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What will be in the Autumn Statement?

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The Chancellor is putting the finishing touches to the government’s second financial package in under two months.

Jeremy Hunt is expected to dismantle much of what his predecessor Kwasi Kwarteng announced in his mini-budget on 23 September.

On Thursday, Mr Hunt will unveil his Autumn Statement – a Budget in all but name – to “get our way back to growing healthily”, as he puts it.

The Treasury say nothing confirmed until the statement is announced. But we do know some of what is likely to be announced.

Spending cuts v tax rises

After the uncertainty of the last few weeks, Mr Hunt said he wants to reduce the size of the so-called fiscal black hole – the gap between what the government raises and spends. This will involve political choices about how much debt is acceptable, what taxes can go up and what spending can be squeezed.

The exact level of spending cuts and tax increase changes based on different decisions being signed off. But the accepted wisdom in the Treasury is that there will be more spending cuts than tax rises. This is likely to mean spending cuts of about £35bn and tax rises of around £20bn.

The Treasury is trying to emphasise this is quite different from the George Osborne era, when the vast majority of savings came through spending cuts.

But a number of Conservative MPs are unhappy at the tax increases we are likely to see – so there could be some political pushback ahead.

Chart showing government spending since 2010

Stealth taxes

This could be a big theme of the Autumn Statement. Stealth taxes involve freezing the thresholds at which people start paying different rates of tax.

For the last few weeks, the Treasury has been discussing a wide range of tax thresholds which could be frozen. But because of inflation and pay increases, this involves people paying more tax because more of their money qualifies for a given tax band.

The final plans are still be signed off, but the signs are that this could be used pretty widely. Income tax bands are likely to be frozen until 2028 – it’s also likely that threshold at which people start paying the 45p tax rate could be reduced to £125,000. That’s quite a turnaround from the days of Liz Truss and Mr Kwarteng wanted to scrap the additional rate altogether.

Energy bills

Ms Truss had planned a massive support package when she was in Downing Street; limiting the average unit price for two years. This “energy price guarantee” meant that typical households would pay no more than £2,500 on gas and electricity annually.

That is not going to happen under Rishi Sunak, because the government is worried about the cost. Instead there will be a more targeted approach from April.

It’s expected the chancellor will still announce a cap of some sort on Thursday, but it will mean bills going up for a lot of people. There is likely to be support for certain groups like those on low incomes and pensioners.

Windfall tax

Rishi Sunak introduced the Windfall Tax on the profits of oil and gas companies when he was chancellor. But ever since, there have been calls for it to be extended, both in timescale and scope.

This is another revenue raiser which looks likely, the question is how. Treasury officials have been exploring increasing the rate of the tax to 35%, extending the time frame the windfall tax applies for and bringing electricity generators into the scope.

Labour wants loopholes closed. At the moment, if oil and gas companies can offset their tax liability if they invest profits in the UK. There was controversy when it emerged Shell had not been liable for any Windfall Tax, despite reported profits of £25.4bn ($30bn) this year – more than double the amount it made over same period in 2021.

patient in social care

Social care

Remember the health and social care levy? It was Boris Johnson’s plan to try and cap the amount of money people in England paid for social care.

But it was a tax rise that Conservative members didn’t like – and Ms Truss scrapped it. Rishi Sunak isn’t going to open that can of worms again, so the money it would have raised has gone, leaving big questions over how a cap would be funded.

It is expected that on Thursday, the chancellor will postpone the introduction of the social care cap for at least two year – roughly the period covered by the spending review. That would kick the decision until after a general election and opens the door to the cap being scrapped altogether.

Triple lock and benefits

This is one of the biggest spending decisions the Treasury has been weighing up. Should pensions and benefits go up by the rate of inflation, despite the rate being extremely high at the moment?

Nobody in government will confirm this, but the mood music is both are likely to happen.

The government committed to the pensions triple lock in its manifesto, something which the prime minister has talked a lot about. The triple lock is popular with Conservative voters. And if the prime minister decided not to follow it, he would risk a rebellion among Tory MPs.

