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‘Very serious’: Bank of England governor warns of Middle East oil shock risk | Andrew Bailey

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The Bank of England is monitoring the Middle East crisis amid fears that a worsening conflict between Iran and Israel will make it impossible to stabilise oil prices and leave the global economy vulnerable to a 1970s-style energy shock.

Andrew Bailey, the Bank’s governor, said he was watching developments “extremely closely” and that there were limits to what could be done to prevent the cost of crude rising if things “got really bad”.

In a wide-ranging interview with the Guardian, Bailey held out the prospect of the Bank becoming a “bit more aggressive” in cutting interest rates provided the news on inflation continued to be good.

Shortly after this interview was published online, the pound fell by ¢1.5 to a three-week low as traders reacted to the hints of a more activist approach to reducing the cost of borrowing.

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Bailey also hit back at claims by the former prime minister Liz Truss that the Bank of England was part of a “deep state” that had set out to thwart her plans. Truss’s problems were of her own making, the governor said.

Bailey was speaking from his office in Threadneedle Street after this week’s Israeli invasion of southern Lebanon and Iran’s launch of ballistic missiles in response. Oil prices rose by 3% amid concerns that a deepening conflict might disrupt supplies of crude from the Middle East.

“Geopolitical concerns are very serious,” Bailey said. “It’s tragic what’s going on. There are obviously stresses and the real issue then is how they might interact with some still quite stretched markets in places.”

Bailey said that in the year since the Hamas attack on Israel there had not been a big rise in oil prices of the sort seen in the past. “From the point of view of monetary policy, it’s a big help we haven’t had to deal with a big increase in the oil price. But obviously we’ve had that experience in the past, and in the 1970s, the oil price was a big part of the story.

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“Obviously, we keep watching it. We watch it extremely closely to see the impact of the latest news. But … my sense from all the conversations I have with counterparts in the region, is that there is, for the moment, a strong commitment to keep the market stable.

“There’s also recognition there’s a point beyond which that control could break down if things got really bad. You have to continuously watch this thing, because it could go wrong.”

Bailey said the economy has proved more resilient than he feared two years ago, or even a year ago. “I think the economy has come through the shocks of the last five years better than many of us feared. So there’s a base there to develop.

“The government is right to focus on how to encourage capital investment. There is a clear need for it in terms of infrastructure. We’ve got at least three very big structural issues out there. One is the ageing population, which obviously we’re not alone in that one. Two is the demands for increase in defence spending. And the third one is dealing with climate change.”

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Bailey became governor in March 2020, just as the Covid pandemic was hitting. He said for much of the period since then the Bank had been engaged in “crisis management” but he hoped the second half of his eight-year term would be calmer.

Inflation as measured by the consumer prices index currently stands at 2.2% – just above its official 2% target, but Bailey said he was encouraged by the fact that cost of living pressures had not been as persistent as the Bank thought they might be. He said if the news on inflation continued to be good there was a chance of the Bank becoming more “a bit more activist” in its approach to cutting interest rates, now at 5%.

He strongly defended the way the Bank responded to the pandemic, global supply-chain bottlenecks and the invasion of Ukraine, rejecting criticism that he and his colleagues left stimulus in place for too long, resulting in the highest inflation in four decades and the need to raise interest rates from 0.1% to 5.25% in 14 consecutive jumps.

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“I sometimes read some of this commentary and think, do you remember what happened in 2020, with the economy? I mean, we did drop off a cliff. Anybody who says it was the wrong thing to do to come in and support the economy as we and others did – that’s just not realistic.”

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If the Bank had not acted at it did, Britain would have been plunged into a second Great Depression, he added.

Among the governor’s critics are Truss, who said Bailey was part of the “deep state” responsible for undermining her short-lived premiership.

“I don’t know what she means by that,” Bailey said, adding he had never met her. Truss’s problems, he said, were the result of her chancellor Kwasi Kwarteng’s mini budget, which led to a sharp increase in market interest rates and potentially massive losses for UK pension funds before the Bank stepped in to help.

