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Thursday briefing: Sunak elects to 'go long' with support then taxes

Warren Murray
·11-min read
Photograph: Tolga Akmen/PA
Photograph: Tolga Akmen/PA

Top story: ‘Extraordinary economic situation’

Good morning – Warren Murray with your know now, rather than later briefing.

Rishi Sunak has brought down a spend now, pay later budget that combines life support for the economy with the biggest tax increases since 1993. The chancellor said he would “go long”– extending many pandemic support measures, including furlough, until the end of September at a cost to the Treasury of £65bn. But two years in which the budget deficit would be the highest in peacetime history meant he had no choice but to freeze personal tax allowances and raise corporation tax from 19% to 25% in one jump in 2023. “It’s going to take this country – and the whole world – a long time to recover from this extraordinary economic situation.”

The independent Office for Budget Responsibility has pencilled in a rapid bounceback of 7.3% growth next year but even so the long-term damage from Covid-19 is expected to leave the economy 3% smaller in five years’ time than it would otherwise have been. Sunak announced that the personal tax-free allowance and higher rate threshold will be frozen from April 2022 instead of rising in line with inflation, bringing 1.3 million people into the tax system and creating a million higher rate taxpayers by the middle of the decade. In addition, Sunak became the first chancellor since Denis Healey in the 1970s to raise the corporation tax rate – reversing most of the cuts made by George Osborne after 2010. Business will, though, get a new “super deduction” allowing them to offset 130% of the cost of capital investment against tax.

Keir Starmer said Labour would back the corporation tax increase but accused Sunak of failing to fix many of the problems exposed by the pandemic. The Conservatives had “spent a decade weakening the foundations of our economy … they won’t confront what went wrong in the past and they have no plan for the future.” The Lib Dem leader, Ed Davey, criticised the “lack of new money and new ideas for the care sector. Even before the pandemic the social care sector was on its knees.” The coronavirus crisis has hit household finances and Wednesday’s budget included measures to help first-time buyers and the self-employed – as well as news that a temporary increase in universal credit would be extended. We spoke to people about what it would mean for them and their families.

* * *

Watch: Budget 2021 - Rishi Sunak defends tax threshold freeze as 'a fair way to help solve the problems that we need to'

Loyalist armies renounce Good Friday Agreement – Overnight a body claiming to represent outlawed loyalist paramilitaries such as the UVF and UDA has announced they are withdrawing support for Northern Ireland’s Good Friday Agreement because of the Northern Ireland Protocol, which governs post-Brexit Irish Sea trade. However, they stressed that unionist opposition to the protocol should remain “peaceful and democratic”. The 1998 peace agreement that loyalist paramilitaries endorsed 23 years ago ended decades of violence and established devolved powersharing at Stormont. Goods arriving in Northern Ireland from Great Britain have been subjected to added processes and checks since the Brexit transition period ended on 31 December, and some unionists see that as separating Northern Ireland from the United Kingdom. The UK government took unilateral action on Wednesday to extend a grace period for movement of agrifood goods into Northern Ireland. The EU has criticised this as breaching the terms of the protocol.

* * *

Meghan speaks – A fresh clip of Oprah Winfrey’s interview with the Duchess of Sussex has been released, in which Meghan accuses Buckingham Palace of “perpetuating falsehoods” about her and Prince Harry. She added that if her remark “comes with risk of losing things – I mean, there’s a lot that’s been lost already”. The clip was released after Buckingham Palace announced on Wednesday that it would investigate allegations of bullying made against Meghan by former royal staff. A spokesperson for the Sussexes suggested the emergence of the bullying claims was calculated to disrupt the Oprah interview.

* * *

Covid slowdown tapers off – The coronavirus is still around and dangerous and people should keep to the rules, the health secretary, Matt Hancock, has warned, as new data showed a slowing in the decline of infections and a possible slight increase in London, the south-east and the Midlands. The latest REACT1 study, which swabs people around the country on a continuous basis, found a drop of two-thirds in infections since the last report covering 6-23 January. But the decline has slowed, say the Imperial College London team behind it. In January to February prevalence of the virus halved in 15 days. Since then it has taken 31 days. While the R number is firmly below 1, scientists warn that infection levels are still too high and one person in every 200 still has the virus.

* * *

‘Two women were failed’ – Nicola Sturgeon has rejected claims the Scottish government plotted to destroy Alex Salmond’s reputation but she admitted a “dreadful, catastrophic mistake” during an inquiry into two sexual harassment complaints against him. The Holyrood government appointed an official to investigate who had previously spoken to the complainers, leading to the government losing a judicial review to Salmond. “Two women were failed and taxpayers’ money was lost,” she said. “I deeply regret that.” Questioned by MSPs, the first minister who succeeded Salmond insisted her former mentor was wrong to claim a vendetta or conspiracy against him.

Answering Salmond’s charges that she offered to intervene on his behalf in the government inquiry, Sturgeon said: “I believe I made it clear I wouldn’t intervene. [I] was perhaps trying to let a longstanding friend and colleague down gently, and maybe I did it too gently, and maybe he left with an impression I didn’t mean to give him.” Sturgeon said of Salmond: “I don’t know whether he ever reflects on the fact that many of us feel let down by him. That is a matter of deep personal regret.”