The same is true on benefits. Ms Truss faced a lot of pressure to commit to uprating benefits in line with inflation. Among those pressing her were some senior MPs who are now in Mr Sunak’s cabinet, including Michael Gove and Mel Stride.

And it was Mr Sunak as chancellor who promised earlier this year the benefits increase would be in line with inflation. He would face a lot of political flack if he changed his mind, despite the changing economic picture.

Council Tax

One of the taxes which is likely to go up soon is council tax in England.

The government currently limits the amount councils can increase the tax to 3% without a referendum to approve bigger hikes.

But the Treasury has been discussing ways that limit could be increased. It wouldn’t mean councils can put tax up by as much as they want without asking voters, but it would mean they can increase it by more. We don’t know exactly how much the increase will be, but there has been speculation the limit could go up to 5%.

This is a way of increasing funding for public services and social care without the government directly raising taxes. But it would increase pressure on household budgets. The Tory manifesto in 2019 said local people would continue to have the final say on council tax, being able to veto “excessive rises”.

Capital Gains Tax

When it comes to tax rises, we’re told the chancellor is of the view that the greatest burden should fall on those with the broadest shoulders.

We’ll have to see how that pans out but Capital Gains Tax is one levy that looks very likely to be targeted. The tax is paid on the profit gained when an asset is sold – a second home or shares, for instance.

It is not clear yet if it would be an overall rise in the rate – something one source believed to be unlikely – or another change to thresholds or exemptions.

Support payments

The government is expected to confirm that there will be support payments to help some groups with the cost of living.

It’s expected this will be focussed on people on low incomes, vulnerable groups and pensioners. This will be separate to universal measures to tackle energy bills.

Reports /TrainViral/

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Politics

Gething downfall delivers Starmer 1st headache

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Just when you’d have been forgiven for thinking politics might quieten down a bit…

The Welsh Labour government was for so long a case study in how the party could operate in power during its long years of opposition at Westminster.

And yet here we are less than a fortnight into a UK Labour government, and the Welsh Labour government is imploding.

So much for all that talk about bringing stability back to politics.

Last week Vaughan Gething was sharing smiles here not just with the new prime minister but the King too.

Now, he’s a goner, delivering Sir Keir Starmer a headache rather than a handshake.

When I was here in March covering Mr Gething’s victory, the seeds of his political demise were germinating before our eyes.

The donations row had already sprouted and his defeated opponent, Jeremy Miles, legged it from the venue without so much as any warm words about the victor on camera.

It was another sign of the cultivating anger, the political knotweed that would soon flourish and ensnare Vaughan Gething.

Along came the row about alleged leaking, a sacking, a confidence vote — and a first minister whose tenure up until today at least amounts to 2.4 times that of Liz Truss. Ouch.

Westminster has generated its fair share of turbulence in the last decade.

But it is far from unique as a source of turbulence in UK politics.

In February, Michelle O’Neill became first minister of Northern Ireland with Emma Little-Pengelly her deputy, after a long period without devolved government at Stormont.

In March, we had a new first minister of Wales, when Mark Drakeford stood down and Vaughan Gething took the job.

In April we had the resignation of the first minister of Scotland Humza Yousaf.

He was replaced the following month by John Swinney. June was the quiet month then. Just the small matter of a general election campaign.

And here we are in July, and Mr Gething is resigning.

So will begin another leadership race, a new government in Wales, a new first minister and a new team of senior Welsh ministers.

There will also be more arguments about Welsh Labour – its direction, its priorities, its capacity to govern effectively and its relationship with the UK party.

If you’re watching this in Downing Street, it’s the last thing you need.

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Shoplifting crackdown expected to be unveiled

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A crackdown on shoplifting is expected to be announced in the King’s Speech on Wednesday.

The government is due to unveil a new crime bill to target people who steal goods worth less than £200.

The policy would be a reversal of 2014 legislation that meant “low-value” thefts worth under £200 were subject to less serious punishment.

The government is also expected to introduce a specific offence of assaulting a shop worker to its legislative agenda.