“I remember Liz Truss saying at the time: ‘It’s a financial stability issue, it’s the Bank of England’s job to deal with it.’ We did. We came in and we used our intervention tools and dealt with it. But it is a bit ironic for somebody who is so critical of regulators to then come out and say the problem is that the Bank of England wasn’t regulating.”

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Bailey said accusations that the Bank was part of a deep state made his job as governor more difficult.

“I’ll say this about some of the things that are said about the ‘deep state’: it’s not easy running public institutions these days. I can tell you.

“People say there’s somehow an agenda for this or an agenda for that, and the agenda really is that we’re trying to run an institution to its maximum effectiveness.”

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Robert Jenrick’s leadership bid: Local Tories reacts

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PA Media Tory leadership hopeful Robert Jenrick speaks to supporters as he stands in front of a sign saying "Jenrick for leader" during his Conservative Party leadership campaign launch at the YMCA Community and Activity Village, in NewarkPA Media

The MP for Newark has made it through to the final two of the Conservative leadership contest along with Essex MP Kemi Badenoch – but do the locals think Robert Jenrick is the right person for the job?

“We need to get it right this time”, Conservative activist Jenni Oliver tells me, as she takes a sip from her cappuccino.

Tory members like Ms Oliver have grown accustomed to choosing prime ministers, but now they’re selecting the leader of the opposition.

“We voted Liz Truss in. That was a big mistake as far as I was concerned. Boris Johnson? No.”

“For me, that’s where the Conservatives lost it.”

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The activists I am meeting for a coffee in the Nottinghamshire market town of Newark have real skin in the game this time.

Unsurprisingly, members of Jenrick’s local Conservative association all believe he is the best person to revive the party’s fortunes.

Tony Roberts, the president of the association, argues that the former cabinet minister has “really matured” as a politician.

Seen initially as an ally of David Cameron on the more “moderate” wing of the party when he became an MP in 2014, Jenrick has shifted to the right after quitting as immigration minster last year.

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They accept that while his views might have changed over the years, his Conservative “values” are the same.

Tories here have fond memories of knocking on doors for Jenrick when he was first elected in a by-election a decade ago.

Sue Saddington, a local councillor, recalls having his campaign team over to her house for shepherd’s pie.

Now she is salivating again at the prospect of him becoming leader.

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The local area “will really wake up to the fact that they have somebody of stature now in Newark,” she said.

“I think Newark will absolutely rejoice to it.”

It is a bold claim in a seat where more than 60% of voters backed other candidates in the July general election.

Jenrick’s majority was slashed from 22,000 to 3,500, with both Labour and Reform UK making huge gains at the election

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He is now the only Conservative MP anywhere in Nottinghamshire or neighbouring Derbyshire.

Political Editor for BBC East Midlands, Peter Saul interviews Jenni Oliver, Sue Saddington and Tony Roberts-  members of Robert Jenrick's local Conservative association in Newark - over coffee outdoors on a bench infront of iconic red telephone boxes

That result is described as a mere “blip” by Mr Roberts.

His more immediate concern is the limited options given to members in the leadership election.

“We’ve got just two, right-wing candidates and I would have liked the membership to have a wider choice,” he said.

“That’s why going down to two was a mistake, it should have been at least three.”

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The timetable of the election race is also mistake.

Unless a candidate drops out, the result will be announced after the Budget – meaning Rishi Sunak, not his successor, will respond to Chancellor Rachel Reeves.

And what of the bookies’ favourite to be next Tory leader, Kemi Badenoch?

Both Ms Saddington and and Mr Toberts stress the importance of the party uniting behind whoever wins.

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But Ms Oliver is not convinced.

“Personally, I think it’ll be a few months – it could be another Liz Truss,” she said.

