Is the mansion tax back?

Hello, good morning, and welcome. It's Wednesday, November the 19th, and just to put you all on notice, the most politically significant part of the COVID Inquiry will be out tomorrow. Module 2, UK Decision Making and Governments, will be released by Baroness Hallett's team at 4pm. And for those around Westminster in 2020 and 2021, well, look, we all just know it's not going to make pretty reading. My name is Sam Coates of Sky News. And I'm Anne McElvoy from Politico. Might the publication of that COVID report give Keir Starmer a way out over the appointment of his top official Chris Wormald. During the pandemic, he ran the Department of Health. Famously, there wasn't a plan. But will this be enough to suggest that they should part ways after months of briefing from parts of number 10 that his appointment to run the civil service was a mistake? Or could it just be that the political instability that we've seen around the Prime Minister in the last few days and weeks means that, effectively, this government is just not stable enough to deal with a problem like the one that it created earlier in the year? Just like they don't seem to be getting on. And with the appointment to replace Peter Mandelson in Washington, one person said it's Tim Hatt's time till Christmas. So don't expect much big decision making beyond the budget until everyone has digested that. And we'll come on to the budget in just a bit. But it turned out yesterday that LinkedIn had struck again. Now, this time, apparently unknowingly facilitating spies from China to target British MPs. An MI5 security notice named two recruitment headhunters who said they were being used by the Chinese Ministry of State security to recruit their staff, friends, and contacts with large financial incentives. I don't really care how blameless LinkedIn are. I'd still get the security services to ban it. Listen, Kenny Badenock's head of policy, Neil O'Brien, was one of those that was targeted, as was a former Tory special adviser who worked for Nadine Sahawi. Along with Scully's very own Darren McAffrey, who got a message from the executive search duo. And I can tell you, of those three, if Darren spilt the beans that he knows to the Chinese, we're all done for. Now, the most important significant thing part of this story for me is that they named China as the aggressor here. Because in other security alerts, like the breach of the MOD contractor data that I broke about a year and a half ago, the government went out of its way to not name China as the aggressor and just said it was a foreign state. Do we think that that matters? I've got a hunch, which is that bluntly, this is actually a really small scale hack. You know, LinkedIn messages are hardly breaching the GCHQ computer. So maybe ministers can get all huffy in the commons and basically name China without much fear of diplomatic blowback. Good spot there, Sam, on the naming and shaming of China and where they've chose to target this publicity offensive MI5, as you say, low level stuff, fishing around, essentially, to find some weak spots among MPs. But I think it is part of a battle royale that is raging behind the scenes. And MI5 and cyber counterintelligence folk have been very keen just to get more warning messages out and point the finger at Beijing as being behind it. They would say it's part of a much bigger puzzle of low level intelligence being gathered, but part of a push to target parliament in many ways, which then leads up to attempts to recruit actual spies and informants within parliament. But this is a bit of a standoff because we also have Sir Richard Moore not long out of post as head of MI6 foreign intelligence service, sort of saying, oh, nothing much to see here on the big Chinese embassy. Yeah, maybe it'll be a nest of spies. What else do you expect? But that it's better to let them have it and keep those open door relationships with China. Blaise Metruvelli, his successor, is preparing her first big major outing in public. I can reveal that will be before Christmas. Now, she will, I think, come under some pressure to take a position on this too. She was brought up in Hong Kong, and she's operated a lot in Hong Kong. So interesting what her perspective is. But yeah, there is this balance. How much do you bring to public attention? And they've chosen to do it in this way of saying, be very aware on LinkedIn, et cetera, but not going too deep into what the Chinese operations really look like in the UK. Okay, that's a really interesting set of analysis and new facts at the new head of MI6 out and about before Christmas, probably having to say something about that Chinese embassy, will they agree with their predecessor? I'm sure you will have all the details for us before they happen. Best endeavours, sir. With PMQ's later today, Kier Stammer is back from Berlin and his dinner with Frederick Merch and Emmanuel Macron, where we are told they talk Ukraine, the Middle East, European security and migration. Now, funnily enough, they haven't given any more details of the dinner. So we rely on the European side maybe in the next few days to come out with a little bit more. But Anna, just to pause on something we talk about occasionally on this podcast, but seem massively important right now, there are a couple of strands to what's going on in Ukraine that when you dive back into the subjects, it's slightly blow your mind. The first one is the particularly challenging internal domestic situation for President Zelensky. There's a massive corruption scandal in Ukraine right now involving his government. It comes down to accusations of embezzling money from the state nuclear company. We're talking tens and tens, hundreds of millions of dollars worth. And some of the allegations are being levelled against members of President Zelensky's closest circle. So that doesn't look great, does it? It doesn't. And I think this will turn out to be very significant in what unfolds, Sam, because we saw overnight the Axios website reporting out of Washington that the Trump administration is drafting a new plan to end the Ukraine war. It will not be in Kiev's favor. It's another 28 point US led plan in consultation with Russia and inspired. So Axios is reporting by Trump's peace deal in Gaza. Now, Ukraine was very much on the menu at the Hotel Adler meeting in Berlin. As you say, details were sketchy from that, apart from the fact that they ate a Halliburton, Halliburton