What the drop in inflation might mean for interest rates and tax cuts  

Welcome to Thursday’s Early Edition from i.

While many eyes yesterday were focused on Sunak’s bonfire of green policies (perhaps more of a bin fire than a bonfire), a little bit of good news crept in. Inflation, which had been expected to rise and therefore encourage the Bank of England to raise interest rates again, actually dropped. A slowdown in price rises for food, in particular cheese, milk, eggs, non-alcoholic drinks, vegetables and fish is good news for consumers. But it may also be good news for the Prime Minister, who brazenly promised to halve the rate of inflation at the start of this year. Some will hope, too, that it could mean good news for homeowners facing yet another hike on their mortgages. And others will be asking if it gives the Government more wriggle room in the upcoming Autumn Statement. We’ll look at all of these issues, after the headlines.

Today’s news, and why it matters

The watering-down of net zero measures by Rishi Sunak has triggered major divisions inside the Conservative Party over the future of its green agenda. Former environment minister Zac Goldsmith called for a snap general election to test the Prime Minister’s mandate for overhauling the Government’s plans.

The bosses of major car manufacturers have bombarded Downing Street with calls and threatened to withdraw investment in the UK over reports the Government may delay a 2030 ban on new petrol and diesel cars, i has learned. Several senior executives at leading manufacturers have warned No 10 they would be forced to pull billions of pounds of investment if Sunak pushes ahead with proposals to delay the switch to electric vehicles. One called the situation an “utter mess”.

Labour is poised to recommit to the 2030 ban on the new sales of petrol and diesel cars despite Rishi Sunak’s apparent U-turn on the policy, sources have told i. The party has so far refused to confirm whether it would stick to the ban following a leak that revealed the Prime Minister was set to announce a delay to 2035, amid suggestions the Conservatives were trying to create a dividing line with Labour.

Alice, one of the women who has recently made allegations against the comedian Russell Brand, believes the UK should reexamine its legal age of consent. But legal experts have questioned whether changing the age of consent so that so-called ‘Romeo and Juliet’ laws apply would have any effect on instances of grooming.

Health chiefs have warned that some 100,000 NHS operations and appointments will have been postponed as a result of this week’s unprecedented strikes by thousands of doctors. Consultants and junior doctors on Wednesday manned picket lines outside hospitals across England as they held their first joint strike, bringing to a halt non-urgent treatment across a large swathe of the health service.

One of Britain’s biggest housing associations broke advertising rules by offering a time-limited “Black Friday” promotion for its shared ownership properties, a watchdog has ruled. L&Q, which owns or manages more than 108,000 homes across England, was told by the Advertising Standards Authority (ASA) that its advert could lead consumers to feel rushed into making the “serious, complex financial decision” of buying a home.

Inflation and interest rates – three questions:

What impact will lower inflation have on the Autumn statement? Despite Wednesday’s better-than-expected figures, it is unlikely they will have a major impact on the spending pot available to Chancellor Jeremy Hunt in his Autumn Statement in late November. As Arj Singh writes: “It means Mr Hunt is unlikely to be able to deliver the kind of big tax cuts demanded by Conservative MPs. Treasury sources said that while the inflation drop was good news, the rate of price and interest rate increases was still outstripping what was predicted by the Office for Budget Responsibility alongside the Spring Budget. A Treasury source said: ‘The inflation figures are good news, but we’re not out of the woods yet.’” Read the full story here.

What about interest rates? Prior to yesterday, experts had widely predicted that the Bank of England (BofE) would increase interest rates, for the 15th consecutive time, to 5.5 per cent. But that decision is now said to be a on a “knife edge”. Committee members take inflation data into account, but the Bank also has a network of agents around the UK who report back on what’s happening in the economy in each region, based on their daily interactions with businesses there. You can read all about what goes on inside the closed-door BofE meetings here. In terms of what happens today, predictions are mixed. “All things considered, we still think it more likely than not that rates will rise again, but the latest inflation data suggest it’s certainly not the slam-dunk it looked a short while ago,” one expert said. But another suggested: “My guess is these figures might just tip it over into a pause.” Read the full story here.