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Challenged on death of Dawn Sturgess, Russian ambassador dismisses inquiry

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Is Reform UK's plan to get Farage into No 10 mission impossible?
BBC A montage image featuring Putin, Salisbury Cathedral and two people in PPEBBC

The family of Dawn Sturgess, who died six years ago after coming into contact with Novichok, have been calling on Vladimir Putin to speak to the inquiry after her death in the Salisbury poisonings.

I put their request directly to Andrei Kelin, the Russian ambassador to the UK, in as part of a wide-ranging sit-down interview that will be broadcast on Sunday.

“I hardly believe President Putin will go to Britain just to testify something,” he said.

The UK government holds Russia, and two Russian agents, known as Alexander Petrov and Ruslan Boshirov, responsible for the attack.

Andrei Kelin questioned the need for an inquiry. “Why drag this history so long?”

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He also rejected suggestions Petrov or Borishov should attend, saying the men had already given answers on TV – referring to a 2018 interview they gave on Russian state TV in which they claimed they had just been visiting Salisbury Cathedral.

That claim was mocked by some in Russia. UK officials called the interview “risible”.

Challenged with the fact that the UK, US, France, Germany, Canada all believe the attack was carried out by Russia with Novichok manufactured in Russia, Kelin said that “too many governments” were involved and dismissed their allegation as “nonsense“.

Pressed to give a response to the Sturgess family, the ambassador appeared to laugh, saying: “I have never met this family … If someone has died, of course we are concerned about that.”

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Watch: Highlights from Laura Kuenssberg’s interview with Andrei Kelin

On Ukraine, Kelin accused the UK of “waging war” on Russia by supporting the country with weapons and resources. If Zelensky “won’t negotiate with us, fine”, he said. “He will lose more and more terrain.”

This week, the Ukrainian president published a so-called victory plan to try to bring the conflict to an end next year.

It includes a formal request to join Nato and the lifting of bans on long-range strikes with Western-supplied weapons deep into Russia.

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Challenged on Russia’s illegal invasion and stalemate in the war, the ambassador said Zelensky “does not want peace … he continues to ask for more and more; Nato, EU assistance, defence packages.

“Anything, but nothing about negotiations at all.”

Kyiv, backed by its allies, has always rejected any suggestions of negotiation after the Russian invasion. They believe that would mean the permanent loss of Ukrainian territory.

Western governments believe that Putin is under rising pressure at home, with increasing casualties and the huge cost of the war. Even Moscow’s finance ministry has acknowledged the intense strain on the economy.

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But Kelin claims Russia is living “absolutely normal life”.

Asked if the suffering on both sides kept him awake at night, he said: “No one likes the war.” He said it could stop if the West stopped supplying arms to Ukraine.

“We are not just going to say, OK, [from] tomorrow we do not shoot each other. We won’t.”

On Friday, Keir Starmer reiterated his support for Ukraine. “We have always said that it is for the Ukrainian people to decide their own future so we’re clear, together with President Zelensky, that the only acceptable outcome is a sovereign Ukraine and a just peace.”

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He also said Russia was getting weaker, with the war soaking up 40% of its budget, and the government believing there were more than 600,000 dead or wounded Russians, and another 500,000 casualties predicted by the end of the year.

With reports in recent days that North Korean troops are backing the Kremlin in the conflict, Kelin was challenged on Russia’s reliance on pariah states like North Korea and Iran.

“For us, it’s normal people, we have been friends, and we have a lot of common interests with North Korea and Iran … Anything bad – we do not see it.”

And on the American election, with just weeks to go, the ambassador claimed the winner didn’t make a difference at all. He said there was a “two-party consensus” on Russia – “and this is anti-Russian sentiment”.

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The ambassador said that Russia had changed its nuclear doctrine in response to conversations among Western allies about allowing Ukraine to use long-range missiles supplied by them to fire into Russia.

Russia now says it would consider an attack from a non-nuclear state that’s backed by a nuclear-armed one to be a “joint attack”. That has been construed as a threat to use nuclear weapons in Ukraine.

