Kwarteng targets overseas aid budget cuts to help fill fiscal hole

This article is an on-site version of our Inside Politics newsletter. Sign up here to get the newsletter sent straight to your inbox every weekday.

Good morning. Kwasi Kwarteng is aiming to cut the foreign aid budget as part of his efforts to demonstrate that he can make his “mini” Budget balance. The political difficulties facing Kwarteng is one reason why Sir Keir Starmer has reconfigured his office. Some thoughts on all that in today’s note.

Inside Politics is today edited by Gordon Smith. Follow Stephen on Twitter @stephenkb and please send gossip, thoughts and feedback to insidepolitics@ft.com.

They think it’s all ODA: it is now!

Kwasi Kwarteng will aim to cut £5bn from the international development budget as part of a package of measures designed to show that his tax cuts haven’t put the UK public finances on an unsustainable trajectory. George Parker, Jim Pickard and Seb Payne have the inside track on the bitter battle raging within the Tory party over the plans.

I don’t want to go over old ground here, having set out the difficulties in cutting the foreign aid budget in an earlier note. The short version is: cutting the ODA budget is the easiest of the cuts Kwarteng might make, in that “all” he has to do is overcome well-organised opposition in the House of Commons. Any other cut he might make will have to overcome well-organised opposition in the House of Commons and a painful electoral backlash in the country as a whole.

But even if he is able to scare up the votes to cut the foreign aid budget (which is far from certain), we are talking about a £5bn dent in a £60bn hole.

It’s going to take a much bigger set of spending cuts or a major U-turn on Kwarteng’s tax cuts to fix the underlying problem. But the Conservative party opposes both painful spending cuts and broad-based tax cuts. That stalemate is one big reason why many in Westminster think there will be an election sooner rather than later, despite the fact the 2019 parliament has some way to run before the government has to call an election, and despite the fact political parties rarely go to the country early when the polls are as bad as they are now.

Blinded by the White

The possibility of a fresh election is one reason why Sir Keir Starmer has reconfigured his office, dismissing his chief of staff Sam White and bringing in Marianna McFadden as deputy campaign director, to work alongside Morgan McSweeney, the party’s campaign director.

The changes are aimed in part at getting Labour ready to fight an election that might happen as late as the winter of 2024, but that also might happen some time before that. Starmer addressed Labour’s special advisers via Zoom yesterday to announce the shake-up to his staff, and one of his central themes was that the economic crisis and the Conservative party’s political difficulties means that an election could happen at any time.

That has created an added urgency to fixing some of the problems in the leader’s office, which many in the shadow cabinet feel has been unresponsive and sluggish. The big winner from Starmer’s changes is McSweeney, considered the brightest young institutional and intellectual prospect of the party’s Blairites, while McFadden, who left a job at the Tony Blair Institute for Global Change is also (unsurprisingly) well-liked and respected on the Labour right.

But while both McSweeney and McFadden are well-respected operators on the right of the party, more importantly they are quintessential Starmer hires.

One important thing to understand about the Labour leader is that he puts a high premium on institutional memory and what unites the people he trusts is not politics but in-depth experience. He trusts and draws on the knowledge and experience of Ed Miliband, who in addition to having been Labour leader was a secretary of state in the last Labour government. He has appointed well-respected staffers from the New Labour era — like McFadden and his director of strategy Deborah Mattinson.

So, yes: Starmer’s reorganisation means more power and influence for aides from the party’s right. But the really important shift here is that Starmer is trying to improve the speed and efficiency of his party in advance of an election: not that we should expect to see a major retreat from the themes Starmer set out in his conference speech, or a decline in the influence of Ed Miliband over the direction of the Starmer-era Labour party.

Now try this

While I have been rubbish at replying to your emails recently, for which I apologise, I am still reading them. I am very grateful in particular to Peter Jenkins for recommending that I visit the Ikon Gallery while I was in Birmingham, and to the Conservative MP, who will remain nameless, for suggesting that I check out Manteca in Shoreditch, a delightful restaurant.

I’m hoping to take a work trip to the devolved parliaments in Cardiff and Edinburgh before the year is out, so please send recommendations for what I should do with my evenings.

Top stories today

• Bank of England signals bond purchase extension | The Bank of England has signalled privately to bankers that it could extend its emergency bond-buying programme. Governor Andrew Bailey late yesterday warned pension funds that they “have three days left” before the support ends, but bankers briefed by the BoE said officials are watching the situation closely and could extend the scheme.

• UK economy shrinks as cost of living crisis bites | UK gross domestic product fell 0.3 per cent between July and August, led by a sharp contraction in industrial production, health and consumer-facing services.

• British low-carbon generators face de facto windfall tax | The government is to introduce a revenue cap on companies in England and Wales — not a windfall tax, the government insists — that generate power from onshore wind, solar, biomass and nuclear. The decision comes after ministers failed to secure a voluntary agreement with low-carbon electricity generators to sign 15-year, fixed-priced contracts.

• Regulators struggle to adapt to post-Brexit role | Recruitment difficulties, a shortage of expertise and exclusion from valuable EU information-sharing networks have left the UK’s major safety and competition regulators struggling to adapt to the post-Brexit environment, an influential group of MPs has warned.

• Jim Ratcliffe bemoans UK government’s lack of Budget ‘rigour’ | One of Britain’s most successful businessmen, Ineos owner Jim Ratcliffe, has issued a damning verdict on the recent UK “mini” Budget, saying the government “needs to get more rigour”.