p cut in National Insurance and changes to high-income child benefit charge thresholds, but the Budget "has the potential to affect us all", said NerdWallet.

However, it may not all be positive, said columnist Henry Mance in the Financial Times, as the government's "fiscal drag act" – the freezing of tax thresholds – means "more income will keep getting caught in higher tax brackets".

Here is how the Budget could hit your wallet.

Workers

Employee National Insurance (NI) contributions will be cut by 2p from 10% to 8% in April, having already fallen from 12% to 10% in January. So the average worker earning £35,400 a year will be more than £900 better off this year, according to the Treasury.

Additionally, the chancellor announced a further 2p cut to Class 4 NI for the self-employed to 6%, after it was reduced to 8% in the Autumn Statement. The Treasury said this would save the average worker £650 compared with last year.

These cuts will "boost take-home pay", said This Is Money, but it won't help those above state pension age as they typically don't pay NI.

Additionally, income tax thresholds have been frozen until at least 2028, the BBC highlighted, so "any kind of pay rise could drag you into a higher tax bracket, or will see a greater proportion of your income taxed than would otherwise be expected".

The Institute for Fiscal Studies estimated that the combination of the NI cuts and threshold freezes since 2021 mean only those on £26,000 to £60,000 a year are really better off.

Investors

Hunt has unveiled plans to boost investment in UK stocks with the launch of a new British ISA. It provides a "dedicated tax-free individual savings account (Isa) allowance" of £5,000 to back UK shares, said Investors’ Chronicle, to "entice investors to allocate more to UK stocks". This is on top of the existing £20,000 annual ISA allowance and will be consulted on.

However, the British ISA has received a mixed reception. The product "seems a good way to think about UK equity opportunities", said Ollie Smith on the Morningstar website, but it is already possible to back these types of stocks in the tax wrapper and many other types of ISA already exist so "further iterations of exactly the same thing amount to nothing more than tinkering".

Some savers may have preferred an overall increase to the annual ISA allowance, said MoneyWeek, and a separate product could "add to the complexity" and "result in a lower take up".

Parents

Hunt "finally bowed to pressure", said The Guardian, on the high-income child benefit charge (HICBC). 

Currently, if one parent in a family earns above £50,000 per year, they have to pay 1% of the amount back. This created "unfairness", said MoneySavingExpert, where a couple earning £49,000 each could get the full benefit but a family where one person or a single parent earning £60,000 or over would see the money clawed back.

Instead, the chancellor said the HICBC will be "administered on a household rather than an individual basis by April 2026" and in the meantime the threshold will rise to £60,000 from April and the level at which it needs to be fully repaid will increase to £80,000. This could mean 485,000 families gain an average of £1,260, the Treasury said.

Landlords

The chancellor also unveiled plans to make it "easier for local people to find a home in their community" with a clampdown on holiday lets.

He said he would raise £245 million per year by scrapping the furnished holiday lettings regime from April 2025, which previously let landlords claim full mortgage interest relief and pay lower capital gains tax when they sell.

The move will save the Treasury money and "ease the housing crisis" in popular holiday destinations such as Cornwall and the Lake District, said the Mirror, where locals struggle to get on the property ladder.

Landlords aren't impressed, though. Writing in The Telegraph, the Secret Landlord said the move will risk tourism jobs and force property investors to sell, while "it's doubtful they'll be bought by local people". Instead, it means the government will "crucify anybody who owns a private property who intends to make any money from anything to do with it".

If more landlords do want to sell their properties, said MoneyWeek, Hunt has at least said he will cut the higher rate of capital gains tax on additional property sales from 28% to 24% in April.

Homebuyers

Despite "historical proof that a strong property market always boosts the economy", said Property Reporter, the chancellor failed to listen to calls for stamp duty reform and first-time buyer support.

The Office for Budget Responsibility (OBR) has revised its outlook for the property market, though, and suggests it could “bounce back faster than expected”, said The Telegraph.

The OBR forecasts that falling interest rates mean house prices will drop by around 2% this year, "slightly under half of the 5 per cent we expected [in the Autumn Statement]", before rebounding by 2% in 2026.

It expects mortgage rates to peak at 4.2% by 2027, which could be a boost for borrowers. This is still higher than the typical 2% rate that many borrowers were on at the end of 2021 and "above the average mortgage interest rate in the 2010s of around 3 per cent".

The government made what is likely to be its final major attempt to woo disillusioned voters before the general election, with the much-anticipated Spring Budget today.

Chancellor Jeremy Hunt began his day with a 17-mile run, according to The Sun's political editor Harry Cole, before presenting his budget to an electorate grappling with a technical recession, stagnant growth and a gloomy economic outlook. 

Here are five key takeaways from his spending and taxation plans. 

1. 2p cut to National Insurance rate 

Hunt confirmed The Times's report of a 2p cut to the rate of National Insurance (NI).

Employee NI will be cut from 10% to 8% in April, and self-employed NI contributions from 8% to 6%. Hunt claimed it would bring the average personal tax bill down to its lowest level since 1975. Combined with the 2p cut announced in last year's Autumn Statement, 27 million workers will save an average of £900 a year, he said, and two million self-employed people will save £650. 

However, Hunt ruled out cutting the basic rate of income tax, which Rishi Sunak (as chancellor) promised would happen in 2024. 

It must be weighed against the context of the highest tax burden since the Second World War and the Conservatives' decision to freeze tax thresholds in 2021, rather than raising them in line with prices, which drags more people into the higher-rate tax bracket. 

The UK's forecaster, the Office for Budget Responsibility (OBR), estimates that almost four million more people will be paying income tax and three million will move into the higher bracket by 2029.

2.  OBR forecasts 0.8% growth 

The OBR forecasts 0.8% growth this year, and 1.9% next year – higher than previously expected, noted The Guardian, but still a "weak growth outlook by long-term standards".

Growth over the whole of 2023 was estimated at 0.1%; the weakest year since the 2009 financial crisis (excluding 2020 and the outbreak of the Covid-19 pandemic), despite Rishi Sunak promising to "grow the economy".

3. Alcohol and fuel duty frozen

After freezing alcohol duty for six months in his Autumn Statement, the chancellor has extended the freeze until February 2025, "cutting costs for breweries, distilleries, restaurants, nightclubs, pubs and bars", according to the Treasury.

Hunt also announced a freeze on fuel duty amid rising petrol prices – due to concerns about the Middle East and global shipping – extending the 5p cut made in 2022 for a third year. 

"There is a fiscal sleight of hand at play," said The Times. The freeze is a temporary policy – meaning the chancellor only has to account for the £5 billion cost this financial year. But Conservatives have frozen fuel duty in each of the past 14 years, "making the policy look pretty permanent".

Taken together, Hunt expects the two freezes will reduce headline inflation by 0.2 percentage points this year. 

The OBR forecasts that inflation will be below the 2% Bank of England target in "just a few months' time", which should allow cuts in interest rates, said Hunt.

4.  Increase in high-income threshold for child benefit

Hunt said he would increase the higher-income threshold at which parents start paying the high-income child benefit charge, from £50,000 to £60,000. 

Almost 500,000 families would gain an average of about £1,260 per household, the Treasury said.

As of April 2026, the threshold will be assessed on a household basis rather than the current individual basis.

5. Borrowing will fall to just 1.2% of GDP 

The chancellor announced that borrowing would fall over the next five years to just 1.2% of GDP. 

"Take this with a pinch of salt," said Paul Johnson, director of the Institute for Fiscal Studies, on X. This will "depend on implementing extremely tight spending plans which will imply cuts for many public services".

Hunt said the government would maintain the plan to increase public spending by 1% in real terms, as set out in the autumn statement, rather than cutting it by 0.75%, as expected. 

Chancellor Jeremy Hunt will announce his second Budget in the House of Commons next Wednesday in what is likely to be his last fiscal update before the next general election.

The looming national vote makes the chancellor's decisions even more pertinent, but the Spring Budget is expected to be "far more limited than last year's autumn statement", said The Times.

Britain's gloomy economic position means Hunt's choices, particularly when it comes to cutting the historically high tax burden, are severely hamstrung. To ease the mounting pressure, he will almost certainly announce plans to find "new sources of revenue", added the paper.

Here are five things to look out for in next week's Spring Budget.

Tax cuts

There is no doubt the government would like to drastically cut the current record level of taxes, but the chancellor "lacks the fiscal firepower" to be able to do it, said the Financial Times. 

The Institute for Fiscal Studies (IFS) has warned that the "economic case" for tax cuts is "weak", but if the chancellor is "determined to cut taxes and wants to boost growth then better options exist than just cutting the rates of income tax, National Insurance contributions or inheritance tax". Instead, a cut to stamp duties on buying property should be "front of the queue for growth-friendly tax cuts", it said.

It is "often the case" that the chancellor faces pressure to cut stamp duty before a Budget to boost the housing market, said consumer site Which?. In particular, there is a long-considered option of cutting or scrapping it to "incentivise older homeowners to sell up" and potentially downsize, and consequently free up housing for families.

Inheritance tax is another divisive tool that many Tory MPs particularly would like to see scrapped. It seems "most unlikely" that the chancellor will cut the tax in this Budget, however, said The Telegraph. Given it affects such a small percentage of the population (just 4% of UK deaths in 2020-21), it is unlikely to feature here but "proposals for change could appear in the Conservatives' election manifesto".

Scrapping non-dom tax status

Hunt is also "exploring the option of scrapping the tax status enjoyed by people who live in the UK, but whose home for tax purposes is overseas", said the BBC's political editor Chris Mason. They don't have to pay UK tax on their foreign income so long as it is not brought into the country. Rishi Sunak's wife, Akshata Murty, is among the country's non-domiciled people, or non-doms, although she has agreed to pay UK tax on her foreign income.

The move, which affects around 70,000 people, is expected to raise £3.2 billion a year, said City A.M.. It would mean Hunt was "taking one of Labour's most prominent tax policies, forcing the opposition to find new sources of revenue for their own spending plans". But it would also "restart a debate about whether reforming the rules would do more harm than good by driving high net-worth foreign nationals out of the UK".

Vape tax

One source of additional income is expected to come through an increase in tax on vapes. While disposable vapes are to be banned, the government is keen to find a balance between discouraging people from taking up vaping through taxation but also maintaining it as a less damaging alternative to smoking.

To achieve this, there will be a "one-off increase in tobacco duty" to ensure vaping products remain cheaper, but a "duty will be levied on the liquid in vapes", said The Times, with higher tax as the amount of nicotine increases. The measures are "expected to raise more than £500 million a year" by 2028-29.

Lifetime ISA reforms

There have long been calls for the government to reform lifetime ISAs and it is rumoured the chancellor could be considering "cutting the early access penalty" from 25% to 20% for first-time home buyers, said The Telegraph.

Currently, those buying a first home worth more than £450,000 would be charged 25% when they withdraw from the account, but a reduction to 20% means "people will not lose any of their own savings" and just the government bonus, said MoneyWeek.

There have been calls to increase the threshold in line with rising house prices, which "would be around £560,000 today", but it is unclear whether that is under consideration.

99% mortgages

In another move to help first-time buyers, the government is considering introducing a 99% mortgage scheme, which would "go even further than the previous Help to Buy scheme", said Which?.

The scheme could allow young people to "get on the property ladder with just a 1% deposit" with the remaining funding provided by a mortgage lender and backed by the state.

The idea has been "largely welcomed by MPs on the left and right" but there is concern that "it could push house prices up higher".

A majority of Britons favour keeping taxes higher if it means more money is spent on public services.

The findings from a new poll are a "major blow" to the government's "hopes of enticing voters with a tax giveaway", said The Independent. Rishi Sunak and Chancellor Jeremy Hunt are believed to be considering cuts to public spending to enable them to announce a reduction in income tax or national insurance at next week's Budget – possibly the last before voters go to the polls in a general election.

But polling by the Fairness Foundation found just 16% of voters favour tax cuts if it means reducing funding for public services, compared to 64% who support keeping taxes as they are or increasing them. Even among Conservatives, half want to see public spending maintained (50%), and almost a quarter would like it increased (23%).

"Public services are in the last chance saloon," warned Christina McAnea, the general secretary of Unison, the public service trade union. "Years of underfunding mean they're already close to collapse and slashing spending further still is the last thing anyone needs."

What did the commentators say?

Speculation over the chancellor's plans has been growing since the Financial Times (FT) reported earlier this month that Hunt was "considering slashing billions of pounds from public spending plans to fund pre-election tax cuts if he is penned in by tight finances" in his 6 March Budget.

The problem, said Robert Colvile in The Sunday Times, is that economic forecasts have moved "relentlessly against" Hunt in recent months, with the Office for Budget Responsibility calculating that his "fiscal headroom" has more than halved to just £13 billion. To "expand his freedom of manoeuvre", the chancellor is reportedly "considering squeezing future spending, which he already squeezed to pay for the last round of tax cuts" at November's Autumn Statement.

Hunt's widely touted 1% annual real-terms increase in public spending until 2029 would "imply serious cuts to some stretched public services", said the FT. The paper reported that Treasury officials were "considering going further" and reducing projected spending rises to about 0.75% a year.

With some ring-fenced departments such as health and defence earmarked for spending increases, said The Guardian, most public services would likely face "swingeing cuts across the next five years" that are equivalent to those undertaken by David Cameron's coalition government.

The idea that tax cuts are affordable "rests on undeliverable spending plans", said the Resolution Foundation. They "imply requiring real per-capita spending cuts of around 18% for unprotected departments like the Home Office, justice and local government by 2028-29" – all of which are already in a state of crisis. The think tank's research director, James Smith, said this was "essentially returning to austerity levels of cuts in terms of the implied spending cuts" – something the foundation's chief executive Torsten Bell called "ludicrous".

And "this comes on the back of large real-terms cuts for those departments from 2010 to 2015 and quite restrained spending since then", said Andrew Goodwin, chief UK economist at Oxford Economics. These "efficiency savings have long since been exhausted", he added. "You're now really talking about choosing which services not to provide any more."

The proposals have been met with a stern warning from the International Monetary Fund (IMF), which deemed the planned spending cuts as unrealistic following a downgrade in its growth forecasts.

With Britain's economy in recession and living standards suffering the longest sustained fall since records began almost 70 years ago, unions have also taken aim at the chancellor's plans. Sharon Graham, the Unite general secretary, said it was an "outrage" that the government was looking to balance the books by forcing more austerity on to services that were already on their knees, said The Guardian.

"The current state of public services are generally pretty poor across the board," said Stuart Hoddinott, a senior researcher at the Institute for Government. Further spending cuts risk "a deterioration in performance that would be unacceptable to any government".

What next?

With increasingly dire economic forecasts limiting options for the chancellor, "the fate of critical tax cuts – which Conservative MPs are banking on as a game-changing moment before the election – hangs in the balance", said The Telegraph.

The effect of public spending cuts would in most cases not be felt until after the election, which Labour is widely expected to win. Keir Starmer's party has plans to "relieve some of the spending pressure with particular tax rises, such as ending the non-dom regime, which will raise money to pay for more weekend and evening GP appointments, among other things", said The Guardian.

But when it comes to the "major working taxes", Labour "will be in lock-step with the Tories", said The Telegraph. Shadow chancellor Rachel Reeves has already ruled out raising income or wealth taxes to fund daily departmental spending.

The Tories' desire to reduce the tax burden is "storing up huge spending cuts down the line, compounding national decay", said Freddie Hayward in The New Statesman, while also "forcing Labour on to the back foot".

Unlike in 1997 or 2010, however, the next government will take office with public services "already at breaking point", said The Guardian.

Chancellor Jeremy Hunt's scope to deliver a pre-election giveaway in his March budget has been given a boost but economists are divided on whether the country can really afford more tax cuts.

Data from the Office for National Statistics (ONS) showed that increased VAT and income-tax receipts, coupled with reduced spending, led to a deficit of £7.8 billion in December 2023, marking "the lowest for the month since the pre-pandemic year of 2019", said The Guardian.

With lower debt-interest payments also contributing to the improvement in the government's financial position, analysts told the paper the prospects for a multi-million-pound giveaway package "had brightened".

Hunt could use the windfall in a number of ways, including tax cuts, increased public spending, or debt reduction – or "a combination of all three", noted The Guardian – but it was tax cuts that he hinted at during last week's World Economic Forum in Davos.

What the papers said

The Chancellor may be plotting fresh tax cuts, but the Office for Budget Responsibility (OBR), fired a "warning shot" yesterday when it said that Hunt has left himself a "tiny" margin of error against the government's own debt-reduction rules, said the Financial Times (FT). 

In November, the watchdog forecast £13 billion of budget headroom, but OBR chair Richard Hughes has issued a warning over the forecast's vulnerability to interest rate assumptions and data revisions.

And the independent public finance watchdog has not yet provided its forecast for the government's headroom in the upcoming budget, a figure that will be a "crucial determinant of the chancellor's scope to cut taxes or increase spending", said the FT.

In simple terms, "fiscal headroom" refers to rules set by chancellors to control government borrowing, said Sky News's economics editor Ed Conway. One of the rules Hunt has set as himself as chancellor concerns the UK's national debt: he has to show that he is bringing down Britain's net debt as a percentage of gross domestic product (GDP) within five years.

But this rule is less "strict" than it sounds, said Conway, akin to the "fiscal equivalent of St Augustine's prayer: 'Lord, make me good. But not yet.'" It allows for an increase in national debt, as long as it appears to decline within five years.

According to last November's autumn statement, the government aims to meet its fiscal rules, with its preferred measure of national debt rising from 90.2% of GDP in 2023/24 to 95% by 2026/27. 

It then declines to 94.9% of GDP in 2027/28 and further to 94.4% of GDP in 2028/29. The crucial "fiscal headroom" is derived from the difference between the last two figures: 94.9% of GDP and 94.4% of GDP, amounting to approximately £13 billion in potential spending for the Treasury.

But it is important to remember that this rule is not an "immutable law of economics" but a self-imposed regulation, added Conway. Despite seeming like a monolithic number, it constantly changes, influenced by fluctuations in the size of the economy and tax receipts, leading to a tendency to "yo-yo around from one year to the next".

What next?

The wisdom of pinning the future of the economy "not on the question of the smartest long-term policy but on the difference between a few decimal places on a spreadsheet" is up for debate, said Conway.