It will not be clear until legislation passes through Parliament what the punishments for any new or strengthened offences would be.

Data from the Office for National Statistics shows that last year was the worst on record for shoplifting in England and Wales.

Police recorded over 430,000 offences in those nations in 2023 – though retailers say underreporting means these figures are likely to represent only a fraction of the true number of incidents.

Michelle Whitehead, who works at a convenience store in Wolverhampton, said her shop had been “hit every day” by thieves.

People were stealing “absolutely anything” including “tins of spam, tins of corned beef, all the fresh meat”, Ms Whitehead told BBC Radio 4’s World at One programme.

“They’re just coming in, getting their whole arm and sweeping the lot off the shelves,” she said. “The shelves were always empty.”

She said she believed “organised” criminal gangs, rather than individuals struggling with the cost of living, were behind the thefts in her shop.

The crackdown on “low-value” shoplifting “will help a lot of little shops,” Ms Whitehead said.

While retailers and shop workers have welcomed the anticipated proposals, a civil liberties group has raised concerns about criminalising people struggling to make ends meet and overburdening the prison system.

The new legal measures are expected to be announced as part of the King’s Speech on Wednesday, a key piece of the State Opening of Parliament that allows the government to outline its priorities over the coming months.

Before the general election, the Labour Party pledged to reverse what it described as the “shoplifter’s charter” – a piece of 2014 legislation that reduced the criminal punishment for “low-value shoplifting”.

Tom Holder, spokesperson for the British Retail Consortium (BRC), told BBC News the impact of the 2014 legislation has been to “deprioritise it in the eyes of police”.

“I think police would be less likely to turn up to what they see as low-level theft,” he said.

Shoplifting cost retailers £1.8 billion in the last year, which could impact prices, according to the BRC.

“Shoplifting harms everyone in that sense – those costs eventually get made up somewhere, whether it’s prices going up or other prices that can’t come down,” Mr Holder said.

Co-op campaigns and public affairs director Paul Gerrard said the supermarket chain had also recorded rising theft and violence against shop workers.

“There’s always been people who will steal to make ends meet. That’s not what is behind the rise we’ve seen,” he told BBC Radio 4’s Today programme on Tuesday. “What’s behind that rise is individuals and gangs targeting large volumes of stock in stores for resale in illicit venues like pubs, clubs, markets, and out the back of cars.”

But Jodie Beck, policy and campaigns officer at civil liberties organisation Liberty, had concerns about the expected proposals, saying there is “already a wide range of powers” the police can use to tackle shoplifting and anti-social behaviour levelled at retail staff.

Ms Beck said the “£200 threshold” would not just target criminal gangs but also “people who are pushed into the desperate situation of not paying for things” because they cannot afford to make ends meet.

She urged the government to avoid focusing on “criminal justice and policing solutions instead of doing the thoughtful work of looking at the root causes of crime, which we believe are related to poverty and inequality”.

Ms Beck also argued the additional legislation could serve to worsen the UK’s “enormous court backlog” and its “bursting prison system”.

Last week, Justice Secretary Shabana Mahmood announced plans to release thousands of prisoners early to ease overcrowding in the country’s prisons.

A spokesperson for Downing Street said the government would not comment on the King’s Speech until it has been delivered by the monarch.

The National Police Chiefs’ Council has been approached for comment.

Reports /Trainviral/

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Government launches ‘root and branch’ review

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Defence Secretary John Healey hailed the government’s defence review as the “first of its kind” and said it will “take a fresh look at the challenges we face”.

Mr Healey noted the “increasing instability and uncertainty” around the world, including the conflict in the Middle East and war in Ukraine, and said “threats are growing”.

The strategic defence review will consider the current state of the armed forces, the threats the UK faces and the capabilities needed to address them.

Sir Keir Starmer has previously said the review will set out a “roadmap” to the goal of spending 2.5% of national income on defence – a target he has made a “cast iron” commitment to but is yet to put a timeline on.

On Monday, the prime minister said the “root and branch review” of the armed forces would help prepare the UK for “a more dangerous and volatile world”.

