Good morning.
In a few hours, Jeremy Hunt will deliver the autumn statement, and because the UK is on track to borrow less than expected, the chancellor has more room to play with than initially anticipated. So, despite months of insistence from both the chancellor and the prime minister that there will be no tax cuts for fear that there would be inflationary consequences, Hunt has hinted rather coyly in interviews that “everything is on the table”, leaving many to predict that some kind of tax cut is on the horizon.
But where will that fall – and who will it benefit most?
The central message that Hunt will try to hammer home is that the Conservative party is the party of economic growth, despite the stagnation that has characterised Britain’s economy for the past decade. As the next general election approaches, this will be one of the last opportunities for the chancellor to make a big splash as the Conservatives attempt to claw back their polling deficit.
For today’s newsletter, I spoke with the Guardian’s economics correspondent, Richard Partington, about what to expect and the stakes for a government trailing by double digits in the polls. That’s right after the headlines.
Five big stories
Gaza | Israel and Hamas overnight agreed a deal for the release of 50 women and children held hostage in Gaza in return for a four-day partial ceasefire, the Israeli government has announced. It did not say when the ceasefire would start, but the prime minister, Benjamin Netanyahu, said the first hostages should be free within 48 hours. Israel said there would be an extra day’s pause for every 10 more hostages freed. To keep up to date with this story, read the Guardian’s live blog. This explainer has more information on the situation.
Wales | The bodies of four teenage boys, who disappeared after travelling to north Wales for a camping trip, have been found inside an overturned and partly submerged car. Police made the find on Tuesday about five miles from where Jevon Hirst, Harvey Owen, Wilf Henderson and Hugo Morris were last seen in Porthmadog two days earlier.
Business | Tax officials are understood to be examining whether David Cameron failed to fully disclose taxable perks such as flights on private planes when he worked for the collapsed lender Greensill Capital, the Guardian can reveal.
Climate | Private jets belonging to 200 celebrities, CEOs, oligarchs and billionaires have spent a combined total of 11 years in the air since the start of 2022, the equivalent of the total emissions of almost 40,000 Britons. The Guardian used public data to track flights by private aircraft owned by celebrities and businesspeople including Elon Musk, the Rolling Stones, the Murdoch family and Kylie Jenner over 21 months.
Tech | Sam Altman is set to make a return as chief executive of OpenAI after the ChatGPT developer said it had “reached an agreement in principle” for his reinstatement. The company made the announcement after days of corporate drama in the wake of Altman’s surprise sacking on Friday. Nearly all of OpenAI’s workforce has threatened to quit unless the board overseeing the business brought back Altman and then quit immediately afterwards.
In depth: ‘They might announce things closer to the election to get bang for their buck’
Following hints dropped by Jeremy Hunt over the weekend about potential tax cuts, there has been a lot of speculation about what exactly could be on the table.
Initially, headlines focused on inheritance tax, a “totemic” issue for the Conservatives, Richard says. As a policy, raising the level at which it is paid – or scrapping it entirely – would not cost the government a lot, nor would it be inflationary, but the government appears to have had second thoughts about putting money into an area that would disproportionately benefit the richest. It may also be something they wait until the spring to announce: “That would give them more time to see how the economy performs,” says Richard. “They also might want to announce things closer to the next election to give them the most bang for their buck.”
In terms of other personal tax cuts, many people will be closely watching news surrounding income tax and national insurance. A 1% cut to income tax would cost the government £6.5bn, which is a decent chunk of the £17bn windfall from reduced borrowing, but still relatively affordable.
On the face of it, this could be a popular policy choice, however Richard says that it’s important to note that there are large increases in taxes happening by policies that are already in place. The six year freeze on income tax thresholds is estimated to raise over £50bn, as inflation drags millions of people into paying income tax for the first time. “So even if they announced a 1% cut in income tax, economists expect that overall people will still be paying more tax,” Richard adds. Other things to look out for include stamp duty reforms and business tax cuts.
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Why has the government changed its tune on tax cuts?
There is a clear political incentive for the chancellor: many backbench MPs have been calling for tax cuts, frustrated that a Conservative government has overseen the highest tax levels since records began 70 years ago. Lower taxes are a “classic part of conservative ideology”, Richard says, and given that Sunak has been under significant pressure from those within his own party to revitalise the Tories’ performance, it would seem like a simple place to start. “They see [tax cuts] as one way to try and turn around their chances at a general election next year,” Richard adds.
Sunak has also hit his target to halve inflation (as he has told anyone who will listen). Inflation now sits at around 4.6% (largely thanks to falling energy prices), and the government believes it can move from stabilising the economy into the next stage of growth and tax cuts. “They’ve always been concerned that the tax cuts would be inflationary because when you put more money into people’s pockets, they have more money to spend and that can lead to inflation,” Richard explains.
The other reason is more obvious: public finances performed more strongly this year than expected, with government borrowing around £17bn lower than was anticipated in March. As a result, Hunt could have as much as £25bn to spend, up from £6.5bn in the spring, according to one economic consultant. All of these factors combined have meant that “the government sees an economic rationale for cutting taxes”, Richard says.