But the ONS's current assessment suggests that, due to higher-than-expected tax receipts and favourable economic conditions, Hunt is likely to meet his fiscal rules with £20 billion to spare. 

And there are several ways he could use this cash, "some more likely than others" said The Times's economics correspondent Jack Barnett. 

He will almost "certainly" extend the freeze on fuel duty at a cost of about £6 billion, said Barnett. But with a general election on the horizon, the Conservatives will be keen to begin "accruing favour with voters", with many in the party "convinced that tax cuts are the means to seize this political capital".  

How effective a round of tax cuts will prove in boosting the Conservatives' electoral chances is questionable; current polling also suggests a round of tax cuts "would make little inroads" in luring voters away from Labour, with just 22% of the public wanting tax cuts if it means lowering spending on public services. 

Jeremy Hunt's announcement that the spring Budget will take place on 6 March – earlier than expected – prompted speculation that the Government plans to call an election in May to take advantage of voter goodwill created by any new tax cuts. 

But senior Tories dismissed the idea: Rishi Sunak said on Thursday that his "working assumption" was that it would take place "in the second half of this year". 

Winning a fifth term after 14 years in power is a tall order, said The Independent, and few expect the Tories to manage it. Sunak is burdened with the "difficult legacy" of his predecessors, and he has made errors of his own, particularly in staking so much political capital on his unrealistic pledge to "stop the boats". 

'Prospects look bleak'

The prospects look bleak for the Government, agreed The Daily Telegraph. When the PM promised last January to reduce the NHS backlog, there were 7.2 million people on waiting lists; now, there are 7.7 million. Debt as a share of GDP is rising, not falling. The one blessing is that the Tories are now at least debating how best to cut taxes.

All is not lost for the Tories, said the Daily Mail. Inflation is falling and a report by accountants PwC finds the UK's outlook is "far rosier" than expected. If Sunak can convince voters that he has a credible strategy to get the public sector working again, he's in with a shot.

Going to the polls on 2 May, when there are local elections in nearly all of England and Wales, would have had some advantages. It would have averted accusations that Sunak was "clinging on", and helped bring out the vote. Waiting until the autumn could also cost the party votes, as more households come off their fixed-rate mortgages and have to renew at higher rates.

'Hope something turns up'

But there would have been dangers, too, with a May election, said Isabel Hardman in The Guardian. "The Budget-as-starting-gun theory relies largely on that fiscal event going well." And as the Tories know to their cost, they don't always do so, even when they include tax cuts.

In his Autumn Statement, Hunt proudly unveiled some tax cuts, while glossing over the stealth taxes imposed by freezing tax thresholds, said Fraser Nelson in The Daily Telegraph. If the Tories repeat that trick in March, in the hope of winning a pre-election bounce, it won't work. Sunak is wise to hold off the election until the end of the year, by which time some recent benign trends should have become more evident. Migration, inflation, mortgage rates, waiting lists and small-boat arrivals are now "on the way down".

If Sunak wants to campaign on "real achievements" rather than "illusory ones", holding fire is sensible. Sunak has only been PM for little more than a year, said John Curtice in the Daily Express, and he knows that election defeat will spell the end of his political career. So he has every reason to sit tight and "hope that something turns up before the autumn".

Fears the UK is heading for a recession are growing as the economy unexpectedly shrank slightly in the third quarter, with gross domestic product falling by 0.1%.

The "tepid numbers" from the Office for National Statistics (ONS) for the three months to September represent a "downward revision" from the earlier estimate of a 0.2% increase, and highlight the economy's struggle to "shake off low-growth performance", said the Financial Times.

The figures mean the UK is "at risk of recession", said the BBC. So how might the nation's economy perform in 2024?

What did the papers say?

The UK's economy is "stuck in a lacklustre state" as it wrestles with "high borrowing costs and the legacy of the worst inflationary upsurge for a generation", said the FT.

Projections released by the Bank of England in November suggested there is "little immediate prospect of a bounceback", as the central bank forecasts "near-zero growth through next year, even as the worst of the inflation subsides".

But speaking to the paper, Chancellor Jeremy Hunt insisted that 2024 was "when we need to throw off our pessimism and declinism about the UK economy".

Hunt has "sought to give Tory MPs an early Christmas present" with "another hint he could cut taxes ahead of a general election next year", said The Independent. The chancellor said the government would "cut the tax burden if we are able to".

He also raised the prospect of the Bank of England reducing interest rates in 2024, which is "when people will begin to have more confidence about their own personal prospects and the prospects of their family".

However, the FT said that his talk of rate cuts will "jar" with the Bank of England, which "jealously guards its independence and has been insisting it is too soon to discuss easing policy".

If employment "stays solid" then the economy "should do OK", John Stepek wrote for Bloomberg, but if unemployment "really surges (as opposed to rising a bit), then all bets are off".

Stepek also forecast that 2024 would be "sluggish for the housing market". Although Hunt "probably doesn't have much room for fireworks at his next budget", he added, it's "hard to see him resisting some sort of freebie" in the form of a tax cut.

But there could be big problems from further afield. Philip Pilkington warns in The Telegraph that the West is "sleepwalking into an economic catastrophe in the Red Sea". The Houthi rebels "could well manage to enact a de facto blockade of the Suez Canal by preventing commercial maritime vessels entry to the Red Sea", he wrote, and "the economic effects of this could be nothing short of profound".

If the Red Sea "remains a no-go zone for some time", it "looks like the Western world is going to have to brace for another wave of inflation", and "frankly, it is not clear that our economies, beaten and bruised from the last wave, can take it".

What next?

The latest ONS figures "show how close the UK could have come to a formal recession, which is marked by two consecutive quarters of negative growth", said The Times, but it will "not be clear until February" whether the UK has entered or avoided recession when figures are released for the October to December quarter.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, told The Times he expected growth to hold steady in the final three months of the year, "before then rising at an average quarter-on-quarter rate of 0.3% during 2024".

However, one of the world's biggest active bond fund managers has "dampened the festive mood" by warning of a serious economic downturn next year, said The Guardian.

Daniel Ivascyn, chief investment officer at Pimco, compared the UK economy with the US, and said that "in the case of the UK – a smaller, open economy, with a consumer that's feeling the brunt of central bank policy far more than their US counterparts – you just have a higher probability of more significant economic deterioration".

He added that "there's potentially more hard landing risks", a term that refers to a marked economic slowdown or downturn following a period of rapid growth.

The next general election could well be decided by economic policy – which may explain why Chancellor Jeremy Hunt and Labour leader Keir Starmer were both at the launch of a new report on the state of Britain's economy. 

The document, from the influential Resolution Foundation think tank, concluded that "Britain's economy is broken", wrote Larry Elliott in The Guardian. But while that may be the "simple message" to draw from the 291-page report entitled "Ending Stagnation", it also makes a string of recommendations to revive the country's struggling economy.

It is a "sensible document" and a "useful checklist", said Ed Conway at Sky News. And many of its conclusions will feel "vaguely familiar to anyone who has followed the economic debate in recent years".

Lift public investment

Britain is not consistently investing in public services well enough, and living on a "feast and famine" approach, said the report. 

Public sector investment is "too volatile" and "prevents forward planning", which in turn creates greater challenges and costs to tackling issues further down the line. The Resolution Foundation accused Britain of "short-termism" when it comes to public spending and said it has been "ignoring the value of assets on the public sector balance sheet".

The average OECD country invests 50% more than Britain in public services, the report said, and it recommends that the government switches to a sustained 3% of GDP and concentrates on "improving the quality, not fiddling with the quantity, of public investment".

Create better, higher taxes

Taxes in Britain are at their highest level since the 1940s. The report calls the current system "incoherent" and said that the increasing tax burden cannot continue to "fall disproportionately on employees". Tax instead should be taken from "income consistently whatever its source". 

To that end, the foundation suggests pushing up "unjustifiably low rates" for high earners and cutting the highest marginal rates, which can result in some parents having their child benefit "taxed away".

It also recommends reforming wealth tax, council tax and inheritance tax, as well as tax on electric vehicles. It claimed its measures would generate revenues of 1.3% of GDP by the end of the next decade and create "better, not just higher, taxes".

Raise benefits to tackle inequality

The report said that markets and jobs cannot ensure that growth "automatically boosts the living standards of the whole population". So Britain's social security system needs to be revamped to ensure people, such as those who care for the disabled, do not live in poverty.

It criticised the drop in living standards for the poorest since 2010 with benefits rising in line with prices, rather than faster-growing wages. Ultimately, it said, benefits must grow in line with wages if inequality in Britain is to fall.

Claims that higher benefits will "harm work incentives are overdone", it said, and while the costs of increases "are real", it suggests scrapping the triple lock on pensions and raising them in the same way as working-age benefits would cover those costs.

Invest in Birmingham and Manchester

Britain is not capitalising on its service-dominated economy by failing to transition cities "deeply scarred by deindustrialisation". With most of Britain's surplus concentrated in London, the foundation said that Birmingham and Manchester must now "take centre stage" to enable the country to prosper.

It advocates for government funding to expand the city centres of both cities, as well as investment to add "over 160,000 additional high-skilled workers" to each area. It also said that billions must be invested to expand transport networks, which is particularly pertinent following the scrapping of the HS2 line to Manchester.

The report does acknowledge that rapid expansion and subsequent "higher local inequality" will be difficult to digest for those already living there, but said each must have "empowered local leadership" to manage the disruption and reinforce "genuine fiscal devolution".

Better pay for hospitality earners

Increasing the pay of low earners in a "crucial" market like Britain's hospitality sector will make it a fairer country. 

The majority of growth in low-paying sectors since 2008 came from hospitality, the report found, with the "proportion of total consumption that hospitality represents" greater in the UK than throughout Europe. This is because it is relatively cheap to consume.

The report suggests improving pay and conditions of workers will wholly benefit them, while richer households, who consume "a larger share of their budgets on face to face services", will experience the effect of subsequent price rises. This demonstrates how improved "labour market conditions" will ultimately "make Britain a fairer country".

Jeremy Hunt announced a cut to national insurance this week in an Autumn Statement geared to boosting long-term economic growth.

The two-percentage-point reduction will benefit 27 million workers and will start in January. The Chancellor also permanently extended the "full expensing" scheme that allows companies to claim back 25p for every £1 they invest in IT, machinery and equipment. Claiming it was worth more than £10bn a year, he called it the "biggest business tax cut in modern British history". 

He also announced reforms to planning rules, pensions, the minimum wage and savings accounts, as well as welfare reforms to get more people back into paid work. 

'Return to low-tax, small-state conservatism'

The Autumn Statement was one of the last chances for the Tories to shift public opinion before the next election, said the Daily Mail. The Chancellor was right to focus on growth and signal the "return to low-tax, small-state conservatism". This shift was overdue, said The Sun. The party's image as the guardian of the small state has been hammered in recent years. A poll last weekend suggested more people now regard Labour, rather than the Conservatives, as the party of low taxes.

The fact that the Treasury has a bit more money to play with than it expected has granted the Tories a convenient cover for tax cuts, said The Independent. The £6.5bn fiscal headroom predicted in March has become £27bn, because persistent inflation has increased the tax take. The flipside, though, is that inflation has also pushed up the cost of running public services, so it’s not really the right time for tax cuts. As for Hunt's plan to deny free NHS prescriptions to benefit claimants who fail to show that they’re actively seeking work, that's "gesture politics of the worst kind". But the Tories do need to do something about the huge rise in working-age people claiming sickness benefits since the pandemic, said The Times. "At more than two million, this is unsustainable."

Hunt has changed his tune, said Kate Andrews in The Spectator. Only last month, he told Tory Party members that the Treasury was in no position to talk about personal tax cuts, "or even to ask 'what if'". That the Chancellor has decided that he can, after all, offer taxpayers a modicum of relief will prompt accusations of irresponsibility from the usual suspects, said Mark Wallace in The i Paper. But there’s nothing reckless or dogmatic about the move. Our tax burden is at the highest level on record: "every government in the past 70 years has thought it right and appropriate to tax less" than the Tories are doing now.

'Fiscal drag'

These cuts may return a little money to taxpayers, said Johanna Noble in The Times, but the Tories are collecting far more through the insidious mechanism known as "fiscal drag". Tax thresholds usually rise in line with inflation, but Sunak froze them in 2021, and they’re set to remain frozen until 2028. This is dragging ever more earners into higher tax bands. In the 1991-92 tax year, only 3.5% of taxpayers paid 40% tax (or above). By 2028, some 14% of taxpayers will. The Office for Budget Responsibility (OBR) estimates that the threshold freezes will raise a combined £44.6bn in extra revenue by 2028-29. Hunt's cuts are small beer in the context of this "stealth tax", said Jeremy Warner in The Daily Telegraph, but at least he is trying to distinguish the Conservatives from Labour. We are "starting to see a proper choice".

Hunt is moving in the right direction in some respects, said Will Hutton in The Observer. Allowing firms to offset investment against corporation tax permanently is a good idea. "This is the only 'tax cut' that has ever been proven to raise investment." Simplifying pension funds also makes sense. But the money given away in personal tax cuts should have been invested in our crumbling public services or used to bolster our "ruinously weak" public finances. As far as Hunt is concerned, these are problems that can be put off until after the election, said Larry Elliott in The Guardian. "He can come up with tax cuts and implausibly tough plans for public spending, knowing that someone else will have to deal with the consequences."

Following weeks of anticipation and speculation, the chancellor has delivered his plans for the UK's economy. 

The Autumn Statement included "110 different measures to help grow the British economy", according to Jeremy Hunt. His tone at today's big reveal in the Commons was "very different" from the "sombre approach he adopted last year", said Sky News correspondent Amanda Akass. Back then, he was trying to fix "the damage of his predecessor's so-called mini budget".

But the outlook now appears brighter, based on latest forecasts for the country's economic growth, provided by the Office for Budget Responsibility (OBR). Hunt announced that the Treasury's independent fiscal watchdog was now predicting that inflation will fall from the current level of 4.6% to 2.8% next year, and then continue falling to below the Bank of England's 2% target in 2025. 

And the UK economy is expected to grow by 0.6% this year, contradicting last year's forecasts that it would shrink by 1.4%. The UK has "grown faster than the euro area", said Hunt, who added that "our plan for the British economy is working, but the work is not done".

National Insurance cuts

Hunt previously ruled out cuts to National Insurance (NI), over fears of undermining the push to bring down inflation, but has now put them "at the heart of his budget", said The Times. 

Employees earning more than £12,570 per year currently pay 12% on earnings up to £50,200. The rate will be cut to 10%, one percentage point further than many were predicting.

The cut is worth about £450 a year for the average worker earning £35,400, said the chancellor, who will introduce emergency legislation to bring the change into effect from the start of January rather than April.

Hunt also announced that from April, Class 4 NI for self-employed workers will be reduced from 9% to 8%. Cutting the rate by 1% "will save around two million self-employed people an average of £350 a year", he told the Commons.

The government will also abolish Class 2 NI, a flat rate of £3.45 a week paid by self-employed people earning above the threshold, entitling them to a state pension. The move will save the average self-employed person £192 a year, Hunt said.

Shadow chancellor Rachel Reeves argued that the cuts would "not remotely" compensate for tax increases already imposed by the Conservatives. The Resolution Foundation think tank said that most people would still pay more NI overall, because of the impact of the decision to freeze the threshold at which people pay it.

National living wage raised

National living wage will increase by 9.8%, rising from £10.42 to £11.44 an hour from April, the chancellor confirmed. 

Hunt said the increase equated to a boost of more than £1,800 a year for a full-time worker, "the third-largest increase in real terms since the living wage was introduced in 2016".

The hike of just over £1 an hour means the Tories will have met their 2019 manifesto commitment to eradicate low pay by 2024, according to the Low Pay Commission, which advises the government on minimum wages.

Permanent tax break for businesses 

The £10 billion-a-year tax break for businesses that invest in equipment and technology is being made permanent. 

The break was introduced in the spring and was slated to be in place for three years, but Hunt said today that falling inflation and borrowing had paved the way for the extension.

This is Hunt's "flagship reform", government insiders told the Financial Times, and is reportedly known inside the Treasury as the "Big Daddy" of business tax cuts. Extending the "full expensing" scheme – which allows a company to deduct all spending on IT equipment, plant or machinery from its taxable profits – indefinitely was "a crucial demand of business groups". 

Hunt said the OBR believes making it permanent will increase annual investment by roughly £3 billion a year.

Benefits raised and reformed

Hunt has increased Universal Credit benefits by 6.7%, in line with September's higher inflation, after rejecting proposals to use October's lower inflation figure of 4.6%. 

The chancellor claimed that the increase, which comes into effect from April, will be worth an "average increase of £470 for 5.5 million households". 

Local housing allowance will also be unfrozen, and the rate will be increased to the "30th percentile of local market rents", he said.

Using October's inflation figure would have saved £3 billion, according to The Times, but would have "hit nine million households struggling to cope with the cost of living".

The chancellor also announced a much-trailed reform of the benefits system, saying ministers would revise the "Fit Note process" and the Work Capability Assessment, in order to push people into seeking treatment rather than time off work.

State pension triple lock maintained

The full state pension will increase by 8.5%, in line with total average earnings, to £221.20 a week.

"This is one of the largest-ever cash increases to the state pension, showing a Conservative government will always back our pensioners," Hunt said.

By rejecting proposals to strip bonuses from September's total earnings calculation, the chancellor kept the controversial pension triple lock in place, guaranteeing that pensions will rise by whichever is highest of three metrics: inflation; earnings over the previous year; or 2.5%.

Hunt also said he was considering allowing employees to choose where their pension contributions from employers went, and that his ultimate goal was to get pensions into bigger funds.

Britain is broken. What will fix it? Lots and lots of money

George Monbiot in The Guardian 

Lack of funding for public services is "approaching crisis point", says George Monbiot in The Guardian, and today's Autumn Statement "will do nothing to address it". While only a "ton of money" will help fix the country, it has often been "squandered". The natural solution, Monbiot argues, can only be a government that "seeks to improve our lives rather than to save an abstraction called money". 

Read more

Why police must build bridges with the Press

Daily Mail Comment 

The police should rely on the media to "communicate directly with the people they serve", the Daily Mail states, but the force has often "forgotten the importance of this mutually beneficial relationship". As trust in the police is "at an all-time low", the only way to remedy the issue is to "embrace the mainstream media rather than treat it as the enemy". 

