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Budget 2021: chancellor limits spending to start building election war chest

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Budget 2021: chancellor limits spending to start building election war chest

Rishi Sunak intends to cut taxes before the next general election, after limiting his budget help to deal with a winter cost of living crisis in order to start building up a war chest for the coming years.

The chancellor made clear that the boost to spending made possible by a stronger than expected economic recovery this year would not be repeated as he reassured Tory MPs that he would take action to reduce the UK’s highest levels of taxation since the early 1950s.

Hours after delivering his third budget speech, Sunak told his backbenchers: “I won’t mince words with you … it is my view that going forward every marginal pound we have should be put into lowering people’s taxes, not more spending”.

Earlier, the chancellor had sought to ease tensions with the prime minister by announcing increases in spending for all government departments for the next three years and major reforms to alcohol taxation that will cut the cost of drinking. An extra £25bn will be spent next year.

The package – designed to show how Britain could move on after the pandemic of the past 18 months – was criticised by environmental groups for a lack of new green measures ahead of next week’s UN Cop26 conference in Glasgow.

“This budget was an own goal for a government that should be leading the world into a new low-carbon age,” said Luke Murphy, at the Institute for Public Policy Research.

And Labour condemned it for its failure to help households struggling with rising prices.

Rachel Reeves, the shadow chancellor, who stood in for a Covid-stricken Sir Keir Starmer to give Labour’s response to the budget, said: “Families struggling with the cost of living crisis, businesses hit by a supply chain crisis, those who rely on our schools and our hospitals and our police – they won’t recognise the world that the Chancellor is describing. They will think that he is living in a parallel universe.”

Reeves highlighted the fact that Sunak had cut taxes on banks, sparkling wine, and domestic air travel, but had little to offer many voters. “At least the bankers on short haul flights sipping champagne will be cheering this budget today.”

After being upbraided by deputy speaker Eleanor Laing for revealing so much of his budget in advance, Sunak’s one surprise was to announce a partial government climbdown on its controversial decision to save £6bn by ending the temporary £20 a week increase in universal credit brought in at the start of the pandemic.

The chancellor handed back £2bn to working UC claimants by lowering the rate at which their benefits are reduced when their pay goes up, and made it clear he saw the move as the start of a new tax-cutting direction for the government.

“I want to say this simple thing to the House and the British people”, Sunak said. “My goal is to reduce taxes. By the end of this parliament, I want taxes to be going down not up.

“I want this to be a society that rewards energy, ingenuity and inventiveness. A society that rewards work. That is what we believe on this side of the House. That is my mission over the remainder of this parliament.”

Conservative MPs greeted the budget enthusiastically – particularly the spending pledges directed at a slew of constituencies for everything from turning derelict land into “pocket parks,” to a new Beatles attraction on Liverpool waterfront. Many later tweeted pre-prepared messages highlighting the investments in their local area.

Sunak’s spend now, cut taxes later approach was made possible by rosier short-term forecasts for the economy provided by the independent Office for Budget Responsibility, which revised up its 2021 growth forecast from 4% to 6.5% and reduced its estimate of the long-term “scarring” to the economy from the pandemic.

The OBR said the stronger growth outlook coupled with the money raised from last month’s announcement of higher national insurance to pay for health and social care had provided Sunak with £50bn of additional resources to deploy in the budget, of which he spent £30bn.

But the government’s fiscal watchdog warned that rising inflation would offset rising wages and result in living standards being virtually unchanged next year.

“We expect inflation to reach 4.4% next year, with the risks around that tilted to the upside. News since we closed our forecast would be consistent with inflation peaking at close to 5% next year. And it could hit the highest rate seen in the UK for three decades.”

Paul Johnson, director of the Institute for Fiscal Studies, described the outlook for household finances as “actually awful”.

Torsten Bell, chief executive at the Resolution Foundation thinktank, said Sunak had used his OBR “windfall” to deliver a “Boris budget”.

“He’s used that windfall to spend significantly more, especially in the next few years. The lasting effect of that extra spending is to allow him to partially reverse some of his own decisions by reinstating cuts to aid spending, and increasing universal credit generosity for working claimants.

“But the forecasts contained far less good news for household finances. Higher inflation will all but end income growth next year. The Chancellor’s welcome reduction in the universal credit taper will soften, rather than tackle, the cost of living crisis facing millions of families across the UK today.”

Neil Shearing, group chief economist at Capital Economics, said: “This budget was perhaps more notable for what the Chancellor didn’t do rather than what he did. The OBR handed Rishi Sunak a significant upgrade to its forecasts for the public finances but, while the Chancellor spent some of the windfall a substantial amount was saved – allowing the Chancellor to start building a war chest that could be deployed ahead of the next election.”

The current parliament will run until May 2024, although there is speculation Johnson is preparing to go to the country in 2023.

The Treasury said £30bn of green measures had been announced as part the government’s net zero package last week.