Summit. Symbolically, this is held close to the line of the old Berlin Wall and Brandenburg Gate. It's a moment when Zelensky is very domestically weakened for the reasons that you refer to corruption, scandals, thick and fast, extremely close to his government, extremely close to him in person. One of his key allies who have really helped build him into the leadership of the country, Timur Mindich, is accused of massive embezzlement of state nuclear company. He's fled the country. Two ministers are facing dismissal, very heated scenes in the Ukraine parliament about that. So altogether, Zelensky's grip on power is much weaker than it was. I saw the former mayor of Kiev last week, speaking very popular person in the country who basically didn't even really try to defend Zelensky. Russia's pressing its advantage in the east. We're seeing a lot of kind of military advance there by Russian forces. So for the US to be piling on pressure right now is very hard. And I think it's inevitable that Kirsten Arma and Friedrich Merz, two of the strongest allies that Ukraine has, will have been discussing that in detail and what their response should be. We're ahead of the G20 summit, which Kirsten Arma goes to on Friday in Johannesburg, where he'll come face to face with some of the key players. Again, wow, I didn't know so much of that. And that was absolutely fascinating. Right, I'm going to take us back home. We've got inflation numbers coming out pretty much at the point that this podcast drops. And that all feeds into the seven days to go countdown to the budget. Now, the political context we know is pretty dire. I've got a couple of numbers for you from you guys polling this week. 59% of people who voted Labour in the last election don't trust Rachel Reeves on the economy. But also, when you ask which party you trust with the economy and which party you trust least, Labour and the Tories come out joint last. So a plague on all the major parties. There's quite a lot of plague to go around, isn't there, right now? Today's big pre-budget event intended to perhaps throw our attention elsewhere is the Defence Secretary, John Healy. He has a press conference from the Downing Street Briefing Room, no less at 10am to link all the tricky decisions in the budget as essential to maintaining the defence spending boost. We know that Britain needs not least in the wake of that rising threat from Russia. The big sell will be that Britain will mass manufacture explosives for the first time in a generation. 30 new factory sites have been identified across the UK. Construction expected to get underway next year. There will be a geographical distribution of those, as you can imagine, that have political impact. They're everywhere from Grangemouth in Scotland, Teeside in the northeast, Milton Haven in Wales, the Times reporting that they will produce explosives, rocket propellants and ignition systems for use on the front line. So there is no doubt this goes way beyond secureonomics. You know, this is really a preparation for needing to defend the country and allies from a potential Russian attack. And it's John Healy, who of course gets to front that up. A quiet man turning up the volume in terms of Labour Cabinet actually looking like he has something to say and something to say it with. Yes, ammunition for the front line. I do wonder which front line. Is that the one with the Treasury? Many Cabinet Ministers might think that. All out war, Sam, all out war. This government really does need to have a bit of a story on jobs at the moment because last night it emerged that the US giant ExxonMobil announced that it was going to close a key chemicals plant up in Scotland with the loss of 400 jobs. They said the Mossmorran ethylene site near Cowdenbeath in Fife, so that's Gordon Brown land, frankly, would shut as soon as February next year after a consultation with it. Now, the politics of all of this are really stark. The US giant said that they were closing the factory. And this is their statement because the UK's current economic and policy environment combined with market conditions, high supply costs and plant efficiency do not create a competitive future for the site. In other words, and there is often this from big corporates when they take difficult decisions, political finger pointing at this government for its decisions for one of the motors for closing the plant. And the move by ExxonMobil is just, frankly, a further blow after the shutdown of the Grangemouth refinery earlier this year. For sure on that one. Sky high energy bills definitely on the radar of the government as we run up to the budget and as part of the cost of living theme that the Chancellor wants to focus on. Politico's Charlie Cooper and Abbey Wallace reporting, Rachel Reeves is eyeing knocking up to 170 pounds off annual energy bills by shifting levies towards general taxation. So that is quite a move. Ministers are targeting a cut, they say, of around that figure of 150 pounds upwards. And that would get Reeves and the energy secretary, Ed Miliband, halfway towards that election promise of slashing bills by, I think it was about 300 pounds by 2030, although some of those targets now do seem to have been consigned to the pre-election era. But it would give the government something positive to pitch on budget day, wouldn't it? That's right. And there is a sort of big picture element to this government, which involves the cost of living. But so much else of it is really challenging. One of the things that they're nervously waiting for in the Treasury right now is the final, final, final forecasts for the economy. The forecast that takes in all the decisions that they've made and combines the impact of those with the OBR's underlying assessment of where we are. Now, the question next weekend will be, has the OBR downgraded growth compared to the last time it assessed the economy? Because you know what the headlines will be. Government actions mean growth further downgraded, disaster for Rachel Reeves. Now, it's a little bit too early to say that that will definitely happen. But I can tell you right now, all the signs are that's where we're going to end up. How so? Well, this is what's called a consolidating fiscal event, forgive the jargon. They are trying to raise more money and spend less to hit their borrowing targets. That's just a big picture of this target. We listeners know that's the case because they've heard us talk it around that many, many times. If you're