Read more

The West's dominance is a dangerous delusion

Wolfgang Münchau in The New Statesman

For the West, "glorious victory" is possible in Ukraine and Israel, Wolfgang Münchau argues in The New Statesman, "but so is total defeat". A "meltdown scenario" could be brought about by "financial crises, monetary bailouts, fiscal austerity and overzealous globalisation". Suffering from deep "political instability", Münchau adds, the West cannot even rely upon traditional allies, with relationships faltering. Put simply, these nations "are not playing on our team any more". 

Read more

Has Latin America Found Its Trump?

Ross Douthat in The New York Times

Argentina's new president Javier Milei is a "wild-haired showboating weirdo", writes Ross Douthat in The New York Times, and displays "Trumpian politics". Despite differences between the pair, they share the style of "right-wing populism". This politics puts forward a "clownish, usually masculine rebellion" against the status quo. And if Milei's "populist convulsion" fails to deliver, says Douthat, there may be "no inherent limit on how wild the next cycle of rebellion might get". 

Read more

Rishi Sunak used a somewhat low-key speech on Monday to signal the UK economy is finally on the right track and it was time to "turn our attention to tax cuts".

It follows weeks of speculation ahead of tomorrow’s Autumn Statement. With inflation finally falling and official figures showing the government borrowing £16.9 billion less than expected this year and enjoying higher tax revenues, commentators expect Chancellor Jeremy Hunt to "pull out a couple of rabbits, while saving a bit of cash in the locker to splash in a pre-election giveaway in the spring", reported Politico.

Having previously declared personal tax cuts to be "virtually impossible", the chancellor and PM appear ready to perform a dramatic U-turn; one driven as much by political expediency as economic responsibility.

What the papers said

Both The Times and The Sun suggest Hunt is preparing to deliver his budget bunny in the form of a cut to National Insurance (NI). Other mooted giveaways, such as a reduction in stamp duty, inheritance tax and income tax, are likely to be delayed until the spring. This means "workers' wallets are likely finally to get a long-overdue break", said The Sun. 

Hunt is also set to cut taxes for businesses by extending so-called "full expensing" – a tax relief allowing businesses to offset their investments against corporate tax – seen as a priority for the chancellor to boost the economy.

While "the overwhelming focus of the cuts will be aimed at helping businesses to invest", said BBC economics editor Faisal Islam, a tax cut that helps "make work pay" and "so improves the supply of workers, helping relieve a key constraint on growth" will be announced. And NI "seems to fit the bill", he said.

The arguments for both business and household tax cuts have been "well rehearsed for decades, albeit with inconsistent supporting evidence", said Mohamed El-Erian in the Financial Times (FT). They are said to stimulate both short and longer term growth "through increased consumer spending and corporate investment", said El-Erian, president of Queens’ College, Cambridge, and an adviser to Allianz and Gramercy. They also encourage "efficient resource allocations throughout the economy" and attract a higher level of foreign investment.

With a looming general election and the Conservatives badly trailing Labour in the polls, there is a political incentive to cut taxes, too. In doing so "the government appears to have finally decided to try to win the next general election rather than face a 1997-style wipeout", said Camilla Tominey in The Telegraph.

This is effectively "buying back popularity with tax cuts", argued Will Hutton in The Observer. It is also "breathtakingly wrong", he said, specifically citing mooted cuts to inheritance tax, which will "do little for growth – instead choking off a much-needed source of revenue and inflating inequality".

The Conservatives are keen to create clear dividing lines with Labour and regain their reputation as the party of low tax. However, shaping the budget around tax cuts would "not only yield minimal short-term gains but also impede a necessary and already-delayed journey towards higher productivity and inclusive and more sustainable long-term growth", said El-Erian in the FT.

According to Hunt's own logic for the past year, "shot-in-the-arm tax cuts risk keeping inflation high", as more money in people's pockets can raise or maintain demand for goods and services, said Mehreen Khan, economics editor at The Times.

Paul Johnson, from the Institute for Fiscal Studies, warned i news of the danger of interest rates staying higher for longer if the Treasury stokes inflation with premature tax cuts. This would have very real consequences for homeowners, keeping mortgage rates higher, he said.

Instead, said Hutton, "every spare pound should be consecrated not to tax cuts but to raising public investment – a key trigger for increased private sector investment and, ultimately, a better future".

What next?

The "contours of the argument" set to play out this week will be the government claiming that "an economic turnaround has created space for a tax cut", said the BBC's Islam. The opposition, meanwhile, will say the PM is "jumping the gun at the behest of backbenchers and in any case only reversing one of two dozen tax rises".

In making a turnaround argument, however, it is worth waiting for what the independent Office for Budget Responsibility (OBR) says in its forecasts for the economy, with the latest predictions from the Bank of England putting overall growth for 2024 at zero.

"That's why the government's celebration of any tax cuts for millions of people this week should be taken with a pinch of salt," said Khan at The Times. "When inflation is still more than double the Bank's target, where the government gives with one hand, the [Bank's Monetary Policy Committee] will be ready to take away with the other."

Following a dramatic cabinet reshuffle, attention in Westminster is turning to next week's Autumn Statement as the government scrabbles to win over voters ahead of next year's general election.

The autumn update on the government's spending plans is one of the "key financial events in the political calendar", said the BBC, affecting "the take-home pay and household budgets of millions of people" and "setting out how much will be spent on key public services".

Jeremy Hunt has been "assessing his options" for next Wednesday's statement, said the Daily Mail's Whitehall editor Claire Ellicott, after the Office for Budget Responsibility (OBR) reported that his "headroom" had grown to between £13 billion and £15 billion. The chancellor had previously ruled out personal tax cuts "over fears that they would undermine efforts to bring down inflation", Ellicott added, but may now reconsider amid "political pressure to give the Tories a way to bridge the poll gap with Labour".

Here are some of the big changes that Hunt may announce.

Tax cut for business

Extending "full expensing" – a tax relief allowing businesses to offset their investments against corporate tax – is reportedly a priority for the chancellor.

"Government insiders" cited by the Financial Times said Hunt was likely to extend the regime beyond 2026. According to the paper, the tax break is known inside the Treasury as "the Big Daddy" of business tax cuts, and extending or even making it permanent is viewed as the "biggest ask" from business ahead of next week's statement.

The chancellor "believes the move would help boost long-term economic growth, one of the central aims in the package", wrote The Telegraph's political editor Ben Riley-Smith. Treasury officials have concluded that extending the tax cut would not be inflationary, Riley-Smith said, "meaning it passes one of Hunt’s key tests".

Inheritance tax

The government has faced growing calls to slash inheritance tax (IHT), which has been called "the most hated tax in Britain".

IHT is currently charged at 40% over the tax-free threshold of £325,000, but reforms could include reducing the headline rate; simplifying the system to allow families to pass on £1 million tax-free; or scrapping the tax entirely.

With the Conservatives currently facing electoral oblivion, supporters of lowering or axing IHT say the move could "shore up support in Tory heartlands and provide a boost for the party's fortunes", reported LBC.

Stamp duty

Another levy tipped for changes is stamp duty. Buyers currently pay stamp duty at a rate of 5% of the value of a property over £250,000, rising to 10% beyond £925,000 and as much as 12% for properties valued at more than £1.5 million. 

The levy raised £18.4 billion for the Treasury in the 2021-22 financial year.

But The Sunday Times reported that the government is now "looking at raising the thresholds", a move likely to be popular with voters. The Treasury also considered an alternative plan to "offer homeowners a rebate on stamp duty if they made energy efficiency upgrades to their homes within two years", according to the paper, but "insiders said this has been ruled out".

As well as winning public approval, a stamp duty cut would "likely kick-start the housing market, which is slower than usual after the pandemic", said LBC. 

Fuel duty

Treasury officials are also "pushing" Hunt to raise fuel duty for the first time in more than a decade, The Telegraph reported last month. Analysts calculated that fuel duty needed to be raised by at least 2p to offset the £5 billion being lost by the Exchequer each year after then chancellor Sunak cut the rate by 5p in March 2022.

The proposed hike would increase fuel duty to 55p a litre for petrol and diesel, but officials "do not believe the move will be seen as a tax rise, as the duty will still be lower than when it was last raised in 2011", the paper said.

An increase is likely to face significant opposition from Tory MPs, however, and risks undermining the prime minister's attempt to woo motorists ahead of the next election.

War on 'woke' civil service

 Hunt is also expected to use next week's statement to reveal the results of an audit of equality, diversity and inclusion (EDI) spending in Whitehall, before launching a "fresh clampdown" on the "swathes of costly box-ticking woke jobs in the civil service", said In the Daily Mail's Martin Beckford.

A review last year by the Conservative Way Forward think tank, based on freedom of information responses, found that as many as 255 staff were working exclusively on equality across Whitehall, at a cost to the taxpayer of £11.5 million a year.

"Having already announced a hiring freeze across government departments", said the newspaper, Hunt is "expected to announce further measures to curb the spread of the controversial posts".  

Microsoft's new offer to buy "Call of Duty" maker Activision Blizzard has been approved by the UK's Competition and Markets Authority (CMA), bringing an end to a near two-year bid to secure the gaming industry's biggest-ever takeover.

The approval follows a "restructuring of the deal" and a "major concession made by Microsoft" to the regulators, said PC Mag. This comes after the CMA blocked the original $69bn (£59bn) bid in April over concerns that Microsoft, which makes the Xbox console, would dominate the new cloud gaming market.

The Financial Times saw the approval differently, saying it "marks a win" for Brad Smith, the Microsoft executive who "led the company's legal campaign to defend a deal that many investors and analysts had written off earlier this year".

Writing on social media, Smith said Microsoft was "grateful" for the CMA's thorough "review and decision", which "we believe will benefit players and the gaming industry worldwide".

The CMA said the revised deal would "preserve competitive prices" in the gaming sector and offer more choice and better services, but the BBC said it has "proved controversial and received a mixed response from regulators around the world". It is the "biggest ever tech deal", said The Telegraph.

Even as it finally approved the takeover, the CMA reprimanded Microsoft, which had criticised the watchdog's initial rejection as "bad for Britain". The CMA's chief executive, Sarah Cardell, said that businesses and their advisers "should be in no doubt that the tactics employed by Microsoft are no way to engage with the CMA".

Chancellor Jeremy Hunt had earlier intervened, urging the CMA to "understand their wider responsibilities". The UK regulator had "appeared increasingly isolated" in blocking the takeover after its EU counterparts passed the deal and the US competition regulator failed to secure a court injunction to stop it, said The Guardian.

A great "will he, won't he" of British politics rumbled on today after Rishi Sunak repeatedly refused to say if the northern leg of HS2 will be scrapped.

Asked on "BBC Breakfast" whether he was set to axe the planned line from Birmingham to Manchester, the prime minister failed to give a direct answer six times. Sunak insisted that he had “absolutely not” given up on the multibillion pound rail scheme but that he was "not going to be forced into a premature decision because it’s good for someone’s TV programme".

Speculation has been rife since a Treasury official arriving at No. 10 for a "super-secret meeting" three weeks ago accidentally "flashed" briefing notes suggesting HS2 was under review, said the BBC's chief political correspondent Harry Zeffman. As MPs and the party faithful gathered in Manchester for the Conservative Party Conference on Monday, fresh reports emerged that the second phase of the project was being ditched. 

 The yet-to-be-confirmed news – which broke moments before Chancellor Jeremy Hunt's flagship speech – "could not be more disruptive", said Sky News's deputy political editor Sam Coates.

What did the papers say?

"It's probably safe to assume that there wasn't a grand plan in Downing Street for the Conservative Party conference to become overwhelmed by speculation about HS2," wrote the BBC's Zeffman. But "make no mistake: that is what's happened".

The prime minister's great re-set has been completely overshadowed by the row, which has "sparked fury" among northern business leaders and politicians including the "most senior Tory outside Westminster", West Midlands Mayor Andy Street, reported The Independent.

Street called an impromptu press conference on Monday night at which he urged the PM not to "cancel the future" and refused to rule out resigning over the matter. Framing the decision in terms of a "once-in-a-generation opportunity to level up", Street suggested that major businesses could be brought in to invest in the scheme.

This idea has also been floated by Boris Johnson. In his Daily Mail column last week, the former Tory leader argued that failing to save the project by securing private financing or any other means would be "betraying the North of the country and the whole agenda of levelling up".

He added: "Cancel HS2? Cut off the northern legs? We must be out of our minds."

What next?

Sunak was expected to convene an emergency cabinet meeting in Manchester later today to sign off his HS2 decision ahead of his conference speech on Wednesday.

According to The Times, the PM will pledge to invest "every penny" saved from scrapping the northern leg – an estimated £36 billion – into regional road and rail schemes. "But much of this money is not scheduled to be spent until the 2030s," said the paper, "limiting Sunak’s room for immediate giveaways." 

The PM's expected announcement will, at least, afford him "an opportunity for his voice, finally, to become the loudest" at the Tory conference, said the BBC's Zeffman. Once Sunak has revealed "what investments the government might be making instead in transport links within the North, the discussion will move onto those specifics rather than the communications difficulties the Conservatives have had on this subject".

Sunak's supporters "will be hoping that the uncertainties of recent days aren't what lingers in the public's memory", Zeffman added.

The HS2 decision "speaks to the policy merry-go-round of recent years and the failure of the British state to complete large projects", said Freddie Hayward in The New Statesman, but the "political damage will partly depend on Labour’s response".

Jon Stone argued in The Independent that "it is difficult to see how Labour could fail to build HS2 without declaring open warfare on its city and regional mayors, including Andy Burnham, Tracy Brabin and Sadiq Khan – who all want the network to be completed".

Yet while Labour will also "want to create a dividing line" with Sunak's Tories, Keir Starmer's probable chancellor, Rachel Reeves, will face "many of the same cost pressures as the current government, and has so far committed to very similar spending plans".

And if Labour struggle to find the billions needed for HS2, concluded Hayward, "consensus between the two parties could see the issue eventually laid to rest".

Jeremy Hunt has vowed to "make work pay" by boosting the minimum wage and cracking down on benefit claimants who refuse to look for a job.

Setting out a series of changes to the welfare system, the chancellor will use his speech at the Conservative Party conference in Manchester today to announce that the National Living Wage will rise to "at least" £11 an hour from next April, providing a pay rise to two million people. Hunt will also argue that the welfare safety net is "a social contract that depends on fairness to those in work alongside compassion to those who are not".

The government will review the way benefits sanctions work. "It is a fundamental matter of fairness," he is expected to say. "Those who won't even look for work do not deserve the same benefits as people trying hard to do the right thing."

'More radical approach'

Hunt will use his keynote speech to "declare war on 100,000 work-shy benefit claimants", the Daily Mail reported. The full details of how the benefits regime will be made tougher are still being hammered out and will be unveiled in the chancellor's autumn statement next month. 

According to the Department for Work and Pensions (DWP), there are currently around 5.2 million Britons on out-of-work benefits – a figure that soared during the pandemic and has not yet returned to pre-2020 levels.

Few Conservatives will argue against tougher sanctions for benefits claimants but Hunt "could and should go far further", said Ross Clark in The Spectator. 

Clark suggested a "more radical approach" would be to abolish unemployment benefits altogether and instead offer anyone who wants it three days a week guaranteed work at the National Living Wage. The government's opponents would deride it as "US-style workfare", Clark argued, but "forcing people to turn up and do some work in return for their keep would ensure that they remain in the practice of employment".

Fair, financially responsible or politically motivated?

The measures are driven by spending pressures on the welfare budget, one Whitehall source suggested to The Guardian, and presented as reforms to get benefit claimants back into work. 

Indeed, some leading Tories are "keen to bring down the benefits bill, partly with a major drive to reduce the numbers of economically inactive, and also by encouraging more over 50s back into the workplace", added Politico's London Playbook.

Work and Pensions Secretary Mel Stride will also use his speech to conference today to unveil plans for a crackdown on "deadbeat dads" who refuse to make maintenance payments for their children.

The Conservatives are also trying to "create a dividing line with Labour" ahead of the general election, said The Times.

The focus on benefits has "echoes of the policy promoted by David Cameron and George Osborne", said The Telegraph. "Their framing of the Tories as being on the side of 'workers not shirkers' helped win the 2015 general election," said the paper.

Amid the clamour for tax cuts – not least from the former PM Liz Truss – the development minister, Andrew Mitchell, warned that this should not be done "on the backs of the poorest", said The Guardian.

"We need to be very clear that we have very properly protected throughout the last 13 years of Conservative government the most vulnerable by maintaining and in some cases increasing the value of their benefits" he said. "That's the right thing for any government to do in any civilised society."

The government is expected to announce today whether it will approve pay increases of 6-6.5% for public-sector workers.

Rishi Sunak has hinted that he might reject the official pay review body’s recommendation for teachers, junior doctors, police and other public-sector workers.

This would “prompt fresh tensions with unions”, said the BBC, “raising the prospect of continuing public-sector strikes”.

But signing off on a 6.5% pay rise would create another problem: where Sunak and his chancellor would find the cash to fund it.

What did the papers say?

Jeremy Hunt has “refused to cover any extra increases with more borrowing”, noted The Telegraph, as he believes that could “fuel” inflation. “Borrowing is itself inflationary”, said the chancellor this week.

Instead, he has ordered ministers to find between £2bn and £3bn of cuts to fund the pay rises. Hunt’s “edict” has “provoked a flurry in Whitehall to find savings”, said the Financial Times, with warnings from some ministers that the cuts would damage “already-stretched public services”.

A source told the paper that “the conversations are live” and the “bleeding stumps are out”, referring to the tendency of ministers to issue dire warnings of the consequences of cuts.

Without resorting to borrowing, offering pay increases of 6% or more would “eat into the budgets” of Whitehall departments, agreed the i news site.

But Unite general secretary, Sharon Graham, told the site the choice doesn’t have to be between borrowing or cuts, and Sunak “could start by looking at the money made by profiteering companies that have been driving up inflation”.

“They want us to think that the choice is between the devil and the deep blue sea,” she added, but this is “simply not true”.

Unison magazine has accused the government of “distorting the truth”. The union’s policy officer, Guy Collis, said the government recorded a budget surplus of more than £5bn in January 2023, and government borrowing is currently £30bn less than forecast.