Jens Stoltenberg, the former Nato boss, said the West had “called Putin’s bluff” over nuclear threats – implying it had crossed many of Putin’s red lines without anything happening.

Kelin said Stoltenberg’s statement itself was “a bluff” – adding Russia would protect itself “with all the means that are in our disposal, and believe me, there are lots of them.”

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Getty Images Russian President Vladimir Putin delivering a speechGetty Images

It is hard to overstate the impact of the Salisbury attacks on the fraught relationship between the UK and Russia.

A senior figure involved in the UK government response told me it was a “huge tipping point.

“It was shocking in the fact that the Russians were trying to kill people on our soil, but also, so blatantly happy for us to know that it was them,” they said, pointing to the use of Novichok, known to be manufactured and used by the Russian state.

Only a year before, then-Foreign Secretary Boris Johnson had gone to Moscow in the hope of a “reset” of the relationship between the two countries.

But another senior source told me: “we simply couldn’t have a normal relationship with them again with that in the background”.

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They described the poisonings as worse than anything that had happened in the Cold War. “The competition was pretty brutal then, but this kind of thing was completely unacceptable.”

More than 20 Western allies expelled diplomats and spies from their countries in response after a bout of frantic diplomacy by Theresa May’s government, including pushing former President Trump to act.

One figure recalls, “it was pretty hairy at the time, a lot of Europeans didn’t want to do it. Trump personally didn’t want to do it but was persuaded to do so”.

The UK insisted that the announcement of the expulsions from each country was made at exactly the same time, with only the UK aware of how many Russians each government planned to order to leave.

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The fear in Downing Street was that Trump would not be willing to take drastic action if he had known the numbers each European country were planning to expel.

The UK government now believes that Russia is the number one threat to the UK’s security.

Labour said in the election: “the defence of the UK starts in Ukraine,” and ministers believe the same now they are in government.

The UK has been at the forefront of leading the Western backing of Ukraine since the invasion in 2022, and has sent billions of pounds worth of weapons and resources to support the effort.

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It’s given staunch political backing to President Zelensky – but don’t expect a decision on his request to use Western long-range missiles for at least a few weeks.

There are concerns in government about Russia increasing its efforts at sabotage on UK soil, with the boss of MI5 warning this week Russia was more and more engaged in “arson, sabotage and more dangerous actions conducted with increasing recklessness”.

Getty Images Military personnel wearing protective suits with gas masksGetty Images

Back in 2018, when the poisonings happened, the UK had no way of predicting how Russia’s aggression would grow into what one source calls an “off-the-charts bigger crisis” – with its illegal invasion of Ukraine.

But as the Salisbury inquiry delves into the impact of the poisoning on one innocent British family, its significance as a moment of the rupture in relations is clear too.

That’s caught in a conversation understood to have taken place between UK national security adviser Mark Sedwill and his Russian counterpart at the time, after Western allies had expelled 300 diplomats.

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“You seem to want to take us back to the days of the Cold War,” the Russian said.

“Well, Yuri, at least we all knew the rules then,” Sedwill responded.

You can watch our interview with Russian ambassador Andrei Kelin tomorrow at 09:00 on Sunday with Laura Kuenssberg on BBC One. We’ll also talk to Health Secretary Wes Streeting.

Top photo credit: Getty Images

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Weight loss jabs for unemployed not dystopian, says Wes Streeting

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Weight loss jabs for unemployed not dystopian, says Wes Streeting

Health Secretary Wes Streeting has dismissed suggestions that plans to provide weight loss jabs to unemployed people with obesity are “dystopian.”.

The UK government is launching a five-year trial with pharmaceutical giant Lilly to test if the weight-loss drug Mounjaro can help get more people back to work and ease the strain on the NHS in England by preventing obesity-related diseases.

The announcement prompted a backlash, with accusations that the government was stigmatising unemployed individuals and reducing people to their economic value.