But Darren Jones, the Labour chair of the Business, Energy and Industrial Strategy Committee, said: “This budget was a missed opportunity on climate change, failing to set out the required leadership on the fiscal measures needed to accelerate progress towards our net zero target. Mere days ahead of the Cop26 international climate change summit, it’s concerning that the Treasury missed this chance to spell out the benefits of net zero and instead took regressive action, such as cutting taxes on domestic flights.”

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Supreme Court Dismisses Suit Challenging Adeleke’s Candidacy

The Supreme Court has affirmed Ademola Adeleke as the authentic candidate of the Peoples Democratic Party, PDP in the just concluded Osun State Governorship Election.

This has laid to rest the suit filed by Dotun Babayemi, a governorship aspirant of the party who sought the invalidation of Adeleke’s victory.

In a judgement delivered by Justice Amina Augie, the five-member panel held that the court lacked jurisdiction to hear the suit after counsel for the appellant, Adebayo Adelodun, withdrew the earlier notice of appeal that was filed within time.

At the resumed hearing, Adelodun, who represented the appellant and Babayemi informed the court that he sought to withdraw the earlier notice of appeal to replace it with the fresh application he filed.

But the panel held that Section 285(11) of the constitution stipulated that an appeal on a pre-election matter must be filed within 14 days from the day of the decision, and that having filed the second appeal out of time, the apex court lacked jurisdiction to entertain the matter.

Justice Augie, therefore, dismissed the appeal for lack of jurisdiction.

Babayemi had asked the court to invalidate the primary election that produced the governor-elect, citing non-compliance with a court order.

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400 Staff To Lose Jobs As BBC Goes Digital

The British Broadcasting Corporation BBC world service has on Thursday disclosed that about 400 of its staff will lose their jobs as part of a cost-cutting programme and move to digital platforms,

The BBC said its international services needed to make savings of £28.5 million ($31 million) as part of wider reductions of £500 million.

In July it detailed plans to merge BBC World News television and its domestic UK equivalent into a single channel to launch in April next year.

BBC World Service currently operates in 40 languages around the world with a weekly audience of some 364 million people.

But the corporation said audience habits were changing and more people were accessing news online, which along with a freeze on BBC funding and increased operating costs meant a move to “digital-first” made financial sense.

BBC World Service director Liliane Landor said there was a “compelling case” for expanding digital services, as audiences had more than doubled since 2018.

“The way audiences are accessing news and content is changing and the challenge of reaching and engaging people around the world with quality, trusted journalism is growing,” she added.

 

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Environment

Hurricane Ian: Cities flooded and power cut as storm crosses Florida

Hurricane Ian: Cities flooded and power cut as storm crosses Florida

Hurricane Ian made landfall at around 15:10 local time (19:10 GMT) on Wednesday, smashing into the coast with wind speeds of up to 241km/h (150mph).

Dramatic scenes saw a hospital roof blown off, cars submerged and trees ripped out of the ground.

The category four hurricane was later downgraded to a tropical storm.

However, Floridians were warned that the most dangerous 24 hours lay ahead and the mayor of Tampa urged people to shelter in place through the night into Thursday morning.

“We are going to get the majority of the rain and the higher winds starting about 20:00, and they are going to last throughout the night,” Jane Castor said during a Wednesday evening briefing.

In a message posted on Facebook, the Weather Prediction Center told residents in the Central Florida Peninsula to expect “widespread life-threatening, catastrophic flash and urban flooding” continuing into Friday morning, with potentially up to 76cm (30ins) of rain falling locally.

Residents were ordered to leave their homes, but many have decided to remain and seek shelter indoors.

Mark Pritchett, who lives in the city of Venice, some 95km (60 miles) south of Tampa, described the “terrifying” moment he stepped outside his home as the hurricane made its way across the Gulf of Mexico.

“Rain shooting like needles. My street is a river,” he said in a text message to the Associated Press news agency.

In Lee County – the south-west region where Ian made landfall – police were prevented from responding to reports of looting at a petrol station because of the storm damage.

As a result, a curfew has been declared “until further notice”.

Lee County Manager Roger Desjarlais said that the Fort Myers community had “been – to some extent – decimated”. According to news agency AFP, some neighbourhoods in the city of 80,000 had been left resembling lakes.

State Governor Ron DeSantis described Ian as the “biggest flood event” south-west Florida had ever seen, and announced that 7,000 National Guard troops are ready to lead rescue operations in flood zones.

President Joe Biden will receive a briefing on Thursday from the Federal Emergency Management Agency.

Ian is now continuing to move north through Florida. Jacksonville International Airport, based in north-east Florida, cancelled all flights scheduled for Thursday.

The storm is forecast to emerge into the Atlantic by Thursday morning.

It is expected to reach Georgia and South Carolina on Friday. Virginia has also joined Georgia, North Carolina, South Carolina and Florida by declaring a state of emergency.

Cuba’s western coast was hit by Hurricane Ian on Tuesday. Power has now been restored in some areas after the island was plunged into a total blackout. Two people are understood to have been killed in Cuba and more than 20 Cuban migrants are believed to be missing at sea.

Predicted path of Hurricane Ian. Updated 27 September

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