“So the money is there”, he wrote, “it just needs government to make health workers its priority”.

A former speechwriter for Tony Blair also believes the issue is simpler than presented by the government, arguing that Sunak “can sort the strikes if he just stops playing small-time politics” by trying to leverage strikes to dent the popularity of Labour.

Writing for the Evening Standard, Philip Collins warned that “soon there will be a parade of strikes and the feeling that no service in Britain is working”. The “initial union demands are too high, of course”, he wrote, “but this is a negotiation”.

What next?

Sunak and Hunt’s decision will come “against a backdrop of a doctors’ strike, a weak economy and persistent high inflation”, noted The Guardian.

As junior doctors begin a five-day strike in England today, the longest walk-out of its kind in the NHS’s history, pressure is mounting for the government to bring an end to the repeated industrial action.

But with inflation currently at 8.7%, Sunak – who has promised to cut it to about 5.3% by the end of the year – wants to avoid pay increases which could “fuel a wage-price spiral”, said the paper.

He has indicated they could overrule the pay review bodies, arguing they need to make difficult decisions in a bid to halve inflation.

In an interview with the BBC’s Sunday with Laura Kuenssberg, Sunak said he was determined to make “affordable” and “responsible” decisions on public-sector pay, which “may not always be popular in the short term”, noted The Telegraph.

He said there was “no point” in him “doing something that sounds popular and nice today, for example on public-sector pay” because he “would be giving with one hand” and “taking with the other through higher inflation and interest rates”.

But Sky News said “it has now been widely suggested” that Sunak will back pay rises of around 6% for public-sector employees in 2023-24. Each department would then publish the independent review body reports and endorse their recommendations.

The rises “could potentially halt further strike action”, said the broadcaster, but “this decision is ultimately down to unions and their members”.

Plans to introduce “1970s-style” price caps on food staples has been widely derided by supermarket and industry bosses, who warn it could lead to shortages, push up inflation and cut competition.

The Sunday Telegraph reported that Rishi Sunak’s aides “have started work on a deal with supermarkets akin to an agreement in France in which the country’s major retailers charge the ‘lowest possible amount’ for some essential food products” such as bread and milk.

“The move would amount to the biggest attempt to manage supermarket prices since controls established by Edward Heath in 1973,” said the paper.

‘Opt-in scheme’

No. 10 has insisted it would not issue price controls directly but rather the opt-in scheme would be voluntary and would allow supermarkets to select which items they capped.

The Times said the plan “was suggested as the price of necessary food items continues to rise, with more than a third of consumers having changed their weekly shop as a result”, according to a YouGov poll for the paper. It found that 48% of voters have moved to cheaper brands, 43% have cut back on the amount of food they buy, and 30% have changed where they shop.

Even as energy cost pressures across Europe have eased in recent months, food prices have continued to soar, “prompting increasingly unconventional market interventions from politicians trying to assuage public anger”, reported the Financial Times.

Central and eastern European states hardest hit by rising prices, such as Hungary and Croatia, “have moved to cap the cost of essentials to shield the most vulnerable, who tend to spend more of their income on food”, said the paper.

Greece has taken an alternative approach to limiting prices by capping retailers’ profit margins on food, while Spain is among those to cut VAT on food. France, which has provided the model for the UK, has taken a less interventionist approach by negotiating a looser agreement with supermarkets to offer the lowest possible price on a selection of essential items.

Writing in The Guardian in favour of price controls, Robert Reich, a former US labor secretary, said that the current rate of inflation “is analogous to the inflation after the second world war when economists advocated temporary price controls to buy time to overcome supply bottlenecks and prevent corporate profiteering”.

‘Soviet-style shortages and queues’

“You don’t need to have studied economics in any depth to understand the problem with price controls,” wrote Ross Clark in The Spectator. “In a free market, prices settle at the intersection of the supply and demand curves, ensuring that both are kept in balance. Mess around with that by trying to fix prices, and you are liable to end up with Soviet-style shortages and queues.”

A statement by the British Retail Consortium (BRC), backed by Tesco, Sainsbury’s, Morrisons and Waitrose, said the plan “will not make a jot of difference to prices” as the cost of foodstuffs has risen due to a combination of the disruption to global supply chains during the pandemic and Russia’s invasion of Ukraine, not as the result of profiteering supermarkets.

Speaking to The Telegraph, one retail boss called it a “hare-brained idea”, while a cabinet minister argued that price caps would not work “in this day and age” and that produce would be “sold elsewhere” if supermarkets refused to increase their prices.

“There are two key problems with price controls: they don’t work, and they destroy the purpose of the price mechanism, which is the efficient allocation of goods and services,” said Stephen Pollard in the Daily Express.

Sunak has vowed to halve inflation to 5% by the end of the year, and “the pledge is seen as central to the Conservatives’ pitch to the public at the next general election and prompted Jeremy Hunt, the Chancellor of the Exchequer, to admit he would accept a recession in the UK if it would reduce inflation”, said The Telegraph.

But, said Pollard in the Express: “The problem is that this is all about politics, not economics.”

The winter of strikes finally appears to be drawing to a close this week as unions back a new pay deal for more than a million NHS staff in England.

The offer, which covers almost all NHS workers except for doctors, includes a one-off payment of at least £1,655 as well as a 5% pay rise from April. Unions have agreed to suspend strike action while their members vote on the deal.

Chancellor Jeremy Hunt told LBC that the government hoped the negotiations breakthrough “will be the start” of a wider settlement of public sector pay. The deal was announced shortly after he delivered his first Budget, which includes plans to extend free childcare and remove the cap on tax-free pension savings. The government's energy price guarantee is being extended too, for another three months from April to June.

In other financial news, Switzerland’s central bank was forced to throw a $54bn (£45bn) lifeline to the country’s second-biggest bank, Credit Suisse, following a sell-off by spooked investors amid broader concerns about the global banking sector..

To find out how closely you’ve been paying attention to the latest developments in the news and other global events, put your knowledge to the test with our Quiz of The Week

1. Who won the Oscar for Best Supporting Actress at the 95th Academy Awards?

• Angela Bassett
• Kerry Condon
• Jamie Lee Curtis
• Stephanie Hsu

2. What has Chancellor Jeremy Hunt’s Spring Statement been dubbed?

• The “levelling up” Budget
• The “back to work” Budget
• The “inflation buster” Budget
• The “future building” Budget

3. UK ministers and civil servants have been banned from having which social media app on their work phones?

• WhatsApp
• Twitter
• Instagram
• TikTok

4. A US man with the world's longest tongue has set another Guinness record by using it to do what?

• Remove five Jenga blocks from a stack in 55.526 seconds
• Lick his elbow 72 times in 30 seconds
• Lap up a litre of ice cream in 94.45 seconds
• Seal 84 envelopes in 60 seconds

5. Which popular holiday destination wants to swap British holidaymakers for “higher quality” tourists?

• Lanzarote
• Gran Canaria
• Santorini
• Madeira

6. Which annual sports event declared a “war on wee”?

• Royal Ascot
• London Marathon
• Cheltenham Festival
• Six Nations

7. Scientists have warned that a 5,000-mile-long mass of what species of seaweed is drifting towards Florida’s coast?

• Cladophora
• Ulva
• Sargassum
• Fucus

8. The newly revealed format for the 2026 World Cup features a total of how many matches?

• 68
• 80
• 96
• 104

9. A property dubbed “Britain’s loneliest home” after being put on the market is located where?

• Yorkshire Dales
• Outer Hebrides
• Cumbria
• Dartmoor

10. The UK Space Agency has given £2.9m to Rolls-Royce to develop what for a future Moon base?

• a thermal battery system
• a lunar exploration buggy
• a nuclear micro-reactor
• a hovercraft for collecting samples

1. Jamie Lee Curtis

Bassett was considered the front runner for the gong, for her role in Black Panther: Wakanda Forever, but lost out to Everything Everywhere All at Once star Curtis, in one of the biggest upsets of the night at Sunday’s awards ceremony.

2. The “back to work” Budget

Presenting his first Budget to Parliament on Wednesday, Hunt laid out a range of measures intended to encourage economic growth by boosting employment, including extending free childcare and lifting a cap on tax-free pension savings.

3. TikTok

The ban on using the Chinese-owned video app on government devices follows a review by the National Cyber Security Centre and brings the UK in line with the US, Canada and the EU, amid worsening relations with Beijing.

4. Remove five Jenga blocks from a stack in 55.526 seconds

California resident Nick Stoeberl also uses his record-breaking tongue, which measures 3.97in (10.1cm), to paint pictures.

5. Lanzarote

The head of Lanzarote’s local government told a tourism trade fair in Berlin that the Canary island’s resorts had become overly reliant on “mass market” holidaymakers from the UK and should be focusing on visitors from Germany, “who spend more when they are here”.

6. Cheltenham Festival

In a bid to prevent racegoers from urinating in public during this week’s meeting, Cheltenham Council provided liquid-repelling hydrophobic paint to residents and businesses. Officials in the Gloucestershire town also produced a poster showing a man and a woman peeing against a tree, with the slogan: “Have fun this race week but remember our town isn’t your toilet.”

7. Sargassum

The Great Atlantic Sargassum Belt extends from West Africa to the Gulf of Mexico and is on course to reach Florida during the region’s busiest summer months. As well as wreaking havoc on local ecosystems, after coming ashore the rotting seaweed emits toxic fumes that may be harmful to humans. Find out more with The Week Unwrapped podcast.

8. 104

Football’s global governing body Fifa has confirmed that the tournament – being co-hosted by the US, Canada and Mexico – is expanding from 32 to 48 teams, which will require 40 games more than the 64 played in Qatar last year.

9. Yorkshire Dales

Estate agent Fisher Cooper has slashed £50,000 off the original £300,000 asking price for 3 Bleamoor Cottages, which isn’t accessible by car and is seven miles from the nearest town, Ingleton.

10. a nuclear micro-reactor

Engineers and scientists at the British engineering giant are aiming to create a small and lightweight nuclear micro-reactor to provide power needed for humans to live and work on the Moon.

Jeremy Hunt has laid out a range of eye-catching proposals for tax and spending in his first Budget, provoking mixed reactions from economists, campaigners and politicians both in his own and opposition parties.

The chancellor’s “back-to-work” Budget is intended to encourage economic growth by boosting employment through measures including extending free childcare and lifting a cap on tax-free pension savings.

Here are some of the big giveaways and takeaways.

Giveaways

Childcare

Amid mounting calls to help cut childcare costs, Hunt is extending the existing 30 hours of free childcare for 38 weeks of the year to children aged over nine months.

The current policy only applies to three- and four-year-olds. But under the changes, working parents of two-year-olds will be able to access 15 hours of free care from April 2024. From September 2024, that 15 hours will be extended to all children from nine months up, benefiting almost a million more parents.

And from September 2025, every parent who works more than 16 hours a week and has a child aged under five will have access to 30 hours free childcare per week.

Hunt is also introducing a pilot scheme paying between £600 and £1,200 to people signing up to the childcare profession, and nurseries will get a funding boost of £204m from this September, rising to £288m next year.

Energy subsidy

The government’s energy price guarantee, which caps average household bills at £2,500, will be extended for a further three months, from April to June.

The energy price guarantee had been set to expire at the end of March, but a fall in wholesale gas prices since late December has reduced the cost of the measure to the Treasury, allowing the chancellor to continue to help households.

“High energy bills are one of the biggest worries for families, which is why we’re maintaining the energy price guarantee at its current level,” said Hunt. Households with prepayment meters will pay for energy in line with customers on direct debit, he added.

Plans to raise the rate of fuel tax on petrol and diesel have been scrapped.

Pensions

The chancellor is planning a substantial increase in how much workers can put aside for their pensions each year and save overall in a lifetime while minimising tax. The annual tax-free allowance is to rise from £40,000 to £60,000, and the lifetime allowance, which stands at £1.07m, will be abolished.

However, the change is not expected to benefit many workers. Consultancy LCP told the BBC that the total number who had already exceeded the lifetime limit or who risk breaching it was 1.3m, which amounts to less than 4% of the UK’s current workforce.

Takeaways

Corporation tax

Despite months of lobbying by MPs and businesses, Hunt is increasing corporation tax from 19% to 25%. The move “is set to trigger a Tory backbench revolt”, said The Telegraph, but the chancellor has argued that any major tax cuts would currently risk destabilising public finances.

As he tried to “see off Tory tax rebels”, Hunt insisted that his Budget would help drive economic growth, telling the Commons that only 10% of companies will pay the full 25% rate.

But Tory MP Simon Clarke, a former member of Liz Truss’s cabinet who helped set up the pro-tax cuts Conservative Growth Group, told the paper that “this is a tax on jobs and growth”. He added: “It is very hard to see how it doesn’t have a chilling effect on the whole economy in a way which will cost every family in the country.”

To boost business investment, Hunt is rolling out a three-year 100% “full expensing” scheme, “allowing companies to offset all capital spending against their tax bill in the year it is incurred, a move costing an average of £9bn a year”, said the Financial Times.

Frozen personal allowance

Personal allowances remain frozen, “pushing more people into higher-rate tax bands and increasing the overall tax rate to 37% of GDP by 2027”, said The Guardian’s Phillip Inman. According to the OBR, that is the highest rate since the Second World War.

Hunt’s decision not to increase the personal allowance but to hike the pensions tax allowance has been met with criticism. Labour leader Keir Starmer said the Budget had benefited the “richest 1%” and was a “huge giveaway” for some of the wealthiest people in the country.

Childcare staff ratios

The government will change the existing minimum one-to-four staff ratio for children in England to one to five, in a bid to cut costs.

However, the Early Years Alliance, which represents around 14,000 childcare providers in England, said any relaxing of ratios would risk “severely compromising the safety and quality of care” and would add pressure on already overstretched carers during “a severe staffing crisis”.

The chancellor is expected to announce a £4bn expansion of free childcare in England to cover one-year-olds and two-year-olds when he unveils his Budget later today, but advocacy groups say the measures risk putting some nurseries out of business.

Jeremy Hunt’s plan comes as part of “a wider drive to help people into work and boost growth”, said The Guardian. Currently parents of children aged three and four are entitled to 15 or 30 free hours of childcare a week for 38 weeks of the year, starting from the term after their child turns three. This is set to be extended to parents of children aged one and two.

Equivalent funding is expected to be announced for Wales, Scotland and Northern Ireland.

Zoe Haimovitch, from HR firm HiBob, told City A.M. the impact “will be enormous” and “welcome news to working mothers”. And Pregnant Then Screwed, a charity that promotes the rights of pregnant women and mothers, said it was “elated to see the Government is now considering investing £4 billion in childcare”. However, it tweeted: “From previous experience we know that the treasury doesn’t give anything, without taking something. The devil is in the detail.”

According to Politico, the chancellor is tipped to move from 1:4 to 1:5 staffing ratios for two-year-olds, as well as “offer £500 sign-on bonuses to new childcare workers; and fund more wraparound childcare in schools”.

Neil Leitch of the Early Years Alliance told Radio 4’s The World Tonight that the plans could “spell disaster” and force “considerably more” nurseries to close without proper funding. The Early Years Alliance, which represents around 14,000 childcare providers in England, has previously expressed concerns about any relaxation of ratios, which it said risks “severely compromising the safety and quality of care” and would place increased pressure on the workforce during “a severe staffing crisis”.

The Guardian’s £4bn estimate for how much the proposal will cost is also dramatically short of the price tag suggested by the Confederation of British Industry (CBI), said Labour MP Stella Creasy. With the CBI putting the cost of measures at more like £8.9bn, Creasy declared the plan “as economically illiterate as Help to Buy”.

The Financial Times said the Treasury will “increase the funding nurseries receive for the free hours, addressing the concerns of providers, which insist the amount they receive per hour falls far short of their costs”.

Childcare costs in the UK are “among the highest in the world”, which has put the government “under pressure, including from some of its own MPs, to provide more help for parents”, said the BBC.

The Treasury is not formally commenting ahead of the Budget.

Financial markets across the world have plummeted in the wake of the Silicon Valley Bank collapse despite central banks’ attempts to quell fears of a repeat of the 2008 banking crisis.

Amid a global rout in stocks, European banks shed as much as 6% in this morning’s trading, putting them on track for their worst two-day drop since the Ukraine war began.

Fears of a potential global contagion appear to be receding thanks to swift action from financial authorities on both sides of the Atlantic over the weekend, but many predict the impact on the tech sector may be felt for years to come.

What is SVB and why did it collapse?

Founded in 1983 in California, Silicon Valley Bank (SVB) became the go-to bank for tech start-ups and claimed to have provided financing for almost half of US venture-backed technology and healthcare companies in 2021.

Yet despite being among the top 20 American commercial banks, with $209bn in total assets at the end of last year, it collapsed last week in a matter of hours.

In short, “SVB encountered a classic run on the bank”, said CNN Business, although “the longer version is a bit more complicated”, with several forces colliding to take it down.

Higher interest rates introduced over the past year by central banks around the world, including the US Federal Reserve, led to higher borrowing costs, which stalled the momentum of tech stocks. It also eroded the value of long-term bonds just as venture capital began drying up, forcing start-ups to draw down funds. It meant the bank “was sitting on a mountain of unrealized losses in bonds just as the pace of customer withdrawals was escalating”, said CNN.

Attempts to shore up its balance sheet by selling off securities at a loss last week triggered a panic among investors, who began pulling their money out, prompting SVB’s share price to plummet, with regulators called in on Friday.

Vox said the “sudden, swift collapse” was the second largest bank failure in US history – behind only Washington Mutual, which had $434bn in assets when it crashed in 2008 – and the biggest since the height of the financial crisis in that year.

What is the wider impact?

“The incident has sent shock waves across the tech sector,” said Vox.

Garry Tan, president and CEO of start-up accelerator Y Combinator, called SVB’s failure “an extinction level event for startups” that “will set startups and innovation back by ten years or more”, said Wired.

The immediate impact aside, “the collapse of the leading specialist in providing financial services to tech companies could make it harder for the next generation of startups to find what they need to build their business”, said the magazine.

“And after witnessing the herd-like, Twitter-fuelled rush to pull money out of SVB, other banks may be cautious toward tech out of fear of experiencing the same problems SVB faced.”

Beyond the sector, “SVB’s blowup is a big deal and a symptom of bigger forces in motion in tech, finance, and the economy”, Vox added.