Speaking on Sunday with Laura Kuenssberg, Streeting said the jabs were part of a broader healthcare plan, adding that he was “not interested in some dystopian future where I involuntarily jab unemployed people who are overweight”.

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“There’s a lot of evidence already that these jabs combined with changes to diet and exercise can help people to reduce their weight but also prevent cardiovascular disease and also diabetes which is game-changing,” Streeting said.

But he cautioned against creating a “dependency culture”.

Some injections are already prescribed on the NHS for the treatment of obesity, and also for people with diabetes.

Prime Minister Sir Keir Starmer previously told the BBC the jabs would be “very helpful” to people who want and need to lose weight.

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“[The drug is] very important for our NHS, because, yes we need more money for the NHS, but we’ve also got to think differently”.

The NHS’s latest Health Survey for England shows in 2022, 29% of adults in England were obese and 64% were deemed to be overweight.

Illnesses relating to obesity cost the NHS £11bn a year, Streeting said.

Obesity has also been linked to the development of type 2 diabetes, with the NHS spending around £10bn a year – 9% of its budget – to care for people with diabetes.

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Minister relinquishes Grenfell brief after survivors object

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Minister relinquishes Grenfell brief after survivors object

A Labour minister in the housing department has given up her duties managing building safety and the government’s response to the Grenfell Tower fire.

According to the Sunday Times, survivors of the tragedy had called for Rushanara Ali to stand down after the newspaper highlighted her attendance at the Franco-British Colloque, a conference that brings together senior politicians, civil servants and business leaders.

For many years, the conference has been co-chaired by Pierre-André de Chalendar, who until recently served as chairman of Saint-Gobain – the parent company of one of the firms heavily criticised in the recent Grenfell inquiry.

While the MP for Bethnal Green and Stepney is not resigning as a minister, she said she was relinquishing her building safety brief because “perception matters”.

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The last meeting of the Colloque was held in January, several months before the general election.

Mr De Chalendar reportedly no longer serves as the co-chair of the conference.

The former head of Saint-Gobain was in charge of the company at the time of the Grenfell fire, when it was a majority shareholder of Celotex.

Celotex was one of the firms to manufacture the combustible insulation inside the cladding on Grenfell Tower.

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The Grenfell Inquiry’s Phase 2 report heavily criticised Celotex for launching a “dishonest scheme to mislead its customers” over the suitability of its insulation for use on high-rise buildings.

According to the register of MPs’ interests, Ali was one of half a dozen MPs who attended this year’s Colloque in Paris in January.

Ali was re-elected to her east London seat in July, where she has been an MP since 2010.

In a statement, the Minister for Homelessness and rough sleeping said: “Trusted relationships between ministers and the Grenfell community are essential for this Department.

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“Before I became a minister, I called for the French delegation of the Franco-British Colloque to cut ties with Saint Gobain. But I understand that perception matters and I have therefore concluded that the building safety portfolio would be best transferred to another minister.

“Our goals of making buildings safe and preventing another tragedy continue to be very important issues for me, and the deputy prime minister and the rest of the ministerial team have my full support in delivering on this work.”

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The Tata family member who became a British MP and fought for India’s freedom

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Picryl Black and white image of Shapurji SaklatvalaPicryl

Shapurji Saklatvala was the nephew of Jamsetji Nusserwanji Tata, who founded the Tata Group

The name Shapurji Saklatvala may not be one that leaps out of the history books to most people. But as with any good tale from the past, the son of cotton merchant – who is a member of India’s supremely wealthy Tata clan – has quite a story.

At every turn, it seems that his life was one of constant struggle, defiance and persistence. He shared neither the surname of his affluent cousins, nor their destiny.

Unlike them, he would not go on to run the Tata Group, which is currently one of the world’s biggest business empires and owns iconic British brands like Jaguar Land Rover and Tetley Tea.