spending less on government than before and you're taxing more, taking more money out of people in businesses' pockets, then growth is just simply likely to go down. You combine that with the fact that the government's wheezes don't seem to have paid off. They wanted the OBR to score a gain, a growth gain from the planning bill, but that hasn't become law in time. They are now bracing themselves probably, though we can't see definitely yet, for a growth downgrade being revealed by the OBR next week. They know this and they would argue that this is the consequence of decisions that they've taken. They've decided not to go for austerity. They've decided not to break their fiscal rules. It's the consequence of that, but it will still be a very gloomy moment. The only thing that might save them, just to circle back to what you were just talking about, is that if in the final forecasts, lowering energy bills, lowers inflation and therefore means the Bank of England might reduce interest rates just a little bit faster, well, that could be a bit of an offsetting growth boost, but I think that's a little bit of a wishful thinking. It's got a slight Hail Mary pass sense about it, but who knows. Cost of living for some might be going down if indeed that energy relief package comes in, but for others, it's very definitely going up. The iPaper has good front page reporting that Rachel Reeves hosted drinks for a select group of labour loyalists. Write your own jokes at 11 downing street on Monday night, working up plans. She was apparently saying in this room, in this group, to target the highest value homes in the country, so the mansion tax, Sam is back. They won't call it that. I think it's just the nice big house tax at this point. You don't, you won't need to have a mansion to be hit by that if it comes in. And apparently over warm white wine, cheese twists and flapjacks, not exactly culinary heaven there, Reeves was urging MPs to sell the message that these rises in taxation would fall the hardest on wealthy people with those big houses. And she wanted to talk loudly a source said about charts showing the distribution of where the new rises will fall and where they would land then on better healed households. So to me, this is becoming the core Reeves way of thinking about how she gets to explain changes to the taxation system and rising taxes that she was hoping not to have to make. It's very Torsten Bell. He's now really her chief advisor on all of this, coming from that resolution foundation background. If you want to make changes, you show the income distribution, you show that it's kind of fairer to people lower down the income distribution. And then you say, you see, it's all these kind of well off people better off than you, averagely, who are taking the pain and you hope that is enough of a political message. Am I right? Am I being a bit skeptical slash cynical? Oh, I think you're 100% right. And the, you know, the idea that this government will sell the budget on the basis of income distribution graphs is so Torsten Bell. I think that's a brilliant point. But the only sort of counter point to that is I remember in 2008, 2009, quite a long time ago, Gordon Brown tried to justify abolishing the 10p rate of tax by showing us lots of income distribution graphs. And he lost the argument that way. So the political history of tax measures being defended by income distribution graphs is mixed. But that I think is a point for listeners with longer memories and quite involved policy interests. The big picture, though, is, as you say, Ed Miliband's mentioned tax lives, as you say, also, they won't call it that. I've been having a chance with people about this. Council tax escalator is one much less sexy name for it. Now, I confess, I'm still at a loss about how it's going to work in practice. Can you just revalue just a proportion of homes? And I'm also a bit confused about where the money goes. Because how does this help central government if local government is collecting it? Nevertheless, I was told one version of what might turn up is that houses over one million pounds. So that's basically quite a lot of London would face a few hundred pounds extra in council tax. But then as the name suggests, it escalates quite quickly. So if you and I mean you and live in a house of more than 10 million pounds, you can choose to deny it. Who knew? Not me. After those building works, who knew? You never know. So if you're in a house of more than 10 million pounds, worth more than 10 million pounds, then you do get whacked for thousands. They are worried, apparently, about grannies in Brixton who own their own home but are on fixed incomes. And that kind of thought is going on when they try to work out what the starting point should be. So let's see. This feels to me like another sort of non-triumph of Britain's completely broken housing market. And of course, your perennial reminder that taxes on the highest end do not raise much money. So let's see. For the pain, how much gain there is for the Treasury? If you do need to sell a 10 million pound house, or even if it's something rather less than 10 million, I think it's going to kick in much better that Sam Coates. Now, we'll troll each other about their houses. But in all seriousness, I was speaking to a senior estate agent, one of the biggest firms in London, that these big properties are simply not moving. I mean, they can't sell any of them because nobody knows what it's going to cost them going forward. So although that might sound like a very tiny violin for very wealthy people buying even bigger houses than Sam Coates, it is actually freezing up the property market. And they can't get any sales and they're having to drop staff who deal with the high end properties by means of saying all of these things are kind of sand in the machine of buying and selling. Well, we've hit our 20-minute limit. So we better wind it up there. Just to say inflation, we've got those numbers now. It's gone down from 3.8% in September to 3.6% now. That's just a tiny smidgen above what analysts were expecting. Still quite a long way off the government's target. But we can't be too much off our target. So let's wrap up. I will see you again tomorrow for the last Politics @Sam and Anne to the Week. See you then. Have a great day. See you tomorrow. Hey, it's Sophie and Will from Sky News. Too many headlines. Too little time. We get it. 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