Amid warnings from the likes of Axios that the US was “in danger of a catastrophic banking crisis”, financial regulators and the Biden administration moved quickly on Sunday to introduce emergency measures to reduce potential contagion that included ensuring SVB depositors would have access to all their money on Monday morning.

The Guardian reported that “banks will also now be allowed to borrow essentially unlimited amounts from the Federal Reserve for the next year”. This is to avert a situation where financial firms would have to “sell a class of investments that have been losing value because of the Fed’s own high interest rate policies”.

Yet despite efforts to shore up confidence, concerns over America’s regional banks do not appear to have fully abated with shares in several US lenders down by double-digits in pre-market trading.

What about the UK specifically?

There was widespread relief within the UK tech sector on Monday after it was announced that HSBC had bought the British arm of SVB, which had deposits of around £6.7bn and provided banking services for 40% of the UK’s biotech sector, for a “symbolic one pound”, Reuters reported.

The deal with one of the world’s biggest banks with trillions of dollars in assets “brought to an end frantic weekend talks between the government, regulators, and prospective buyers”, said the news agency.

Brokered by the Bank of England, it “involves no taxpayer money”, said the BBC, and means “customers and businesses who had been unable to withdraw their money will now be able to access it as normal”.

Chancellor Jeremy Hunt said: “We were faced with a situation where we could have seen some of our most important companies – our most strategic companies – wiped out, and that would have been extremely dangerous.”

This doomsday scenario has now been averted even if the short-term market turmoil continues.

Prime Minister Rishi Sunak and Chancellor Jeremy Hunt are to forge ahead with plans to raise corporation tax from next month, despite calls from within the Conservative Party to cancel the hike.

Increasing the levy on business profits, first proposed by Rishi Sunak in the 2021 Spring Budget when he was chancellor, will see corporation tax rise by six percentage points from 19% to 25% in April. The hike will form part of Hunt’s “slimmed down” Budget scheduled to take place next week, said the i news site.

‘Pile tax upon tax on British companies’

As the Spring Budget nears, Sunak has increasingly faced calls from business leaders and some MPs from within his party to halt the planned rise to corporation tax, including from former prime ministers Boris Johnson and Liz Truss. In his first major speech since leaving office, Johnson openly challenged his successor to cut corporation tax “to Irish levels or lower” – Ireland’s corporation tax currently stands at 12.5% – in order to “turbocharge” investment in the UK and “drive levelling up across the whole country”.

The Trussite Conservative Growth Group has also reportedly asked the chancellor to halt the rise in a “dossier of demands” submitted to the Treasury last week as part of its efforts to shape the Budget, said the i news site.

British entrepreneur James Dyson took aim at the corporation tax hike in a letter to the chancellor reported over the weekend, as well as efforts to introduce levies on subsidiaries of UK multinational companies. He criticised the plans as “yet another tax grab” that will stop businesses from boosting the economy, arguing that the government “has done nothing but pile tax upon tax on to British companies”, said The Sun.

The billionaire entrepreneur is “right” to urge the government “not to go ahead with a suicidal hike in corporation tax nor, at the same time, to tie the country to a one-size-fits-all global minimum tax”, said the same paper in an editorial yesterday. “Treasury coffers may be empty, but there is plenty of evidence that tax cuts, properly costed and used effectively, can increase government tax income,” argued the paper. “Not to mention giving us an advantage over our rivals in attracting and keeping world-class, wealth-creating businesses.”

“If we are to prosper after Brexit,” said columnist Robert Colvile in The Sunday Times, “we need to make ourselves a more attractive place to do business than our rivals, across all manner of areas. Yet in just the past few weeks, we have seen ARM, our chip design champion, and the pharma firm AstraZeneca both shun the UK”, he said. Indeed, AstraZeneca “explicitly” cited “our high business taxes. The government may argue that we can’t afford to help business,” wrote Colvile. “The truth is that we can’t afford not to.”

‘Lowest tax in the G7’

But “buoyed” by widespread support for the Brexit deal he signed with the European Union last week, Sunak is in “an increasingly strong position to stare down Tory detractors over his budget plans”, said Bloomberg.

The view from the Treasury is that despite the hike, the 25% corporation tax will “still be the lowest in the G7” and leave “70 percent of business unaffected”, reported Politico, “and that the public would not accept cuts to public services to pay for the increase to be cancelled”.

Treasury sources have also played down suggestions that improved economic forecasts “would lead to a change in direction for the Government”, said the i news site. Officials have highlighted analysis from the Institute for Fiscal Studies that “one-off measures, such as prolonging the freeze on fuel duty and extending energy bills support would be affordable, but not large public sector pay rises or a cut to corporation tax”, added the paper.

“They backed up what we have been saying for months,” a Treasury source told the paper – that the Spring Budget is likely to be a thin one. “It will be steady as you go. Very little has changed this month compared to November.”

The Chancellor has received an unexpected boost “from the final snapshot of the public finances” before next month’s Budget, said Arthi Nachiappan in The Times. Economists polled by Reuters had forecast a deficit of £7.8bn in January.

But, lo and behold, what was actually delivered was a £5.4bn surplus – fuelled by record self-assessed income tax receipts of £21.9bn: a third up on last year and the highest January figure since monthly records began in April 1999.

The Government’s balance sheet is often in surplus in January, but this year’s had looked like being hit by rising government debt costs and spending on energy support schemes. Instead, the Treasury banked an unexpected tax receipt boost – with “the fall in natural gas prices” an extra boon.

‘Double-edged sword’

Lower than expected public spending has led to a sizeable undershoot in total borrowing this financial year, compared with the OBR’s forecast in November. The overall bill remains high, said Chris Giles in the FT, but it’s £30bn lower than the £177bn the OBR predicted – meaning that Jeremy Hunt will deliver his Budget cushioned by a sizeable windfall.

That, of course, is “a double-edged sword”. It gives the Chancellor “more options on taxation and spending”, but will also mean more demands on public money at a critical time in public sector pay negotiations. “The Treasury can no longer say there is no spare cash available.”

‘Running out of excuses’

The surplus “could tempt the Chancellor to offer a pay increase” to stop “another wave of strikes”, said KPMG economist Michal Stelmach. Indeed, according to the TUC general secretary, Paul Nowak, the Government is “running out of excuses” to break the deadlock. Rishi Sunak is now reported to be exploring a 5% pay rise for public sector workers – but Hunt “is batting away calls” for an improved offer, on grounds that public finances remain “under pressure”, said The Guardian.

The Chancellor will want “to build greater headroom” into the system to “provide scope for pre-election giveaways”, said Chris Giles. More importantly, he knows that high inflation could hurt government spending plans and leave public services “exposed”. Despite this week’s good news, concluded Cara Pacitti of the Resolution Foundation, Hunt “can’t afford to be relaxed about the state of public finances”.

The chancellor has warned that “we are not out of the woods” despite new figures showing that the UK narrowly avoided falling into recession in 2022.

The economy flatlined in the final three months of last year, following a drop of 0.3% between July and September, meaning the UK is not technically in recession – which is defined as two consecutive quarters of economic decline.

“The fact the UK was the fastest growing economy in the G7 last year, as well as avoiding a recession, shows our economy is more resilient than many feared,” said Jeremy Hunt.

However, economists and commentators warned that the outlook remains bleak and that even if the UK has not entered a recession yet, for many it will still feel as if it has.

What did the papers say?

Britain has avoided a recession “in the least glamorous way possible”, wrote Kate Andrews for The Spectator, because “it is not a story of growth, but a story of stagnation, that has kept the dreaded label of ‘recession’ at bay”.

There is “no guarantee that people feel better off”, she added, because “with real wages taking such a hit, many will feel as though we’re in recession anyway”.

“Whether we’re ‘technically’ in a recession isn’t actually so important,” said Politico’s London Playbook, because “when such small changes are involved, a plus sign is not a conveyor belt of milk and honey, any more than a minus sign is Armageddon”.

The National Institute of Economic and Social Research told the newsletter that “this year will feel like a recession for many, regardless of the data”. It added that “a focus on the economic crisis faced by most of the British population, rather than technicalities, offers a more insightful perspective”.

Political economist Richard Murphy agreed. “Who cares if we are not in a technical recession if millions of people cannot make ends meet, heat their homes, pay the rent or mortgage and feed their children?” he asked on Twitter.

Reuters put the data in a global context, noting that the UK’s output in the fourth quarter was still 0.8% below its pre-pandemic level, “in sharp contrast to other major advanced economies which are now above their pre-pandemic size”.

Despite the good news of a recession averted, City AM noted that the markets were un-buoyed: the FTSE100 index was trading slightly lower, down 0.24% this morning.

What next?

The Bank of England is still expecting a recession to occur sometime in 2023 but believes that the period of negative economic growth will be shallow and shorter than previously predicted.

Most analysts agree. Paul Dales, chief UK economist at Capital Economics, told the Evening Standard: “Given that the drags from high inflation and high interest rates are very large, we still think the economy will enter a recession this year.”

And Jeremy Batstone-Carr, from Raymond James Investment Services, told the Daily Express that “we are still in for the downturn which so far has been barely kept at bay”.

Although “there is greater hope that a downturn may never materialise at all or could be shallower or much more short-lived than initially feared”, Alice Haine, personal finance analyst at Bestinvest, told The Sun, the economy is “not out of the woods yet”.

A “milder recession” would mean that “unemployment rises more slowly, wage growth stays strong and domestically generated inflation falls at a slower pace than expected”, Thomas Pugh, an economist at RSM UK, told This Is Money.

However, he added, this could in turn be bad news for homeowners as it “could result in the Bank of England raising rates by more than expected”.

Rather than the economy going into recession, it may just remain flat, argued one pundit. Instead of “doing the timewarp and bracing for a recessionary return to the seventies, sparked by energy shocks, soaring inflation and industrial strife”, Susannah Streeter, head of money and markets at Hargreaves Lansdown, told the Daily Mail, “we could be heading for an early noughties-style period of stagnation”.

Thousands of nurses and ambulance staff are striking today in the biggest round of industrial action by NHS workers in the health service’s 75-year history.

With disruption planned across public services throughout February, trade unions and the government are locked in disputes over pay and working conditions. Ministers argue that raising public sector pay in line with inflation could lead to a wage-price spiral – a “perpetual loop” of price hikes leading to wage hikes that further increase prices, said Sky News.

But latest official data shows that workers are suffering significant salary cuts in real terms.

Spiralling wages

Rishi Sunak insisted last week that he would “love” to give nursing staff “a massive pay rise”. But the government is facing tough “choices” about how best to distribute the “record amount of money” being pumped into the health service, with recruitment and resources among the priorities, the prime minister told Piers Morgan during an interview on TalkTV.

The government’s key concern is that a wage-price spiral could cause “entrenched inflation”, said Paul Whiteley, a professor of government at Essex University, on The Conversation. The fear is that rising prices will “prompt increased pay settlements, which in turn produce further price rises, wage increases, and so on”.

Jeremy Hunt warned last month that the government “must not do anything that risks permanently embedding high prices into our economy, which will only prolong the pain for everyone”. Rather than raise public sector wages in line with inflation, the chancellor tweeted, the “single best way to help people’s wages go further is to stick to our plan to halve inflation this year”.

Matthew Lynn argued in The Telegraph in November that while “no one should blame” unions for fighting for pay raises for their members, “decisions that make perfect sense at the individual level can add up to a catastrophe when everyone is doing the same thing”. A wage-price spiral could prove “very” bad – and once it gets going, “it is incredibly hard to stop”, he added.

Miscalculations?

According to the Office for National Statistics (ONS), average total pay rose by 6.4% between September and November last year.

But with inflation so high, workers are suffering “one of the biggest pay cuts in real terms that we’ve seen this century”, said the BBC’s economics correspondent Andy Verity.

Adjusted for inflation, real-term wages fell by 2.6%, one of the “largest falls in growth since comparable records began in 2001”, said the ONS.

Economists say that increasing public sector pay would not necessarily increase inflation. “Reasonable” agreements could “easily solve the present impasse”, said Whiteley on The Conversation, “without triggering a wage-price spiral”.

The Guardian’s economics writer Phillip Inman said the wage-price spiral “is an academic concept based on a theory of inflation expectations” rather than “empirical evidence”.

Alex Bryson, professor of quantitative social science at University College London, told Sky News that the government was “missing much of the bigger picture – unemployment and shrinking of the size of the economy”. The “chief reason” that inflation has risen so rapidly was “not wage-push but Covid-induced restraints”, he said, and energy prices and the ongoing conflict between Russia and Ukraine have further contributed to the UK’s economic instability.

The government’s position “looks like it’s based on both bad economics and bad politics”, Whiteley agreed. The reality is that there is “little prospect” of wage inflation while the public sector faces significant labour shortages.

And Sunak’s stance “does not seem like a winning strategy” in political terms either, he added. “Many voters think the government is basically hostile to the public sector”, an impression that “could strengthen” in the run-up to the next general election.

Major changes are coming to tax bills from April that could mean “millions of households will be worse off”, said The Sun.

Income tax allowances will be frozen in the new tax year, as will tax band thresholds, explained MoneyWeek. This means “considerably more people will have to start paying higher-rate and additional-rate tax” as wages slowly creep up and they are pushed into more expensive tax bands.

The government’s “ongoing tax grab” means it’s “vital to take advantage of all your allowances before midnight on the evening of the 5 April”, Hargreaves Lansdown analyst Sarah Coles said on Yahoo Finance.

The issue is made worse now that interest rates have reached a 15-year high of 4.25%, said the i newspaper, while inflation has continued to rise, “leaving consumers likely to face the largest increase in their bills in decades”.

Here are the main tax changes that could hit your wallet.

Income tax thresholds

Income tax is paid to HMRC based on your earnings above your personal allowance. In England, Northern Ireland and Wales, up to £12,570 can be earned without paying tax, but a rate of 20% is applied on further annual earnings up to £50,270, and then 40%.

These rates aren’t changing in April, but the allowance and thresholds are being frozen until 2028. And having tax thresholds that fail to rise in line with inflation or wage growth means you’ll “end up paying more tax on your income, particularly if you end up in a higher tax band as a result”, Which? said.

This phenomenon is known as fiscal drag. According to calculations by wealth manager Quilter, if wage growth averages 5% per year for the next four years but income tax thresholds remain frozen, a worker earning £50,000 today will be £2,643 worse off in the 2027-28 tax year. And in total, they would be £6,463 poorer over the four-year period.

Quilter has warned HMRC that almost 1.5 million more people will be “dragged” into higher tax bands by 2027-28, MoneyWeek reported.

The 45% rate

Higher earners who pay the top tax rate of 45p per £1 face handing over even more of their income, after Chancellor Jeremy Hunt used his Autumn Statement to lower the earnings threshold for this tax bracket. This was confirmed in his spring 2023 Budget.

At the moment, earnings are taxed at 40% from £50,271 up to £150,000. But from April, the so-called additional rate threshold will drop from £150,000 to £125,140.

The change, which is expected to push around 250,000 taxpayers into the higher band, makes tax planning “even more critical”, Paul Barham of tax firm Mazars told FTAdviser.

“If salary sacrifice is an option through your employer, consider using it to reduce your taxable earnings or think about increasing your pension contributions,” he said.

Beyond income tax

There is some good news at least for those worried that their energy bills are “heading skyward”, said the i newspaper, as Hunt said in his Budget that the government’s energy price guarantee – which limits gas and electricity bills – would remain at its current level of £2,500 until July amid falling wholesale costs.

The lifetime allowance cap on how much you can save in a pension will also be scrapped from April in a bid to encourage older workers, primarily senior NHS staff, back to work.

There are other changes due to kick in from April that could hit your budget, though. The amount you can earn before paying capital gains tax on sales of assets such as a second home or shares outside an Isa is set to be “dramatically cut”, Which? said. The allowance is falling from £12,300 to £6,000 in April, and will be reduced again next year to £3,000.

The tax-free allowance on dividends (payments made to a company’s shareholders) is also due to fall, from £2,000 to £1,000, before being reduced further to £500 from April 2024.

Households may also face paying more council tax, after Hunt changed rules to give town halls “additional flexibility” to increase the bills without a public consultation.

Business owners are facing a shock, added MoneyWeek, with corporation tax rising from from 19% to 25% for companies with more than £250,000 in profits. Hunt did also announce a new scheme that will allow businesses to deduct money invested in equipment from taxable profits.

Ultimately, said Larry Elliott in The Guardian, this year may prove to be “less dramatic” than 2022, but that “does not mean life is going to get any easier”.

Marc Shoffman is an award-winning freelance journalist, specialising in business, property and personal finance. He has a master’s degree in financial journalism from City University and has previously worked for the FT’s Financial Adviser, the financial podcast In For a Penny and MoneyWeek.

News that the UK is expected to be the only major global economy to shrink in 2023 has renewed calls from some Conservative MPs and commentators for immediate tax cuts to stimulate growth.

Forecasts released by the International Monetary Fund said the UK economy will contract by 0.6% in 2023, rather than grow slightly as previously predicted. This would mean it performing worse than other advanced economies, including sanctions-hit Russia, as the cost of living continues to hit households.

The BBC said the IMF has painted a “bleak picture” for the UK. However, Chancellor Jeremy Hunt has so far resisted “pressure from some in his party to cut taxes to stimulate the economy”, warning it was “unlikely” that there would be room for any “significant” tax cuts in the spring Budget, and that lowering inflation “is the best tax cut right now”.

‘Targeted tax cuts will help growth’

A new pro-tax cuts group of around 40 Tory MPs – enough to deprive the government of a Commons majority – called the Conservative Growth Group is already meeting to discuss ideas. They are expected to be joined by the last two occupants of No.10, Liz Truss and Boris Johnson, who are both reportedly planning pre-Budget public interventions.

The Financial Times reported that Truss, whose dramatic tax-cutting experiment nearly crashed the UK economy and forced her to resign as PM after just 50 days only a few months ago, will push for tax cuts “despite new forecasts warning of slower growth and lower tax revenues than expected”.

Some Conservative MPs have blamed the chancellor for the disappointing IMF figures, arguing that his decision to increase taxes was dragging down growth. They have been joined by some of the more Conservative-friendly newspapers, including the Daily Mail and Daily Telegraph, in calling for immediate tax cuts.