He instead became an outspoken and influential politician who lobbied for India’s freedom in the heart of its coloniser’s empire – the British Parliament – and even clashed with Mahatma Gandhi.

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But how did Saklatvala, born into a family of businessmen, pursue a path so different from his kin? And how did he blaze a trail to become one Britain’s first Asian MPs? The answer is as complex as Saklatvala’s relationship with the his own family.

Getty Images Communist Party of Great Britain MPs Saklatvala Shapurji (1874 – 1936), left) for Battersea, and Walton Newbold (1888 – 1943) for Motherwell, at the opening of parliament, London, UK, in November 1922. (Photo by Topical Press Agency/Hulton Archive/Getty Images)Getty Images

Communist Party of Great Britain MPs Saklatvala Shapurji (left) and Walton Newbold (right)

Saklatvala was the son of Dorabji, a cotton merchant, and Jerbai, the youngest daughter of Jamsetji Nusserwanji Tata, who founded the Tata Group. When Saklatvala was 14 years old, his family moved into Esplanade House in Bombay to live with Jerbai’s brother (whose name was also Jamsetji) and his family.

Saklatvala’s parents separated when he was young and so, the younger Jamsetji became the main paternal figure in his life.

“Jamsetji always had been especially fond of Shapurji and saw in him from a very early age the possibilities of great potential; he gave him a lot of attention and had great faith in his abilities, both as a boy and as a man,” Saklatvala’s daughter, Sehri, writes in The Fifth Commandment, a biography of her father.

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But Jamsetji’s fondness of Saklatvala made his elder son, Dorab, resent his younger cousin.

“As boys and as men, they were always antagonistic towards each other; the breach was never healed,” Sehri writes.

It would eventually lead to Dorab curtailing Saklatvala’s role in the family businesses, motivating him to pursue a different path.

But apart from family dynamics, Saklatvala was also deeply influenced by the devastation caused by the bubonic plague in Bombay in the late 1890s. He saw how the epidemic disproportionately impacted the poor and working classes, while those in the upper echelons of society, including his family, remained relatively unscathed.

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During this time, Saklatvala, who was a college student, worked closely with Waldemar Haffkine, a Russian scientist who had to flee his country because of his revolutionist, anti-tsarist politics. Haffkine developed a vaccine to combat the plague and Saklatvala went door-to-door, convincing people to inoculate themselves.

“Their outlooks had much in common; and no doubt this close association between the idealist older scientist and the young, compassionate student, must have helped to form and to crystallise the convictions of Shapurji,” Sehri writes in the book.

Getty Images MUMBAI, INDIA - NOVEMBER 08, 2007: Old Tata House - Esplanade House. (Photo by Kapil Patil/Hindustan Times via Getty Images)Getty Images

A photo of Esplanade House, the Tata’s house in Bombay

Another important influence was his relationship with Sally Marsh, a waitress he would marry in 1907. Marsh was the fourth of 12 children, who lost their father before becoming adults. Life was tough in the Marsh household as everybody had to work hard to make ends meet.

But the well-heeled Saklatvala was drawn towards Marsh and during their courtship, he was exposed to the hardships of Britain’s working class through her life. Sehri writes that her father was also influenced by the selfless lives of the Jesuit priests and nuns under whom he studied during his school and college years.

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So, after Saklatvala travelled to the UK in 1905, he immersed himself in politics with an aim to help the poor and the marginalised. He joined the Labour Party in 1909 and 12 years later, the Communist Party. He cared deeply about the rights of the working class, in India and in Britain, and believed that only socialism – and not any imperialist regime – could eradicate poverty and give people a say in governance.

Saklatvala’s speeches were well received and he soon became a popular face. In 1922, he was elected to parliament and would serve as an MP for close to seven years. During this time, he advocated ferociously for India’s freedom. So staunch were his views that a British-Indian MP from the Conservative Party regarded him as a dangerous “radical communist”.

