Ed Davey, the Lib Dem leader, starts by welcoming the news that the government will review the way carer’s allowance operates, and how people have been aggressively penalised over over-payments.

We have the story here.

Starmer says he hopes the review will resolve these problems.

Davey asks if the UK will sanction two Israeli ministers – the finance minister, Bezalel Smotrich, and the national security minister, Itamar Ben-Gvir – who have made extremist comments backing Israeli settlers in the West Bank who have attacked Palestinians. Yesterday David Cameron said the last government was considering this.

Starmer says the government is “looking at that” because the comments made were “abhorrent”.

UPDATE: Starmer said:

We are looking at that because they’re obviously abhorrent comments … along with other really concerning activity in the West Bank but also across the region.

The humanitarian situation in Gaza is dire, the death toll has surpassed 42,000 and access to basic services is becoming much harder,

Israel must take all possible steps to avoid civilian casualties, to allow aid into Gaza in much greater volumes and provide the UN humanitarian partners the ability to operate effectively.

Rishi Sunak says China has carried out aggressive exercises in the Taiwan Strait. Will the foreign secretary use his meetings in Beijing this week to condemn this action?

Starmer says the activity in the Taiwan strait is not conducive to peace. He says the government will cooperate with China where it can, but challenge it where it has to.

UPDATE: Sunak said:

This week, China has carried out unwarranted, aggressive and intimidatory military exercises in the Taiwan Strait. Our allies are rightly concerned after worrying reports that the government may have intervened to stop a visit to the UK by the former Taiwanese president.

Can the prime minister confirm that the foreign secretary will use his meetings in Beijing this week to condemn China’s dangerous escalatory acts in the strait?

And Starmer replied:

The continued military activity in the Strait is not conducive to peace and stability. Stability in the Taiwan Strait is in all of our interests.

On the wider point that he raises, we will co-operate where we can as permanent members of the UN security council, issues like net zero, health and trade, compete where we have different interests, but challenge, the point he makes is absolutely right, where it’s needed to protect national security, human rights and our values, and we will put that challenge in.

Q: What would be the economic impact of leaving the European convention on human rights? Businesses say they want stability.

Jenrick says leaving the ECHR would have no impact on the economy. But it would save the government “a lot of money because we’re currently spending billions of pounds, as the Labour government is acknowledging today, on housing illegal migrants who are here”.

Robert Jenrick has finished his speech, and he is now taking questions.

Q: Kemi Badenoch says she is Labour’s worst nightmare. Is she right?

Jenrick says he agrees that the party is facing an existential moment.

I think that our party faces an existential challenge right now. Our party has no divine right to exist. That’s why we need to get the choice right in this leadership election, and that’s why I stand for ending the drama, ending the excuses, and actually delivering for the British people.

He claims polling suggest he would be the best leader for the party. He says his campaign has moment. Months ago, he was an outsider.

Q: Are you proposing a return to austerity?

Jenrick says he does not see it that way. He thinks says returning welfae payments to levels they were pre-pandemic, or civil service numbers to what they were in 2015, would save huge amounts of money.

A group representing more than 300 Chagossians has expressed concern that the deal for the UK to hand back its last African colony to Mauritius does not include a right to return to the island of Diego Garcia.

The deal struck earlier this month, which followed years of bitter dispute and court rulings rejecting UK sovereignty over the Chagos Islands, allowed for resettlement, except to Diego Garcia, which is home to a joint UK-US military base and will remain under UK control.

The Chagos Refugees Group, based in Mauritius, said that, at its annual general meeting on 13 October, members unanimously expressed concern that, by not allowing a right of return to the largest of the islands, the agreement disregards the full human rights of Chagossians from the island where most trace their ancestry.

In a letter to the British high commissioner in Mauritius, Charlotte Pierre, the Chagos Refugee Group’s president, Olivier Bancoult, said:

We firmly request that all native Chagossians from Diego Garcia and their heirs be granted the right to freely visit and live on Diego Garcia, as is their natural right, given that foreign workers currently have this privilege.

When the agreement was struck, there was a suggestion that Chagossians from Diego Garcia could be prioritised for jobs there.

The letter also calls for Chagossians to be involved in the negotiation process to ensure that Chagossians’ rights and interests are fully safeguarded,”, having previously been excluded, and for “a comprehensive support package for Chagossians born in Chagos and their descendants, including a lifetime pension for those born in Chagos”.

Chagossians were expelled from their homes in the 1960s and 70s in what has been described as a crime against humanity and one of the most shameful episodes of postwar colonialism, to make way for the base on Diego Garcia.

Under the deal, base operations on the island will remain under UK control into the next century – initially for 99 years with the UK having a right to extend.