Former Tory leader Sir Iain Duncan Smith told the i news site: “I have said for some time we need growth or our debts will get bigger. Targeted tax reductions will help achieve that,” he argued.

Among proposals being discussed by the Conservative Growth Group are a drive to reduce regulation, short-term fiscal stimulus, lower government spending, stalling the planned corporation tax rise, and a review of IR35 payroll rules.

“Those who make up this new growth group see the Spring Budget as a test – but ultimately the autumn statement and then the pre-election Budget are the most important events,” said Katy Balls in i news. But “by getting the arguments in now, they hope to shape the debate around those – and the debate on the direction of the Tory party if they head to an electoral defeat (as polls currently imply)”.

‘People seem to have very short memories’

Setting out his vision for the country in a speech at Bloomberg on Friday, Hunt said that the “biggest and quickest tax cut” the government could deliver “for families up and down the country” was to “halve inflation”. It is this focus on bringing inflation down rather than cutting taxes that has put him on a collision course with many in his party.

The FT went further and said: “The insistence of the Tory right that tax cuts are needed in the Budget exasperates Sunak and Hunt, whose strategy is to stabilise the economy and bring inflation under control.”

“People seem to have very short memories,” an ally of Hunt told the paper, referring to his predecessor Kwasi Kwarteng’s “mini-budget” statement last September that sent markets into turmoil and the pound tumbling.

“Whatever sympathies one may have for the Trussites of the Conservative Growth Group, there is no responsible case for cutting taxes on income or consumption against this macroeconomic background,” said The Telegraph’s world economy editor Ambrose Evans-Pritchard.

“Whatever is gained from the countercyclical stimulus is more than lost on higher bond yields, higher mortgage rates and higher refinancing costs for companies, as well as higher Treasury payments on inflation-linked gilts,” he wrote. “Rishi Sunak is surely right: we are not ‘idiots’”.

Jeremy Hunt will set out the government’s tax and spending plans for the year ahead as he delivers his first budget as chancellor on Wednesday.

Hunt said over the weekend that there were “no easy fixes” to boost the UK’s weak economic growth as he “paved the way for a Budget that will eschew big giveaways in favour of fiscal discipline and an effort to bear down on high inflation”, said the Financial Times (FT).

“I think we have fantastic opportunities in this country,” Hunt told the BBC’s Sunday with Laura Kuenssberg. “There is a hard road to follow to get there but we really can be one of the most prosperous countries in Europe, if not the world.”

While the year ahead looks “far less malign than it did in the autumn”, said the BBC’s economics editor Faisal Islam, “the Bank of England and the International Monetary Fund (IMF) have pointed to medium-term challenges facing the British economy”.

Notably, the UK is the only G7 nation where the economy “has not yet returned to its pre-coronavirus pandemic size, with staff shortages weighing heavily on many firms”, said Reuters.

Given the “tumult we have seen in the Tory Party recently, the message that Hunt will want to send with that red box is one of stability”, said the BBC’s Islam.

No tax giveaway

Hunt has been under pressure from some Conservative MPs and business leaders to use the Spring Budget to roll out targeted tax cuts in a bid to stimulate growth. But major tax-cuts now seem unlikely, with Hunt telling the BBC it was important to be “responsible” with the public finances. “Conservatives cut taxes when they can,” he said, but countered that this would have to be “within the bounds of what is responsible”.

Businesses “are braced for a downbeat affair, with corporation tax set to increase from 19 to 25 per cent for firms making profits of more than £250,000”, said The Sunday Times. One bright spot for companies, though, “will be a successor to the ‘super deduction’, a two-year scheme, introduced by then-chancellor Rishi Sunak, that gave companies 130 per cent tax relief on purchases of equipment”, the paper added.

Boris Johnson is among the Tory MPs and business leaders calling for the planned corporation tax rise to be ditched, but so far the calls have been rebuffed.

The chancellor is caught politically, said the FT’s Stephen Bush. “On the one hand, further tax rises will cause howls of anguish from Conservative MPs. On the other, cuts to public services will trigger voter anger.” In fact, “one problem is that there aren’t really any options that either voters or Conservative MPs like”, said Bush.

Economic inactivity

In an interview with Sky News, Hunt pledged action on the high numbers of those deemed economically inactive.

“I will be systematically going through all the areas where there are barriers that stop people from working who want to, so that we can help people get back to work and fill those vacancies for our businesses,” he told the broadcaster.

The chancellor “will set out plans to encourage over-50s to return to work through an expansion of skills training”, said the broadcaster. Alongside this, “the system used to assess eligibility for sickness benefits will be scrapped, enabling claimants to receive payments even after they return to employment.”

The Universal Credit sanctions scheme is also to be “tightened”, reported The Independent, with thousands of claimants to be told to attend more regular meetings with work coaches, and “skills bootcamps” to be expanded by 8,000 places per year, up from 56,000, by 2025.

Childcare focus

The budget will also address rising calls for help with the cost of childcare. “The changes are much smaller in scale than the ‘big bang’ reforms Liz Truss was preparing as prime minister, which included a major expansion of free childcare,” said The Telegraph’s political editor Ben Riley-Smith.

Hunt is set to increase the amount that parents on Universal Credit can claim for childcare, but admitted it would be “expensive” to extend extra funding to all working families. Carers will also be able to look after five two-year-olds rather than four, which “brings the English rules into line with those in Scotland”, said Riley-Smith.

And there will be a £500 bonus for people signing on as childcare workers in a pilot scheme. The financial incentive is “designed to convince Britons to join the industry after problems finding employees fuelled a decline in the number of available childcare places”, said Riley-Smith.

Energy plans

The current Energy Price Guarantee has kept energy bills for the average home capped at around £2,500 a year, but is set to expire in April, when it will rise by 20% to around £3,000.

The chancellor “is expected to extend the programme at the £2,500 level by a further three months, at a one-off cost to the taxpayer of around £3bn”, said the i news site.

Additionally, prepayment meter customers “will no longer be charged more to receive their energy under reforms to be announced in the budget”, said The Guardian.

Fuel and alcohol duty frozen

The Treasury is “under huge pressure to keep the popular 12-year fuel duty freeze”, as well as the more recent 5p cut, said The Sun. But it “remains undecided on both policies – and officials in No11 are said to be concerned by the £6bn per year price tag”, said the paper.

The Sun also reported that alcohol duty will be frozen until August in what it calls “a major win for pubs and brewers”.

And there is some good news for drivers: the budget will include £200m to fill around four million potholes, according to the Daily Mail.

The UK economy surprisingly grew by 0.1% in November, raising hopes that the country avoided entering a recession at the end of last year.

Output “edged up over the month”, said The Times, helped by growth in the dominant services sector, with pubs and bars enjoying a boost as people piled in to watch World Cup games.

December’s GDP figures will need to drop by about 0.5% for fourth-quarter growth to be negative and the UK economy to technically enter recession, which is defined as two consecutive quarters of negative growth.

“To add to the growing optimism”, said the Evening Standard, Tesco and Marks & Spencer have both recorded “bumper Christmas trading figures”, suggesting Britain’s economy “may be showing greater resilience than predicted in the face of the cost of living crisis”.

The UK “may avoid a recession for now but it won’t feel like it for many”, wrote Larry Elliott, economics editor of The Guardian. GDP figures are “notoriously erratic”, he said, so the UK “could yet” fall into recession “in the face of rising interest rates and higher taxes over the coming months”.

Ruth Gregory, senior UK economist at Capital Economics, said in a note to clients that “even if the economy does a bit better than expected in quarter four, it is at best stagnating” and “we still think a recession is on its way in the first half of 2023”.

Chancellor Jeremy Hunt responded to the latest figures with caution, pledging to “stick to the plan to halve inflation this year so we get the economy growing again”. Labour’s Rachel Reeves said: “Today’s results are just another page in the book of failure that is the Tory record on growth”.

This week Jeremy Hunt enacted “the latest cut of his short tenure as Chancellor”, said Alex Lawson in The Observer. Once again, he moved to rein in the largesse of his predecessor Kwasi Kwarteng: in this case, the energy bill relief scheme for “non-domestic” customers. Hunt’s message to business was “unapologetically blunt”, making clear that the existing package was “unsustainably expensive” and that, after March, support would continue only at a much lower level.

The main change, said BBC Business, is that energy costs will no longer be “capped”. Companies will instead receive “a discount on wholesale prices” when energy bills are high – with heavy users, such as the glass, ceramics and steel industries, getting the largest discounts. To the extent that the notion of a cap has been retained, it is now based on what the Government is prepared to spend. Hunt confirmed a maximum support package of £5.5bn over the year from April – down from an estimated £18bn over the six months of this winter.

The Federation of Small Businesses described the announcement as a “huge disappointment” that could spell “the beginning of the end for tens of thousands of small businesses”. Luckily, “the unusually mild winter” has prompted sharp falls in wholesale prices, said The Times.

If it hadn’t, you can bet the language would have been stronger. But, as ever with these schemes, the devil lies in the detail, said the FT. Because some companies signed fixed-cost contracts when prices were higher, many may be paying similar costs from April, but with “a massive reduction in support”, according to Investec analyst Martin Young.

The biggest worry among industry groups, though, is that “the flat-rate discount will not give enough protection” if prices jump sharply again. Even after recent price falls, the new scheme means companies will typically pay “more than six times more for their energy than before the pandemic”.

There’s no question that this deal – worth £2,400 a year to the average pub – is “far less generous”, said Alistair Osborne in The Times. Even so, with the national debt now standing at £2.48trn, it’s in the “national economic interest” to stop subsidising businesses. “Britain is awash with zombie companies addicted to state handouts.” The taxpayer shouldn’t be propping them up. At least now they have an incentive “to get on with energy efficiency”.

Hunt’s new package is “broadly reasonable”, said Nils Pratley in The Guardian – at least for the time being. But if we’ve learnt anything over the past 15 months of volatile energy markets, it is that it pays to keep options open. “Tweaks and even serious overhauls may yet be needed.”

Just months before “Brexit ejected him from the Treasury”, George Osborne “gave City bankers one final bashing for their sins”, said Simon Foy in The Daily Telegraph.

In March 2016, the then-chancellor introduced a new law allowing senior bankers to be jailed for up to seven years “if their risk-taking was deemed to be egregious enough”. The move terrified City executives; but now, after years of stagnation, priorities have changed.

Last week, Chancellor Jeremy Hunt watered down the “senior managers’ regime” – in one of “30 regulatory reforms” designed “to awaken the Square Mile” and bolster its position as an international financial centre. Dubbed the “Edinburgh Reforms” (because they were announced there), or Big Bang 2.0, the measures will also loosen the capital “ringfencing” rules for retail banks; mandate financial regulators to focus on economic growth and competitiveness; and allow pension funds to invest in a wider range of assets. “Risk-taking in the City is back with a bang.”

Mixed reactions

The plan was applauded in the City. But elsewhere, the reaction was one of horror, said Kalyeena Makortoff in The Guardian. Sir John Vickers, the economist who led the inquiry into the UK banking industry after the 2007-08 crisis, said the Chancellor may be taking Britain down an “extremely dangerous path”.

Vickers is “particularly concerned” about plans to roll back ringfencing rules that protect savers by separating their deposits from riskier investment banking operations. Although targeted at smaller banks, they could also result in larger operators, such as NatWest and Lloyds, “facing fewer restrictions on how they fund their operations”, while enabling them “to sell more complex products to customers”.

‘Debatable’ proposals

Hunt is right, said Lex in the FT: “over-stringent banking regulation fosters the stability of a graveyard”. But while some proposals, such as loosening the EU-imposed Mifid II regulatory regime, are “undeniably welcome”, others are “debatable”.

Rather than abandoning “the principle of accountability” for senior managers, it would be better to enforce it narrowly but strictly. And anything other than “minor tweaks” to ringfencing would be a mistake – it might boost competition, but at the cost of requiring “future bailouts”.

The regulatory cycle follows “a well-worn pattern”, said Patrick Hosking in The Times. “A market crash, or consumer scandal leads to howls for something to be done and an abrupt tightening of the rules.” Then these safeguards get slowly chipped away – until the next crash. “Too much City ‘growth’ and innovation… is built on nothing more than complexity and leverage.” They’ve tried “unleashing the City’s potential before”. It didn’t end well.

Rishi Sunak was praised as a man of “integrity” by CBI director-general Tony Danker when he addressed the business group’s annual gathering in Birmingham this week. Members may have concluded that anything is better than “blathering on about Peppa Pig World” like his predecessor, said Ross Clark in The Spectator. But Sunak’s performance was hardly inspiring: “his usual enthusiasm sounded more like a desperate appeal”.

The PM, after all, knows as well as his CBI audience that last week’s Autumn Statement “was not about stimulating growth. It was 90% fiscal consolidation.” Sure, businesses were “thrown a few cherries in the form of R&D incentives”; but the “underlying story” is that they’re “going to pay more tax”. Neither the rise in corporation tax to 25% nor higher capital gains tax bills will stimulate investment.

Chancellor Jeremy Hunt did offer one other sweetener, said Daniel Thomas in the FT: a five-year relief on business rates worth £13.6bn. But critics, such as the Federation of Small Businesses, said that the Chancellor’s statement was “high on stealth-creation and low on wealth-creation”, and would pile more pressure on the UK’s 5.5 million small firms. Others “expressed dismay that the Government had not done more to try to stimulate the economy” – by, say, forging “a new deal” on immigration to solve staff shortages, or loosening EU trading rules.

Here, again, the PM disappointed, said Harry Horton on ITV. Sunak categorically denied talk of a move towards a “Swiss-style EU deal”, featuring more liberal migration rules and the possibility of more frictionless trade. Few in the audience were mollified by his assertion that better “robotics and automation” could do the trick instead.

In prioritising financial stability over anything else, said Alex Brummer in the Daily Mail, the Treasury is “stifling enterprise and entrepreneurship”. Yet, bizarrely, they take Silicon Valley as their model, said Dominic O’Connell in The Times. And when Hunt outlined the “future engines of the economy”, he listed just five: digital, life sciences, green tech, financial services and hi-tech manufacturing. If you run a traditional manufacturing business, “you would definitely feel unloved”. Trade bodies say that British firms are “in survival mode”.

They’re right, said Matthew Lynn in The Daily Telegraph. The Autumn Statement may have gone down pretty well with markets, but it’s “a recipe for stagnation”. Britain has “chosen” to become a zero-growth economy – as in “Italy or Japan, whole decades will go by with no increase in total output”. If they adapt, firms can survive even this challenging environment. But let’s not pretend it will be anything but “a grind”.

Jeremy Hunt confirmed that the UK was “now in recession” as he announced tax hikes and public spending cuts totalling £55bn in his Autumn Statement this week.

Revealing the government’s budget plans, the chancellor said the UK needed to give “the world confidence in our ability to pay our debts”. His plans leave Britain facing the highest level of taxation since the Second World War, as households nationwide feel the effects of the cost-of-living crisis and a record fall in living standards.

Hunt told the BBC this morning that his fiscal plans were necessary to “get through” the recession, “bring inflation down and grow the economy healthily when we get to the other side”.

Labour’s shadow chancellor Rachel Reeves said the Autumn Statement was effectively “an invoice for the economic carnage the government has created”.

To find out how closely you’ve been paying attention to the latest developments in the news and other global events, put your knowledge to the test with our Quiz of The Week.

Need a reminder of some of the other headlines over the past seven days?

• Donald Trump announced plans to run for the US presidency in 2024, setting the stage for a showdown with Ron DeSantis, his main rival to be the Republican candidate
• An Iranian court issued the first death sentence related to the anti-government protests that have rocked the country following the death of Mahsa Amini
• Nato said a missile strike that killed two people in Poland was likely to have been fired by Ukrainian forces in response to a Russian attack
• EU negotiators at Cop27 backed a “loss and damage” fund for poor countries hit hard by the effects of climate change.

Labour’s Rachel Reeves won plaudits for her immediate takedown of Chancellor Jeremy Hunt’s Autumn Statement, which she labelled “an invoice for the economic carnage the government has created”.

The shadow chancellor was widely praised for her response to Hunt’s announcement – which featured tax hikes and spending cuts – as well as to Kwasi Kwarteng’s disastrous mini-budget back in September. “Not since Gordon Brown faced off against Ken Clarke in the early 1990s has a Labour shadow chancellor been so effective at dismantling the Tory economic record,” said Patrick O’Flynn in The Spectator.

If Hunt’s austerity-driven Autumn Statement was a test to see whether or not Reeves is a viable chancellor-in-waiting, she “comprehensively passed it”, he added.

But the party and Reeves’s quickwitted dismantling of Hunt’s plan “leaves something big on the table: a positive vision of what Labour would do differently”, said Archie Bland in The Guardian’s Friday morning briefing.

“Reeves’s speech yesterday was full of punchy lines,” Bland continued, “but they were more focused on making the government sound like bungling, venal morons than advancing a different theory of the economy.”

An editorial in the same paper agreed, saying that “Labour is not offering any competition for people’s thinking”.

‘Hallmarks of a Labour budget’

Perhaps one reason why Labour has not offered an opposing plan is that “Hunt’s autumn statement had all the hallmarks of a Labour budget”, said Beth Rigby, Sky News’s political editor. With the UK’s tax burden now at its highest point since the Second World War, Rigby argued that Hunt’s latest fiscal plan “borrowed much from the opposition front bench”.

Last Sunday, just four days before Hunt’s statement, Reeves announced that Labour would extend the windfall tax and raise capital gains tax. Hunt announced iterations of both of these ideas, with tax hikes in the form of threshold freezes and an increase to the windfall tax on energy companies. Such were the similarities between the two chancellors’ visions that one senior economist told Rigby that the Conservatives had “shot Labour’s fox”.

Writing for The Spectator, Isabel Hardman agreed with Rigby, stating that Hunt’s measures “weren’t a million miles away from what you’d expect from Labour in these circumstances”. Like O’Flynn, Hardman was impressed by the “mix of cold fury and jokes” with which Reeves assessed Hunt’s economic announcements.

But, added Hardman, “Labour shouldn’t just congratulate itself”. Instead, the party must hammer home its criticisms “until Westminster gets bored of them and voters are picking up on them”.