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What about benefits and pensions?
Welfare recipients could be impacted by today’s statement, if the chancellor decides to increase benefits by a lower amount next year. Traditionally, the treasury increases the value of benefits each year using inflation data from September, which was 6.7% this year. However there has been a lot of speculation that the government could use October’s inflation data, which, at 4.6%, was considerably lower and would save the government billions. Richard predicts that the government might not go through with this as it could be politically damaging: “They wouldn’t want to walk into an election year being portrayed as the nasty party that cuts taxes for the rich and targets poor people,” Richard says.
According to analysis by Philip Inman, Hunt could also save £600m on next year’s triple lock pension by changing the calculation and excluding bonuses.
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It’s all to play for …
Everyone is seeing this statement through the lens of an upcoming election. This is one of the last opportunities to set up an economic plan before voters go to the polls, so if Hunt does not make any big swings, it likely means that he is saving his biggest announcements for the spring budget, which hints at an election late in 2024.
After the failure of one of the government’s flagship policies in the supreme court last week, Hunt will be trying to strike a tone that shows stability and leadership: “It’s going to be about growing the economy, encouraging more people to work and encouraging businesses to invest in the UK,” Richard says. Lets see if it pays off.
What else we’ve been reading
I still have the thermal socks I bought in Aldi’s middle aisle five years ago keeping my toes toasty so I read this piece by Sirin Kale with glee about everything from air fryers and skiwear to hot tubs and kayaks, available for a limited time only causing middle-aisle mayhem. Nazia Parveen, acting deputy newsletters editor
A lack of affordable housing has pushed thousands of people into temporary accommodation. Jessica Murray’s report into Britain’s affordable housing crisis is a troubling but important read. Nimo
She is the rising star who could become one of Britain’s most powerful women after the next election. For Vogue, Angela Rayner speaks candidly to Frances Ryan about child poverty, going toe to toe with old Etonians, and how she has always had to “earn” her place. Nazia
“If I cannot solve it myself then I cannot stress too much about it”: a perfectly reasonable sentiment if you left the tap running longer than you should have or if you forgot to turn off the light. In reality those words were uttered to Ajit Niranjan by a person at Monaco’s annual yacht show when asked about their thoughts on the giant carbon emissions released by the super-boats. It would be hilarious if the planet was not literally on fire. Nimo
This is a sobering read. Roger Harding on the implications of climate change policy and how working class people, who emit the least, will suffer the most. Nazia
Sport
Football | Dejected Wales face the Euro playoffs after a 1-1 draw with Turkey and Croatia’s 1-0 victory over Armenia.
Cricket | The International Cricket Council has become the latest sports body to ban transgender players from the elite women’s game if they have gone through male puberty. The ICC said it had taken the decision, following a review and consultation, to “protect the integrity of the international women’s game and the safety of players”.
Rugby | The BBC may no longer be able to afford to keep its share of the Six Nations due to the spiralling costs of broadcast rights and a fall in its income, its outgoing director of sport has warned MPs.
The front pages
The Guardian’s lead story is “Hunt bows to Tory demands for tax cuts in bid to revive economy”. The terrible accident in Wales is the picture lead – “Bodies of missing teenagers found”. The Metro calls that a “Tragedy on lads’ camping weekend” while the Sun observes they were “So young”. “Missing boys died in crash horror” says the Daily Express; “So tragic” is how the Daily Mirror puts it. They were, says the Daily Mail, “Four pals who went camping … and never came home”. Others have the story and the boys’ photographs on their fronts but not as the lead. The Daily Telegraph goes with the autumn statement – “Biggest tax cut for business in 50 years” – as does the Times: “Hunt offers tax cuts for workers and businesses”. “Hunt will cut personal taxes but interest rates to remain high until 2025” says the i while the Financial Times has “Hunt to put £9bn a year tax break for business at core of growth drive”.
Today in Focus
A truce agreement in Gaza
On late Tuesday night, Israel’s cabinet met to vote on a temporary ceasefire in Gaza and a hostage and prisoner exchange. Julian Borger reports
Cartoon of the day | Nicola Jennings
The Upside
A bit of good news to remind you that the world’s not all bad
In a bid to counter the loneliness that descends with Scandinavia’s dark winter months, the northern Swedish city of Luleå has launched a campaign to ease social isolation by encouraging people to say hello to one another. The Säg hej! (say hello!) campaign says it aims to create a friendlier city by nudging people towards small but significant social interactions.
Åsa Koski, who came up with the idea for the campaign, says being greeted by strangers makes people feel “more seen and a bit more like you belong”. “Research shows that it has an effect on health and often an effect on wanting to help each other. If you say hi to your neighbours you are more likely to help them.”
Sign up here for a weekly roundup of The Upside, sent to you every Sunday
Bored at work?
And finally, the Guardian’s puzzles are here to keep you entertained throughout the day – with plenty more on the Guardian’s Puzzles app for iOS and Android. Until tomorrow.
