Kate Andrews

The government’s transition on taxes has taken place at lightning speed. We’ve gone from chancellor Jeremy Hunt hinting at tax cuts yesterday morning on the BBC to Rishi Sunak confirming that not only are tax cuts coming this Wednesday, but they are now a major priority for the government, as laid out in five new promises made today. Arguably the UK economy has been defying the doomsday predictions for a while now But it’s not just the policy that’s changing. It’s the rhetoric too. Hunt has gone from insisting that tax cuts are ‘virtually impossible’ in September – not something to consider right now, he said in October – to ushering them in this November and embracing a new tone about the economy.

Has Jeremy Hunt had a change of heart or a change of circumstances? The Chancellor has spent the past few months crushing any hope of a major tax cut in next Wednesday’s Autumn Statement, insisting that the government’s main priorities – including tackling inflation and improving the dire state of the public finances – directly contradict calls to cut taxes now.  Just a month ago, Hunt was telling grassroot members at Conservative party conference that the Treasury was in no position to talk about personal tax cuts, ‘or even to ask what if’.

Slowly but surely, the labour market in the UK appears to be cooling down. Data from the Office for National Statistics this morning shows the number of job vacancies across the economy fell by another 58,000 between July to September, taking the total figure to an estimated 957,000. This is still far above pre-pandemic levels, but the number has been dropping constantly, and is down again for a sixteenth consecutive period. Meanwhile, both the UK’s unemployment figure and inactivity figure have remained ‘largely unchanged on the quarter’: sitting at 4.2 and 20.9 per cent, respectively. This bodes well for an economy that is trying to dodge the dreaded label of ‘stagflation’.

The UK economy grew 0.2 per cent in September. This followed 0.1 per cent growth in August, revised downwards from 0.2 per cent. Monthly figures don’t always tell a story on their own, but these past two months of data reflect the UK economy’s trend for the year – one, unfortunately, of virtually no growth. The provisional Q3 figures are out this morning as well, showing no economic growth between July and September. A tiny 0.1 per cent uptick in the services sector was offset by a small fall in construction output, which has led to a flatlining economy. Compared with the same quarter in 2022, GDP has increased by 0.

Good headlines are coming out of the Eurozone this morning, as the inflation rate slowed to 2.9 per cent in October. This is a spectacular fall from its double-digit peak last October, when the rate sat at over 10 per cent. Today’s news brings inflation to a stone’s throw away from the European Central Bank’s target of 2 per cent. But it’s not without trade-offs. Alongside today’s inflation news, we have also learned that growth across the Eurozone took a hit, averaging a 0.1 per cent contraction between July and September this year. This dip was worse than the consensus, which expected to see a small uptick in GDP. Some growth seen in countries like France and Belgium were outweighed by contractions elsewhere – notably in Germany.

The UK’s unemployment rate rose to 4.2 per cent in the three months leading up to August this year, according to new experimental data from the Office for National Statistics (ONS). This is a 0.2 per cent increase compared with the previous quarter (March to May 2023), but not a big change compared to previous data sets. The new numbers tell a familiar story: that the labour market is cooling slightly yet employers remain desperate for workers. For the last five decades, the ONS has relied on its Labour Force Survey – which covers ‘tens of thousands of households across the UK’ – for its employment data.

Timing is a funny thing. The Chancellor received some good news about the public finances this morning, just when everyone is focused on fairly catastrophic election results for the Tories. A few hours after it was announced that strong Conservative majorities were overturned in the ​​Mid-Bedfordshire and Tamworth by-elections (Katy Balls analyses the results here), we also learned that there may be slightly more scope than previously thought for Jeremy Hunt to come up with some pre-election sweeteners, with the pressure on to cut taxes. Public sector net borrowing in September came to £14.3 billion – a staggering sum, yes, but £1.6 billion less than in September last year and far below the Office for Budget Responsibility's (OBR) most recent forecast of £20.