Fresh calls for a general election

Despite similarities between Hunt’s budget and Labour policy, opposition MPs took yesterday’s statement as an opportunity to call for an early general election – and a Labour government. “It’s time to break free from [the Conservative Party’s] vicious cycle,” said deputy leader Angela Rayner, while Jarrow MP Kate Osborne tweeted that “we need a #GeneralElectionNow so we can start to fix this mess”.

But opposition MPs stopped short of announcing policies or stating how their plan for government would differ from the approach taken by Rishi Sunak’s recently formed Tory cabinet.

‘Poisoned chalice’

Should Labour be returned to power following the next election, the party will inherit a “poisoned chalice”, said Chloe Chaplain on the i news site. “Under the current projections”, Hunt’s statement could commit Keir Starmer to “considerable public cuts in his first years in office”, leaving the Labour leader in a “difficult position”, she wrote.

Speaking on BBC Radio 4’s Today programme on Friday morning, Reeves said her party “will not be able to do everything we want as quickly as we want” because of the “mistakes the Tories have made”.

But when challenged by presenter Mishal Husain on the steps Labour would take once in office, Reeves “refused to spell out” what the party would “scale back” in its own spending plans, reported Oli Smith in the Daily Express.

Jeremy Hunt has delivered his Autumn Statement in the House of Commons, promising to restore market confidence in the UK economy while committing to deep spending cuts.

The chancellor claimed his “plan for stability” will save £55bn, and it includes both tax rises and cuts to public spending. However, Hunt admitted that the UK was already in recession.

Personal tax

The threshold for the highest rate of income tax has been slashed from £150,000 to £125,140, meaning more people will pay the 45p top rate.

Meanwhile, the chancellor announced a series of threshold freezes, which will ultimately bring in more revenue for the Treasury. Income and inheritance tax thresholds will be frozen for a further two years, on top of the existing four-year freeze. The annual tax exemptions for capital gains and dividends will be cut.

Hunt admitted: “We are asking more from those who have more.” However, The Telegraph said that “Britain is on course for its highest tax burden on record” as the threshold freezes will mean “thousands of people are dragged into higher tax bands”.

Business tax

Hunt has announced a new, and temporary, 45% levy on electricity companies, which is expected to raise £14bn. This is alongside a host of other windfall taxes including a rise in the existing tax on gas and oil companies from 25% to 35%.

The chancellor was quick to confirm that 40% of businesses would continue to pay no National Insurance contributions at all in an attempt to convince the public that the Conservatives remain the “party of business”. But, as Aubrey Allegretti, a political correspondent for The Guardian, explained: “Many of the announcements he is making relate to years long after the next general election – so some of the pain will not be felt for years to come.”

Public spending

Along with higher taxation, the chancellor is also cutting spending on public services. Despite promising that budgets would “continue to rise in real terms”, Hunt confessed that departmental spending would – in the short term – remain at the rate agreed in the 2021 Spending Review.

There was good news for the NHS, which will see its budget increased by £3.3bn in each of the next two years, and for schools, which will receive an extra £2.3bn in both 2023/24 and 2024/25.

Allegretti questioned the combination of taxation and public service cuts, suggesting that “voters might wear higher taxes, but they would probably expect better from languishing public services”.

Energy

While the cap on residential energy bills will be extended for a further 12 months from next April, it will rise from £2,500 to £3,000. An extra £900 of support will be provided to households on means-tested benefits, £300 more will be given to pensioners and £150 will be given to those on disability benefit.

Hunt confirmed the government will press ahead with plans for a new nuclear power plant at Sizewell C in Suffolk, while also continuing to pursue a strategy of energy efficiency across the construction industry.

Foreign aid

Foreign aid spending will remain at 0.5% of national income, still below the government’s official target of 0.7%, although defence spending will be kept to at least 2% of GDP. There are no plans for foreign aid spending to be returned to the target rate. Laura O’Callaghan, writing for The National, said Britain has seen “its reputation as a leader in international aid” suffer as a result of successive cuts to the aid budget.

Jeremy Hunt will raise taxes, cut public spending and rein in energy support to fill what the Treasury has called an “eye-watering” black hole in the nation’s finances.

In his Autumn Statement this morning, the chancellor said the UK needed to give “the world confidence in our ability to pay our debts” as he laid out plans to “deliver a consolidation of £55bn”.

However, some economists have questioned the Treasury’s calculations because they are created by arbitrary fiscal rules set by the government.

What did the papers say?

The black hole is “the gap, the space, between future tax revenues and public spending, which, if big enough to bust the fiscal rules, has to be tackled”, wrote David Smith, economics editor of The Sunday Times.

However, there was “no hint” of this “fiscal mess” when Rishi Sunak campaigned for the Tory leadership over the summer, he added. The former chancellor promised further tax cuts because, “on the face of it, the public finances were in good shape”.

The Office for Budget Responsibility (OBR) had warned in March that the chancellor’s fiscal headroom “could be wiped out by relatively small changes in the economic outlook”. Since then, a drop in GDP and surges in interest rates and inflation have caused a “shift in the OBR’s assessment of the public finances”, wrote Smith.

By July, the £30bn of headroom had been lost because of higher inflation, higher interest rates and slowing economic growth. Some have pointed the finger of blame at Liz Truss and her controversial mini-budget, but although she has “undoubtedly made a bad situation worse” she is “not to blame”, wrote Joel Hills, business and economics editor at ITV News.

The problem, he argued, is that the UK has been “hit by a series of economic shocks: Brexit, the pandemic and the war in Ukraine”, while “inflation is rampant, interest rates are rising and the labour market is tight”.

Meanwhile, “left-of-centre economists” have questioned the very idea of a “measurable ‘black hole’ in the public finances”, said The Guardian. It argued that “its existence is only created by whatever fiscal rules the government has set itself” and that estimates of its size are “highly sensitive” to economic projections.

In a paper he co-authored for the Progressive Economy Forum, the economist Jo Michell spoke of the “dangerous fiction” of a fiscal black hole at a time when there are a number of “turning point signals” that mean it makes more sense to wait before introducing tax and spending measures.

What next?

Speaking to the Daily Mail at the weekend, Hunt admitted there is “some choice” over the fiscal rules a government chooses to follow and “also uncertainty in any projections”. However, he warned that if the UK failed to show the world that “we are going to pay our way”, there will be “higher interest rates, higher inflation, more instability and more worries for families and businesses”.

His Autumn Statement is “seen as crucial for restoring economic stability and credibility” after former chancellor Kwasi Kwarteng’s mini-budget in September “sparked market turmoil”, said the Nick Eardley, the BBC’s chief political correspondent.

Sunak “wants to be the premier fiscal hawk in Britain”, wrote Sam Coates, deputy political editor of Sky News, “unafraid to take difficult decisions and cut the state”. But, warned Coates, “this comes at a political, as well as an actual, cost”.

The UK is once again being labelled the “sick man of Europe” as wages continue to lag well behind the soaring cost of living and a dysfunctional labour market contributes to a looming recession.

According to the Office for National Statistics, GDP fell by 0.2% in the third quarter of the year, the first indicator of what the Bank of England predicts could be the longest sustained period of negative growth in a century, setting unemployment on course to nearly double by 2025.

UK productivity growth in general since the 2008 financial crisis has trailed that of comparable nations such as the US, France and Germany. Median incomes have also lagged behind neighbouring countries over the same period, according to the National Institute of Economic and Social Research. Only Russia – hit hard by crippling international sanctions following its invasion of Ukraine – is forecast to have worse economic growth in 2023 than the UK among the G20 nations.

What did the papers say?

“Global factors are at play,” said The Telegraph: “inflation is sweeping across much of the world, Russia’s war has unleashed an energy crisis across Europe and interest rates are soaring as the cheap debt of the post-financial crisis years evaporates.

“Yet the UK has found itself at the forefront of the crunch,” said the paper, which asked: “Why is Britain suffering more than its peers?”

One major factor is the UK’s dysfunctional labour market. On the face of it unemployment, currently at 3.6%, is near its lowest point for nearly half a century. Yet despite demand for staff, the number of people in work has failed to recover to pre-Covid levels, unlike in every other G7 country where employment has risen compared with the end of 2019.

The answer, said The New Statesman, “goes beyond EU workers lost to Brexit, pandemic labour supply issues, or the discredited Big Quit theory – that we woke up to our meaningless 9-5 lives during lockdown and decided to resign en masse”. While these may have had some impact, “the real answer can be found in a clunky-sounding measure called ‘economic inactivity’: working-age people who aren’t working or looking for jobs”, said the magazine.

Almost 9 million people of working age are now classed as “economically inactive” – that is, neither in work, nor looking for work – a rise of more than 600,000 since the pandemic began.

This includes an increase in early retirement and, crucially, a sharp jump in long-term sickness, which is “the driving factor for increases in inactivity among older age groups”, reported The Health Foundation.

“The combination of rising long-term sickness and a backlog of 7 million people waiting for NHS treatments is a toxic one,” said David Smith, economic editor at The Sunday Times. “It all adds up to a labour market that is more dysfunctional than at any time in recent history.”

Back in the 1970s, the then US secretary of state Henry Kissinger famously declared that economically “Britain is a tragedy”, said Politico. Now “the United Kingdom is heading to be the sick man of Europe once again”, the news site added.

What next?

While “the starkest number contained in the latest employment figures is the record gap between pay rises in the private and public sectors”, that the size of the potential workforce continues to shrink “remains most baffling to economists”, said BBC business editor Simon Jack.

Chancellor Jeremy Hunt made it clear over the weekend that he saw the UK’s shrinking workforce as one of the main challenges facing the economy, because it would hold back economic growth while adding to wage pressures that could make higher inflation last longer.

As a consequence, with “living costs rising and fewer people available to work, employers have had to offer higher pay to fill vacancies, even though earnings have still not kept pace with rising prices”, said the Financial Times.

How exactly the gaps in the labour market can be filled “remains a source of debate”, said The Spectator: “should full emphasis should be put on getting British natives back into work, or do we need more immigration?”

“One certainty is that Tory ministers are concerned about the labour shortage – leading to internal rows over loosening immigration – and Labour has noticed,” agreed The New Statesman. Shadow work and pensions secretary Jon Ashworth has proposed a “reformed employment service” to give specialist, tailored help to over-50s.

“Reviving the UK’s flatlining economy will not happen overnight,” said Politico. “Experts speak of an unbalanced model heavily reliant upon Britain’s services sector and beset with low productivity, a result of years of underinvestment and a flexible labour market which delivers low unemployment but often insecure and low-paid work.”

But, the news site noted, “as Italy’s experience demonstrates, it’s one thing to diagnose an illness – another to cure it”.

Jeremy Hunt has warned of higher taxes for “everyone” and significant cuts to public spending ahead of his Autumn Statement this Thursday.

Speaking to BBC One’s Sunday with Laura Kuenssberg programme, the chancellor said the UK economy was facing “very choppy waters” and had probably already entered a recession. He wants to fill what Treasury officials have called an “eye-watering fiscal black hole” of £50bn.

The “highly anticipated” fiscal event “will have a massive effect on Brits, especially as the cost-of-living crisis continues to crunch household finances”, said The Sun.

Advance reports suggest Hunt will adopt a 50:50 split between spending cuts and tax rises, in contrast to George Osborne’s 80:20 austerity ratio.

Spending cuts

Cuts to public spending are expected to mostly take the form of “efficiency savings” from government departments, said The New Statesman, which “could mean the scaling back of some projects, Whitehall job cuts and real-terms reductions in public sector pay amid high inflation”.

Thursday’s announcement will undoubtedly have a “big impact” on public spending, with government departments expected to be capped by the funding limits originally allocated in 2021, until 2025, said Kuenssberg on the BBC.

This would amount to “a huge budgetary tightening on the same scale as his predecessor George Osborne’s austerity Budget of 2010”, reported the Financial Times. Last week, the paper estimated that the chancellor intends to cut £33bn from public spending and £21bn from tax rises, but said the final figures were yet to be decided.

Prime Minister Rishi Sunak has vowed to protect only one area of spending, the NHS, meaning others could face much deeper cuts.

The government has already indicated it will look to cut planned investments such as the HS2 rail project. Cutting capital spending might raise £10bn, but paring back public investment would be the “anti-growth” option, according to the Resolution Foundation.

Stealth taxes

“It is understood most of the extra revenue will come from freezing tax thresholds,” said Kuenssberg.

She wrote: “In order to stick to the Conservatives’ manifesto promise not to raise individual taxes the chancellor will instead repeat the trick of his predecessor. He’s expected to freeze the threshold at which you start paying tax. It’s got a horrible technical name – ‘fiscal drag’ - and it can have a horrible impact on earners too.”

The Sun described these as “stealth taxes”. It means that “while the government doesn’t change the headline tax rate, you end up paying more money”, explained the paper, “because while salaries rise, the tax threshold stays the same, and so you get dragged into paying higher rates”.

The £12,570 threshold where you start paying 20p income tax and 12p National Insurance is already being frozen for four years until April 2026. Many now expect a freeze on income tax thresholds to be extended for another two years, meaning, for example, those earning more than £50,000 a year could end up paying £3,659 more in tax overall.

Inheritance tax threshold freeze

The same thinking is behind a predicted freeze on the inheritance tax threshold, “a move that could pocket the Treasury an extra £1bn from grieving families”, said MoneyWeek. Hunt is expected to maintain the £325,000 threshold, which has been frozen since 2009, for a further two years beyond the planned end date of April 2026. An estimated 10,000 extra families may have to pay inheritance tax in those two years “as more people’s estates are dragged above the tax threshold”, said the magazine.

Patrick O’Flynn in The Telegraph dubbed the plans a “slap in the face to Conservative voters” and claimed it amounted to a “cruel and unusual punishment being enacted upon the homeowners of Middle England”.

Energy profits levy extension

With the likes of BP and Shell reporting record profits in the three months to September, “pressure is continuing to mount for an enhanced windfall tax on oil and gas giants to help fill the Treasury coffers”, said Sky News.

The Times reported that Sunak and Hunt want to maximise revenues by increasing the tax rate on oil and gas profits from 25% to 35%, extending the policy until 2028, and expanding it to cover electricity generators. This could raise an estimated £45bn over five years, the paper said.

The Treasury was forecast to raise £7bn through a windfall tax on profits from oil and gas companies' UK businesses in 2022, yet figures from the Office for National Statistics show the amount collected between May, when the levy came into force, and the end of September was just £2.8bn.

Benefits and pensions claimants prioritised

There had been reports Sunak and Hunt were looking for ways to raise benefits in line with wages rather than inflation and to drop the Osborne-era pensions “triple lock”, which commits to raising pension payments in line with inflation, average earnings or by 2.5% each year, whichever is higher.

The first measure alone would save the Treasury an estimated £5bn a year. However, the move would be politically dangerous, especially at a time when people are struggling to pay their bills amid a cost-of-living crisis that will disproportionately affect those on benefits and low income.

Because of this, The Times expects Sunak and Hunt “will increase pensions and benefits in line with inflation in an effort to ensure the budget is seen as ‘fair and compassionate’”.

This does not mean either commitment will survive past the next election, though. According to the Daily Mail, ministers are considering scrapping the triple lock altogether after 2025 and replacing it with a different formula, something Sunak has not ruled out.

Pensioners and those on benefits are also expected to received targeted help with one-off payments towards rising bills once the government’s energy price cap comes to an end in April next year. While it could save the Treasury £40bn from the total cost of the energy bailout, it is expected to add hundreds of pounds a year to households that are not eligible for help.

Rishi Sunak’s cabinet reshuffle marks the start of a fresh round of clashes between the Labour and Conservative frontbenches.

The new prime minister has replaced a third of Liz Truss’s cabinet in “an attempt to reset the government” following her “calamitous 49-day premiership”, said The Telegraph’s political editor Ben Riley-Smith. Sunak has removed “key allies” of Truss and Boris Johnson and “rewarded some loyal supporters with top jobs”, wrote the BBC’s Paul Seddon.

But while the arrival of Britain’s first ethnic-minority prime minister has been heralded as a milestone for diversity, it “looks like Rishi has a woman problem”, an insider told The Sun. With just seven women among the 22 full-time members of the new cabinet, “it’s like Boris’s cabinet, without Boris”, the source reportedly quipped.

On the opposite side of the despatch box, Labour leader Keir Starmer has told his shadow cabinet to use their tried-and-tested “stock of well-honed attack lines” against Sunak, according to The Guardian’s Jessica Elgot. But new tactics may come into play as each member of the Labour team squares up against their Tory counterpart.

Home office: Suella Braverman vs. Yvette Cooper

Braverman arrived back in the Home Office as home secretary just days after quitting the role for breaking the ministerial code. The Telegraph’s leader column welcomed Braverman’s chance “to prove her abilities” after she was forced to resign “over a technicality”.

But Cabinet Secretary Simon Case was “livid” about her swift return, The Times reported .And charities have accused Sunak of “amping up the cruelty” in his new cabinet by bringing the right-winger back into the fold, said The Independent’s home affairs editor Lizzie Dearden.

Braverman made a bid for the top job back in July, but was eliminated from the Tory leadership race in the second round after attracting only 27 backers. By contrast, her Labour counterpart has been tipped as a future leader of the opposition party.

Last year Cooper “received an outpouring of support for asking a series of powerful questions” about Covid to the then home secretary, Priti Patel, said Indy100. Cooper has also laid into the decision to appoint Braverman to the role, accusing Sunak of putting “party before country”.

Foreign office: James Cleverly vs. David Lammy

Cleverly has retained his role as foreign secretary despite having regularly courted controversy over the years. In 2010, he was forced to apologise after tweeting that Lib Dem deputy leader Simon Hughes was a “dick”. In 2019, Cleverly himself came under attack on social media for dismissing Ken Loach’s benefits film I, Daniel Blake as “a work of fiction”.

Indeed, Cleverly is regularly portrayed on social media as “an unusually stupid politician”, wrote Ailbhe Rea The New Statesman.

Lammy has attracted his fair share of criticism too. In 2019, he was criticised for saying that comparing the Tory party’s European Research Group (ERG) to the Nazis was “not strong enough”.

But Lammy has been applauded for his performance and policies as shadow foreign secretary since taking on the role last year. Environmental campaigners welcomed his vow at the Labour conference in September to introduce a “green dimension” to foreign policy so that “never again will we be dependent on fossil fuel dictators”.