Is Sunak on track to halve inflation? When the Prime Minister made his promise in January, the rate of inflation was just over 10 per cent. Until yesterday, it looked fairly unlikely that Mr Sunak would be able to meet his pledge. While we won’t know for sure until mid-January next year, when inflation figures for the fourth quarter of 2023 are published, some economists are now more optimistic. Michael Saunders, a senior advisor at Oxford Economics and former member of the BofE’s Monetary Policy Committee, which sets interest rates, said meeting the target was now “probable but not definite”, having said in July it was “touch and go”. He said the “oil price could upset things if it goes on rising”, but that regardless of whether the target was hit or not, Mr Sunak and the Government “deserved little or none of the credit”. Read the full story here.

Around the world

Poland has announced it will no longer supply weapons to Ukraine amid a dispute over grain imports. Poland’s Prime Minister, Mateusz Morawiecki, said it would instead focus on arming itself with more modern weapons.

Armenians fearing ethnic cleansing in Nagorno-Karabakh at the hands of Azeri forces have accused Russia of complicity and of failing in its role as security guarantor. Tens of thousands of Armenians were awaiting evacuation from the besieged enclave after a ceasefire deal was agreed with Azerbaijan. Protesters gathered outside the Russian embassy in Armenian capital Yerevan chanting “Putin is a dickhead” after the Azeri incursion this week and Moscow’s failure to prevent it.

The accusations of rape and sexual assault against Russell Brand have hit headlines in the US and become a talking point, but signs of any action in a post-MeToo Los Angeles have been slow. Actress Rose McGowan, one of the most high-profile figures to make claims about disgraced film mogul Harvey Weinstein, questioned why the accusers had remained anonymous.

European Union politicians have said there is a “whole pile of problems” that needs to be fixed before the UK can return to the bloc, after Sir Keir Starmer indicated such a move was unlikely to happen this decade. Austrian MEP Andreas Schieder said the priority was sorting out many unresolved Brexit issues, amid discussions over whether the UK could become an “associate member” of the EU.

A woman had to be rescued from a toilet in Michigan after lowering herself into the latrine to retrieve her Apple Watch. First responders were called after people heard her yelling for help. “She was in the muck, if you will,” a Michigan state police spokesman said.

Watch out for…

King Charles, who is delivering a speech to the French senate today on the importance of tackling climate change. But his visit risks being overshadowed by Rishi Sunak’s U-turn on net zero.  

Thoughts for the day

After U-turning on a petrol and diesel car ban, Rishi Sunak is trying to clean up a mess of his own making. There’s the strong whiff of desperation amid his dire personal polling, says Paul Waugh.

Brexit Britain has a new European future and Keir Starmer knows it. A radical vision of Europe is being developed and there is a place for UK within it – if someone grasps the opportunity, writes Ian Dunt.

Sophie Turner has got herself what every ex-wife needs after her split from Joe Jonas: new friends. If I could give anyone a piece of advice about coming out of a long marriage with a broken heart, it would be to find yourself a new pal, writes Rebecca Reid.

Culture Break

 Sex Education series 4: This final season is a cringey disappointment. The once-revolutionary comedy really should have ended a year ago – this is irritating, on-the-nose and impossible to emotionally connect with. What happened?

The Big Read

Seven recycling bins and Rishi Sunak’s other net zero claims, fact-checked. The Prime Minister’s net zero speech was peppered with eyebrow-raising claims – what’s the truth behind them?

 Sport

 ‘Something special is coming’: How Aston Villa can copy West Ham’s blueprint for European success. With a four-time Europa League winner in the dugout and players delivering on the pitch, Aston Villa begin their European journey with high hopes just four years on from life in the Championship, writes Michael Hincks.

Something to brighten your day

 The surprising ways you can lower your Alzheimer’s risk, according to a brain expert. As new research highlights the links between brain health and exercise, Professor Paul Matthews shares his tips.