During his time as an MP, he also made trips to India, where he held speeches to urge the working class and young nationalists to assert themselves and pledge their support for the freedom movement. He also helped organise and build the Communist Party of India in the areas he visited.

Getty Images 24th September 1933: Addressing crowds at Speakers' Corner in Hyde Park, Communist MP Saklatvala Shapurji calls for the release of the Reichstag Fire suspects in Germany. The fire, which burned down the Reichstag parliament building, was allegedly started by Communist Party member Marinus van der Lubbe and gave the German government a pretext to introduce a state of emergency across the country and suppress opponents of the Nazi regime. (Photo by Keystone/Getty Images)Getty Images

A photo of Saklatvala giving a speech in Hyde Park in 1933

His strident views on communism often clashed with Mahatma Gandhi’s non-violent approach to defeat their common adversary.

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“Dear Comrade Gandhi, we are both erratic enough to permit each other to be rude in order to freely express oneself correctly,” he wrote in one of his letters to Gandhi, and proceeded to mince no words about his discomfort with Gandhi’s non-co-operation movement and him allowing people to call him “Mahatma” (a revered person or sage).

Though the two never reached an agreement, they remained cordial with each other and united in their common goal to overthrow British rule.

Saklatvala’s fiery speeches in India perturbed British officials and he was banned from traveling to his homeland in 1927. In 1929, he lost his seat in parliament, but he continued to fight for India’s independence.

Saklatvala remained an important figure in British politics and the Indian nationalist movement until his death in 1936. He was cremated and his ashes were buried next to those of his parents and Jamsetji Tata in a cemetery in London – uniting him once again with the Tata clan and their legacy.

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Reeves considers income tax threshold freeze

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Reeves considers income tax threshold freeze

An announcement in the upcoming budget of a continued freeze on income tax thresholds beyond 2028 would not constitute a breach of Labour’s election manifesto promise, government sources have insisted.

In the run-up to June’s general election, both leader Sir Keir Starmer and the soon-to-be Chancellor Rachel Reeves pledged to “not increase taxes on working people”.

But a threshold freeze could allow the chancellor to raise an estimated £7bn by bringing more people into the tax system.

Reeves is currently trying to find £40bn through a mixture of savings and tax rises that she will announce in the new government’s first budget on Wednesday 30 October.

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Tax thresholds were frozen by the previous Conservative government in 2022, but were due to rise again each year from 2028.

The chancellor is now said to be weighing a plan to extend the freeze for the remainder of the parliament.

The decision not to increase tax thresholds would continue a process called “fiscal drag”, in which more people are “dragged” into paying tax, or higher rates of tax, as their wages rise and cross the unchanging thresholds.

If Reeves goes ahead with the plan, roughly 400,000 more people will find themselves paying income tax at the basic rate.

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Government insiders have insisted this does not breach Labour’s manifesto pledge to “not increase taxes on working people”.

Sources are pointing to the exact wording of the manifesto, which states that the “rates” of income tax would not rise.

In other words, in England, Wales and Northern Ireland these would remain – depending on income – at 20p, 40p and 45p. 

But as people’s wages increased, so too would their tax bill.

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In 2019, the Conservatives also pledged not to increase tax “rates” – and went on to freeze tax thresholds.

At the time, this was denounced by the Labour opposition as a “stealth tax”.

However, it is not one the party has specifically pledged to reverse.

Labour’s opponents will argue that an extension of a freeze would undermine the party’s wider-ranging promise not to increase taxes on working people.

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Reeves has just 11 days to firm up her plans ahead of Budget day.

The country’s first female chancellor has warned of a £22bn “black hole” in the public finances – a gap caused by the rules the government has chosen to follow governing how much money it can borrow over the next five years.

Filling this hole would only be enough to “keep public services standing still”, the chancellor said this week.

This means she is hoping to find £40bn in order to avoid real-terms cuts to government departments.

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Reeves has warned of “difficult decisions” ahead.

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