Treasury: Jeremy Hunt vs. Rachel Reeves

Hunt, who stays on as chancellor, is “seen as a steady hand, so keeping him could be an attempt to reassure the markets”, said Sky News’s Faye Brown. Since being parachuted in by Truss earlier this month to replace Kwasi Kwarteng, Hunt has “won plenty of praise from both his own party and even grudging respect from those opposing him”, added the i news site’s Paul Waugh.

Yet both of Hunt’s tilts at the party leadership ended in failure. And while he was previously was Britain’s longest-serving health secretary, he was also “very possibly” the “most unpopular”, said The Times, with healthcare staff accusing him of driving medics out of the profession.

As Sunak’s new cabinet now settles in, Hunt’s opposite number “is convincing the City they can bank on her”, said The Sunday Times. Following a “whirlwind tour of breakfasts, lunches and dinners with captains of industry”, former Bank of England economist Reeves has “come to be seen as an unflashy but credible contender for No. 11”, according to the paper.

Her reported success marks a major reversal in fortunes for Reeves, who finished in fourth place in the 2006 Bromley and Chislehurst by-election, as Labour’s support fell from 10,241 votes to 1,925 – the worst performance for a governing party since 1991.

Department for Levelling Up: Michael Gove vs. Lisa Nandy

Secretary of State for Levelling Up Gove has become the Tories’ “undisputed comeback king” after being “recalled to the cabinet following his latest spell in the wilderness”, said The Telegraph’s associate editor Gordon Rayner.

“It’s stating the obvious but the reason he keeps being brought back into the fold is because he gets stuff done,” an unnamed ally told the paper, “and there are precious few ministers who you can say that about.”

But Nandy is also a “formidable performer”, said Politico’s Eleni Courea.

The Labour shadow minister is “neither from the ‘Corbynista’ nor the more right-wing ‘Blairite’ side of the party”, the Financial Times said. The Guardian agreed that the “refreshingly untribal” Nandy has the “pragmatism and ability to bridge divides”.

Deputy PM: Dominic Raab vs. Angela Rayner

Reappointed deputy PM after just a few months on the sidelines, Raab has received mixed reviews for his performances in the chamber. In April 2020, he took over prime ministerial responsibilities while then Tory leader Johnson was hospitalised with Covid.

Politico’s Annabelle Dickson reported that according to “half a dozen current and former colleagues” of ex-lawyer Raab, he was “a forensic stand-in for the prime minister, albeit one who sometimes lacks charm”.

Raab has also served as foreign secretary but was demoted to justice secretary last September, following criticism of his handling of the withdrawal from Afghanistan.

Rayner has trodden a sometimes rocky political road too. Long-running tensions between Rayner and Starmer came to a head when he sacked her as party chair and national campaign coordinator following Labour’s poor local election results in 2021. Months later, she was criticised for describing Tories as “homophobic, racist, misogynistic … scum” at the Labour conference.

Yet Rayner has also been praised for her plain-speaking style and has performed well against Raab in the Commons. “Rayner skewers Raab at PMQs,” Isabel Hardman reported in The Spectator following a clash in July.

Jeremy Hunt has been described as “the most powerful man in government” and “de facto prime minister” following his surprise appointment last week.

After the new chancellor axed most of Liz Truss’s mini-budget, the ever-influential power-dynamic between No. 10 and No. 11 Downing Street is back under the spotlight.

While Hunt’s position is seen as exceptionally strong, Truss has shown her power by already sacking one chancellor during her short reign. Prime ministers and chancellors are “rarely the friendliest of neighbours”, said The Guardian, as there is a “history of rivalry”, between them.

Who really has the power?

There have been many “power struggles between No. 10 and the Treasury”, agreed policy experts Dave Richards, Diane Coyle, Martin Smith and Sam Warner for LSE Blogs.

The authors recalled how, in 1964, the new Labour PM Harold Wilson created the “ill-fated” Department for Economic Affairs with responsibility for driving economic policy, in the hope of “clipping the wings of the Treasury”.

In 1989, Margaret Thatcher and her chancellor, Nigel Lawson, were at “loggerheads” over whether to join the exchange rate mechanism (ERM), recalled The Guardian. The chancellor demanded that the PM sack her own economic adviser, Sir Alan Walters. When she refused, Lawson quit, which unleashed a series of events that ultimately ended Thatcher’s premiership.

With Tony Blair and his chancellor Gordon Brown there was “more than a decade of festering resentment��� between the Treasury and No. 10, recalled Jon Davies, co-author of a book about the Blair years, in The Telegraph.

So “jealous of his perceived terrain” was Brown, said The Telegraph, that in 2000, when the PM announced on TV that Britain would reach the European average for health spending, Brown stormed into No. 10, shouting: “You’ve stolen my f***ing Budget!”

Do they need to be friends?

After Brown finally took over in No. 10 in 2007 he often clashed with his own chancellor, Alistair Darling. Perhaps mindful of the political damage that such tensions caused, David Cameron and George Osborne, who were already friends and godfathers to each other’s children as they settled into No. 10 and No. 11 Downing Street, formed a comparatively positive relationship.

Osborne was Cameron’s “closest ally” in government, said the BBC, and served as his chancellor for the six years Cameron was prime minister – from 2010 to 2016. However, Cameron’s successor, Theresa May, reverted to form and endured a “tense” relationship with her financial colleague, Philip Hammond, said The New Statesman.

During the Covid pandemic, Rishi Sunak’s furlough programme, made the then-chancellor the most popular member of the government – “a status ‘Dishy Rishi’ burnished with slick social media messages that stressed his own brand more than the government’s”, said AP. His Eat Out to Help Out policy also saw Sunak take “centre stage” in 2020, noted the Daily Express.

Ultimately, it was said that Sunak “wielded the dagger” that knifed Boris Johnson in the back and brought about his departure from Downing Street, said The Independent, as another ruined PM/chancellor relationship changed everything.

Why does it matter?

The connection between PM and chancellor is “probably the most important, and potentially the most problematic, of all ministerial relationships”, wrote history professor Richard Toye on the Exeter Blog.

Domestic economic management is “the most important factor in determining electoral success”, wrote Toye. Therefore, the chancellor becomes “a unique point of strength or weakness” for a prime minister. If the relationship goes well and the economy thrives, the PM can feel “fairly secure in 10 Downing Street” but if it goes wrong the consequences can “rock a government to its foundations”.

Getting the balance right is easier said than done for the MP in No. 11. A problem for chancellors is that “if they get too close to the prime minister, then like George Osborne, they become tarnished when the PM is out of favour and the political parties look for a ‘clean break’,” said Tax Journal.

“If, however, chancellors fall out with prime ministers,” then “their careers tend to be cut short by the prime minister”.

Liz Truss has declared her commitment to the pensions triple lock, a Conservative manifesto pledge in successive elections since 2010, despite rumours that she was set to renege on the promise.

Earlier this week, Downing Street said the prime minister was “not making any commitments” on government spending. Pushed on pensions specifically, a spokesperson said that reviewing the previous triple lock commitment was a “mutual decision” by Truss and the new Chancellor Jeremy Hunt, and it was their “agreed position” to prioritise economic stability.

But at a tumultous PMQs, Truss told MPs that she was “protecting the triple lock” after all, adding: “We have been clear in our manifesto that we will retain the triple lock. I am completely committed to it and so is the chancellor.”

After a morning of front pages “screaming about the prospect of the state pension shrinking - and sending the Foreign Secretary James Cleverly out this morning to defend that - Truss has now about-turned again, back to where she was originally”, said the BBC’s political editor Chris Mason.

Describing it as a “U-turn on a U-turn”, The Guardian’s political editor Pippa Crerar tweeted that the chancellor’s “clenched jaw” suggested he wasn't quite so committed.

With today’s announcement that inflation has returned to over 10%, keeping the triple-lock means state pensioners would see a rise in their weekly payment from £185.15 to just over £200 in April 2023, “helping to alleviate some of the other pressures on their budgets during the cost-of-living crisis”, said The Guardian.

What do the papers say?

“It is not hard to see why” the chancellor was refusing to guarantee the triple lock, said The Times’s Oliver Wright and Steven Swinford. “If Hunt decided to raise pensions by average earnings rather than inflation it would save the Treasury £4 billion to £5 billion a year,” they added.

But news of the potential U-turn had not gone down well in the Conservative party heartlands. “Don’t dare go back on pensions triple lock” was the Daily Express’s front page as it claims Truss is “betraying” pensioners. “Millions face pain on pensions” was the Daily Mail splash.

The pensions triple lock “has been a central pillar in Tory policy towards the elderly for the last decade”, said The Telegraph, “appearing in successive Conservative election manifestos”. But with annual inflation growth hovering around double digits, well above wage growth which sat at 5.4% in August, this promise “would cost the government at a time when it is trying to reel back with tax cut reversals and spending cuts”, said the Financial Times (FT).

It would, though, “cause real hardship for some of the least well-off people in the UK and would be certain to trigger a political backlash”, said The Guardian’s economics editor Larry Elliott. In total, pensioners would be £471 a year worse off than they expected to be next April, and those who retired after 2016 will see their payments decrease by £614.

Senior pensions and retirement analyst at Hargreaves Lansdown, Helen Morrissey, told the FT there will be many pensioners banking on this increase, especially after last year’s increase of just 3.1% “was rapidly swallowed up by rising inflation leaving many people struggling to cope”.

What next?

There remain serious doubts that the government would be able to push through any changes to the triple lock, given the serious disquiet among Conservative MPs.

Maria Caulfield, the Tory MP for Lewes, tweeted: “I will not be voting to end the pensions triple lock. Pensioners should not be paying the price for the cost of living crisis whether caused by the war in Ukraine or mini budgets.” MP for St Austell and Newquay Steve Double added: “Nor me”.

Others have cited that the decision to remove universal help with energy bills in April may mean the government can ill afford another blow to the pockets of pensioners in the same month. “A reduced pension rise, combined with a cut in help on energy bills, could be part of a ‘double whammy’ for millions of pensioners,” said former pensions minister Sir Steve Webb.

However, “it could be argued that it is unfair that pensioners should be protected from inflation while urging wage restraint on firms”, said The Times’s Wright and Swinford. “Against this, the triple lock is politically totemic.”

Indeed one Tory backbencher told the i news site: “They are joking. Who was it that voted for us last time? Brexiteers and pensioners. Sorry but it’s not going to happen.”

Households are facing average energy bills as high as £5,000 from April following Liz Truss’s latest policy U-turn.

Under the government’s energy price guarantee, a typical household using both gas and electricity would have paid £2,500 annually for two years.

However, Chancellor Jeremy Hunt announced yesterday that the guarantee will finish next April, with a review being launched on how to support consumers after that.

The government said its new policy will “cost the taxpayer significantly less than planned” and will target those most in need of support.

Speculation is already underway on where this will leave energy bills in the spring. Ofgem, the regulator, has yet to set a cap for April, but the consultancy Auxilione “predicts that average bills could hit £5,078”, according to The Times. Other forecasters’ predictions are lower: RBC Capital Markets expects £4,684 a year, the Resolution Foundation £4,000 and Investec £3,923.

Meanwhile, tweeted Samuel Tombs, chief UK economist at Pantheon Macroeconomics, if Hunt lets Ofgem set the price cap again from April, “then current wholesale prices point to a 73% jump in energy bills, to £4,334, for those no longer receiving any support”.

There is uncertainty about who will receive support from April. The U-turn on energy “was of course forced by turmoil in the markets”, wrote Helen Thomas in the Financial Times, but the change of plan means “it is entirely unclear who will be supported, at what prices and in what way come spring”, she added.

National Energy Action told Sky News that ending the energy guarantee after six months is an “almighty trade-off” that has already caused “huge uncertainty”.

The fuel poverty charity’s chief executive Adam Scorer said: “Many vulnerable people were holding on by their fingertips. Government has to be very, very careful it doesn’t prise them away.”

Jeremy Hunt has announced the reversal of “almost all” of the tax measures proposed in the growth plan put forward by Liz Truss and his predecessor Kwasi Kwarteng only three weeks ago.

In a statement this morning, the new chancellor also said that Truss’s flagship energy cap price guarantee, which was due to last for two years, would now be reviewed in April. A Tory party insider described the energy and tax U-turns as “an utter humiliation of the prime minister”, according to the Financial Times’s Sebastian Payne.

Pundits had expected the reversal of the tax cuts, which triggered market turmoil, but the axing of Truss’s long-term spending commitment on energy was a “big surprise”, said The Guardian’s Andrew Sparrow. “There is nothing left of the Truss agenda at all.”

What the papers said?

The pound “spiked” and “borrowing costs are falling further” following Hunt’s statement about the government’s medium-term fiscal plan, said The Telegraph.

The announcement was brought forward from 31 October amid growing calls from both outside and within the Tory party for Truss to quit. The aim will be “to appease markets and Tory MPs alike” following the “disastrous fallout” from Truss’s original plan, said Politico.

But “abandoning the existing energy price cap scheme from April leaves this government holed below the waterline”, argued Sky News’s political editor Sam Coates. As well as households now having to face energy bill rises from April, “just as millions face mortgage payments too”, the reversals also suggest that “Labour got it right when Truss got it wrong” by proposing universal rather than targeted support.

And if the bid to steady market nerves is successful, Hunt is likely to get all the credit, according to some analysts. Truss “is no longer leading”, wrote The Telegraph’s associate editor Christopher Hope. Instead, “she is being led”.

What next?

One of Truss’s “biggest political problems is that cabinet ministers and senior MPs are already leadership plotting and organising in private”, tweeted the FT’s Payne. “Much like the end of Boris Johnson, it’s very hard to put all that back in the bottle once it's out.”

Amid mounting speculation yesterday about Hunt’s announcement, Payne reported that “even at the most senior levels of government, there is a sense that the arrival of a new chancellor has not saved the prime minister”.

But a “senior” Conservative ally of the PM told The Sun that “it is time the plotters thought about who they work for, it is the British people”.

“Those wanting a People’s Vote-style rerun of the summer contest will simply bring about an early general election,” the unnamed insider reportedly warned.

Like Truss and the Tories, the markets are also facing an uncertain future. Bloomberg economist Jamie Rush said that “Hunt has taken meaningful steps toward restoring fiscal sustainability”.

“But there’s a huge amount still to do to convince markets the UK is on the right path,” Rush continued. “His next challenge will be to identify spending cuts that are actually deliverable – that will be hard to do.”

Benjamin Nabarro of US bank Citi told The Times that the UK still had a “chronic credibility issue” that “doesn’t look set to be addressed anytime soon”.

Some believe that the damage to the credibility of both Truss and the country from last month’s mini-budget could be irreversible. “When I saw that 6am emergency statement from the Treasury, I had a flashback to my frenetic time reporting on the financial collapse of Greece during the global financial crisis 14 years ago,” tweeted ITV’s Political editor Robert Peston.

“The UK is still a long way from being in the kind of hole that Greece was in. But I genuinely never thought I’d see this kind of rolling series of tax and spending u-turns by any British government, a crisis caused exclusively by the ill-judgement of that same government.”

The race to replace Boris Johnson as Tory leader was turning acrimonious as the eight contenders prepared for the first-round vote today.

The Daily Mail said the contest had already become a “bitter mud-slinging battle”, with leadership hopeful Jeremy Hunt warning of the risk of recession if current favourite Rishi Sunak landed the top job.

And Nadine Dorries accused Sunak’s camp of “dark arts” and “dirty tricks”. Dorries, who is backing Liz Truss, claimed Sunak had ensured Jeremy Hunt got the required 20 votes to remain in the leadership contest, because “polling suggests that Hunt would struggle to pick up the support of Tory members in a run-off” against the former chancellor, The Times reported.

Westminster soap opera

The stories that emerge from Tory leadership elections are “part of Westminster folklore,” said Jon Craig, Sky News’s chief political correspondent. “These contests are top box office in the soap opera of British politics, with dirty tricks, plots, backstabbing, shocks and surprises.”

Despite being the current favourite to win this leadership contest, Sunak should “beware”, said Craig: “front runners rarely win.” And while the former chancellor currently has some 45 MPs publicly declaring for him, that could all change come today’s first-round vote.

“MPs often pledge support to one candidate and then vote another. Some pledge support to more than one candidate,” added Craig.

Recession under Sunak, warns Hunt

Speaking to The Daily Telegraph yesterday, Sunak said he would model his premiership on Margaret Thatcher’s, as he described his economic vision as “common-sense Thatcherism”, and called for responsible tax cuts as he told his leadership rivals: “You have to earn what you spend.”

As the front-runner, Sunak is already taking flak from other leadership hopefuls, with Hunt, chair of the health select committee, warning that Sunak’s approach could lead the country into further economic woes.

Hunt told LBC Radio: “Rishi Sunak is… increasing corporation tax and it will be higher than not just America or Japan, but France and Germany as well.

“And I’m worried that on our current trajectory, we’re heading into recession, and we’ll be there for too long,” he said. “I was very worried when he announced his budget… The thing that struck me was this slashing of the growth forecast for next year.”

‘Dirty tricks’ and ‘dark arts’

A further sign of how “ill-tempered” the leadership race has become is an accusation from the culture minister that Sunak’s campaign team had resorted to “dirty tricks” and “dark arts” to boost the former chancellor’s chances of winning the leadership race, said The Mail.

The Telegraph said that Dorries had “picked up on Twitter speculation”, leading her to accuse Sunak’s team of “lending votes” to Hunt so he could remain in the leadership contest – and ultimately giving Sunak a clearer run at becoming Conservative leader.

Dorries, a Johnson loyalist who is now backing Truss for prime minister tweeted last night: “This is dirty tricks/a stitch-up/dark arts. Take your pick. Team Rishi wants the candidate they know they can definitely beat in the final two and that is Jeremy Hunt.”

The claim has been denied by both Sunak and Hunt’s camps, with the latter telling the paper: “We are running completely independent campaigns. It’s a very dangerous game to play, and so I think most people would be very wary before doing that sort of thing. I’m not saying it never happens.”

Eight MPs have gone through to the first round proper of the leadership race.

Alongside Sunak, Hunt and Truss, Penny Mordaunt, Tom Tugendhat, Nadhim Zahawi, Suella Braverman and Kemi Badenoch have secured the backing of at least 20 MPs.

A first vote will begin at 1.30pm today with those who made the first ballot now looking to win backing from 30 MPs out of the 358 total to survive into the second round on Thursday.