The review will invite submissions from the military, veterans, MPs, the defence industry, the public, academics and the UK’s allies until the end of September and aims to deliver its findings in the first half of 2025.

“I promised the British people I would deliver the change needed to take our country forward, and I promised action not words,” Sir Keir said.

“That’s why one of my first acts since taking office is to launch our strategic defence review.

“We will make sure our hollowed out armed forces are bolstered and respected, that defence spending is responsibly increased, and that our country has the capabilities needed to ensure the UK’s resilience for the long term.”

The review will be overseen by Defence Secretary John Healey and headed by former Nato Secretary General Lord Robertson along with former US presidential advisor Fiona Hill and former Joint Force Commander Gen Sir Richard Barrons.

The group will have their work cut out.

The global security threats facing the UK and its Western allies are more serious and more complex than at any time since the end of the Cold War in 1990.

They also coincide with what many commentators have said is a catastrophic running down of the UK’s armed forces to the point where the country is arguably no longer considered to be a Tier One military force.

In terms of the number of troops in its regular forces, the British Army is now at its smallest size since the time of the Napoleonic Wars two centuries ago.

Recruitment is failing to match retention, with many soldiers and officers complaining about neglected and substandard accommodation.

The Royal Navy, which has spent vast sums on its two centrepiece aircraft carriers, is in need of many more surface ships to fulfil its tasks around the globe.

Its ageing fleet of nuclear-armed Vanguard submarines, the cornerstone of the UK’s strategic defence and known as the Continuous At Sea Deterrent (CASD), is overdue for replacement by four Dreadnought class submarines and costs are mounting.

Commenting on the review, Mr Healey said: “Hollowed-out armed forces, procurement waste and neglected morale cannot continue.”

Too many UK commitments?

The defence and security threats facing the UK, Nato and its allies further afield are multiple.

They include a war raging on Europe’s eastern flank in Ukraine against Russia’s full-scale invasion. The UK, along with the EU and Nato, has opted to help defend Ukraine with multi-billion pound packages of weapons and aid, stopping short of committing combat troops.

The policy behind this is not entirely altruistic. European governments, especially those closest to Russia like Poland and the Baltic states, fear that if President Putin wins the war in Ukraine it will not be long before he rebuilds his army and invades them next.

Some of those countries are already busy beefing up their own defence spending closer to 3% or even 4% of GDP.

The challenge for Nato has been how to provide Ukraine with as much weaponry as it can, without provoking Russia into retaliating against a Nato state and risk triggering a third world war.

The Royal Navy has been in action recently in the Red Sea, where it has been operating alongside the US Navy in fending off attacks on shipping by the Iranian-backed Houthi rebels in Yemen.

But the UK has also made naval commitments further afield in the South China Sea with the Aukus pact, comprising of Australia, UK and the US, aimed at containing Chinese expansion in the region.

Critics have questioned whether a financially-constrained UK can afford to make commitments like this on the other side of the world.

Closer to home in Europe, there is a growing threat from so-called “hybrid warfare” attacks, suspected of coming from Russia.

These are anonymous, unattributable attacks on undersea pipelines and telecoms cables on which Western nations depend.

As tensions increase with Moscow there are fears such actions will only increase and the UK cannot possibly hope to guard all of its coastline all of the time.

But while those nervous Nato partners living close to Russia’s borders are busy beefing up their defence spending closer to 3 or even 4% of GDP, the UK has so far declined to put a timetable on when it will raise its own defence spending to just 2.5%.

Opposition figures have criticised the government for refusing to say when defence spending will be increased.

Before his election defeat, former prime minister Rishi Sunak committed to reaching 2.5% by 2030.

Shadow defence secretary James Cartlidge previously said: “In a world that is more volatile and dangerous than at any time since the Cold War, Keir Starmer’s Labour government had a clear choice to match the Conservatives’ fully funded pledge to spend 2.5% of GDP on defence by 2030.

“By failing to do so, they’ve created huge uncertainty for our armed forces, at the worst possible time.”

Reports /Trainviral/

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