* * *

PM embattled over rape claims – In Australia the prime minister has rejected calls for an inquiry after the country’s attorney general identified himself as the person accused recently of committing a rape when he was a teenager. The minister, Christian Porter, has denied the allegations, made by a woman who has since killed herself. They knew each other as teenagers. Police have said there is no case for prosecution but a coronial inquest may still be held. The government of Scott Morrison is under intense pressure after Brittany Higgins – a former staff member of Morrison’s defence minister, Linda Reynolds – said she had been taken while inebriated to Reynolds’ office in the Canberra parliament by another employee and raped. Today, Morrison has conceded that Reynolds called Higgins a “lying cow” in a recent office discussion of the case. He has stood by both ministers, denying they should resign. The Australian of the year, Grace Tame, who was groomed and molested by a school teacher, has given a powerful speech calling for reform on a national scale to address the “heinous crimes” of sexual abuse and urging other abuse survivors to “share your truth – it is your power”.

* * *

Who wants first ride? – Elon Musk’s Starship rocket has delivered another fiery spectacle but at least this time it landed in one piece, albeit not for long. Overnight SpaceX’s third Thunderbirds-looking prototype, dubbed SN10, flew 10km high and descended successfully, reigniting its rockets and making what looked like a smooth touchdown.

But then a fire broke out at its base, followed in a few minutes by an explosion that made it leap into the air and crash down in a fireball. “RIP SN10, honorable discharge,” Musk tweeted. SpaceX plans to keep trying until it gets to Mars.

Today in Focus podcast: Guantánamo amigos

Mohamedou Ould Salahi was once Guantánamo’s highest-value detainee, but during the 14 years he spent behind bars he was never charged with a crime. Salahi and his former guard Steve Wood reflect on their time at the prison.

Lunchtime read: How to survive World Book Day

It being the first Thursday in March, today the UK marks World Book Day – and are you among those parents left scrambling for paints and glue-guns every year? Yes, there’s the pandemic, and there’s the lockdown, but for those still taking part here are some options that Donna Ferguson and nine-year-old Flora put together in less than 30 minutes.

Sport

Ole Gunnar Solskjær has admitted Manchester United’s lack of cutting edge is a “worry” after his side were held to a third successive goalless draw to leave them 14 points behind the leaders Manchester City before the derby on Sunday. Kelechi Iheanacho’s sweetly struck equaliser illuminated Leicester’s 1-1 draw at Burnley, and David McGoldrick’s first-half goal gave Sheffield United a 1-0 win over Aston Villa. Emma Hayes heaped praise on Ann-Katrin Berger after the goalkeeper saved two penalties and took a knee to the face as Chelsea overcame Atlético Madrid 2-0 in the first leg of their last-16 Champions League tie, while Chloe Kelly’s vibrantly incisive wing play troubled Fiorentina throughout a 3-0 win for Manchester City.

All eyes are on the pitch as England face India in the fourth and final Test but arguments between the two sides go beneath the Ahmedabad surface to stir up antipathies rooted in the colonial relationship. Sebastian Vettel is convinced he can win another Formula One title with his new Aston Martin team. The new president of the Tokyo Olympic organising committee has hinted that foreign fans will not be allowed at this summer’s Games. England Women cruised to a seven-wicket victory against New Zealand in Wellington to take a 1-0 lead in their three-match Twenty20 series. And the Los Angeles county sheriff’s department has executed a search warrant on Tiger Woods’s car after the golfer was involved in a serious crash last week.

Business

The Japanese yen has hit a seven-month low on the dollar as hopes that vaccinations and more government stimulus will drive the US economy into a solid rebound lift the greenback and benchmark Treasury yields. The creep up in benchmark yields may weigh on Asia-Pacific stocks – by early today Australian shares had lost 1%, though the economy registered its biggest ever monthly trade surplus. China’s CSI300 fell more than 3% in morning trading. The Nikkei share average lost 1.59% as investors jumped out of technology stocks into sectors viewed as more likely to benefit from an economic recovery. And South Korea’s central bank says the economy shrank for the first time in 22 years in 2020 as the pandemic destroyed service industry jobs and depressed consumer spending. This morning a pound is worth $1.394 and €1.156 while the FTSE is pitching towards a half per cent lower open.

The papers

“Spend now, pay later” – the kicker for the Guardian’s budget splash today. The FT’s headline is a partial match: “Sunak reveals spend now, tax later plan”.

The Times’ preoccupation is as you might expect: “Highest tax levels for 50 years” although you’d have to hope it doesn’t last that long … wait, the Telegraph clarifies: “Sunak’s five-year tax grab”. The i says “Highest taxes since 1960s” – well I wouldn’t know … The Rishi-friendly Express says “Our recovery begins today” although even it has to concede “Millions hit by tax grab”.

The Mirror reports on “All-out war at palace” – saying the Queen has gone “to war with Harry and Meghan” over claims the duchess bullied royal staff (perhaps Her Majesty should tell the couple to think of others). The Mail has that one as “Palace probes claims Meghan bullied staff” and does the budget as “Rishi’s masked tax raid”, showing the chancellor putting on a face mask. Metro calls the chancellor “Risky Sunak”, saying he has “risked £65bn on a quick recovery”, which is a nice insightful intro from the freebie. The Sun has: “Only way is sup” – a welcoming treatment of “booze, fuel and furlough boost”, in order of priority I take it?

Watch: Do coronavirus vaccines affect fertility?

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