Kemi Badenoch, the bookmakers’ favourite in the Conservative leadership contest, has not been doing many broadcast interviews, but she has given an interview published today in the Daily Telegraph. Here are the main lines.

• Badenoch said the leadership contest was an “existential” moment for the Conservative party, and that if it were to choose the wrong leader it could end as a political force. The Telegraph headlined on this line, which could be read as a strong attack on her rival, Robert Jenrick. But in the interview the point she really wanted to make was that it would be a mistake for members to think they could elect a leader and then just replace them quickly if they fail, as happened with Iain Duncan Smith, Boris Johnson and Liz Truss (the last three Tory leaders chosen by members). She said:

If we get this wrong, there’s not going to be a party. There’s no second chance. We have one chance to get this right.

This endless tossing out leaders as if they’re just disposable has been one of the things that has damaged the party brand.

People want to see some stability and some certainty. This is not the time for more psychodrama. We need to get serious and I think members are very serious about wanting to pick a leader for the long term, and they are looking very closely at which candidate best represents their views.

Many Tories assume that whoever wins the contest this autum will be replaced after about two years because they are not likely to generate an electoral recovery and because MPs will want to try someone else.

• Badenoch suggested she was not keen to see Boris Johnson return to parliament. Asked if she would like to bring him back, she replied:

I’m very much about the future.

He is a former MP. If there’s an association that thinks that he would be a great MP for them I think that he should be allowed to stand there. But I am not recruiting former prime ministers to say please come back. I’m trying to make sure that we are talking about the future and drawing a line under the last 14 years.

• She claimed she would be “Labour’s worst nightmare” as Tory leader. She thinks her ethnicity would make it hard for Labour to depict the Tories as prejudiced, the Telegraph says. And she said:

The team that I’m putting together will be Labour’s worst nightmare, not just me.

I understand them better than they realise. I know where their weak points are. I know that they do not start with principles, or certainly, they don’t have the same principles that we do.

• She said too many young people were doing degrees that did not get them into jobs. And she suggested that an apprenticeship she did before going to university was more use to her than her degree. She said:

It cannot be right that we are sending people to do degrees where they can’t get jobs They’re coming out with a lot of debt, and we then wonder why we don’t have people in work …

I can’t remember three quarters of my engineering degree. The apprenticeship I still remember, and that influences a lot of my thinking, the practical skills I got from that I use much more than a lot of the theory which I learnt.

The number of graduate jobs that we have are not enough to sustain the number of people going to university.

• She rejected claims that she is dodging a public debate with Jenrick. She said she was also accused of crossing the street to start a fight, and that both charges could not be true.

• She criticised Jenrick’s call for the UK to leave the European convention on human rights, saying: “Trying to recreate the [leave/remain] referendum is not something people want to hear right now.”

Here is Eleni Courea’s story on the Treasury wanting to announce tax rises and spending cuts worth £40bn in the budget.

Darren Jones, the chief secretary to the Treasury, has described today’s fall in inflation (see 9.36am) as “welcome news”. But, in interviews, he also warned there would be “hard” choices in the budget.

Asked whether he could rule out real-terms spending cuts for crucial public services, Jones replied:

We’re setting budgets for public services at the end of October for one financial year, 25/26.

We will not be returning to austerity and we will present an honest set of spending plans that deal with the £22bn black hole that we inherited from the previous Conservative government.

That will be hard, but it’s the right thing to do and it’s the start of the period of change under this Labour government that will see better public services over the years ahead.

Inflation in the UK has fallen to its lowest level in three and a half years, giving a pre-budget boost to Rachel Reeves as expectations grow for the Bank of England to cut interest rates. Richard Partington has the story here.

Good morning. Governments engage in expectation management, and the latest example is on the front page of the Financial Times this morning, where there is a story saying Rachel Reeves, the chancellor, has identified a “£40bn funding gap” as she prepares the budget, which is happening a fortnight today. In their story George Parker and Sam Fleming report:

UK chancellor Rachel Reeves has identified a £40bn funding gap ahead of her Budget in two weeks — far more than previously expected — as she prepares big tax rises to patch up the NHS.

The figure represents the funding that Reeves needs to protect key government departments from real-terms spending cuts, cover the enduring impact of an annual £22bn overspend and build up a fiscal buffer for the remainder of the parliament.

The Financial Times has been told by officials close to the budget process that the Treasury is seeking ways of closing a shortfall of £40bn, with tax rises set to form the centrepiece of her response.

The FT also points out that Reeves told cabinet colleagues yesterday the budget would require “difficult decisions on spending, welfare, and tax”.

A “funding gap” is what is otherwise described as a black hole in the accounts, and it can be hard to keep track of what the best black hole estimate is because the figures keep changing. Here is a quick recap.

The £22bn black hole: In a statement to MPs in July, Reeves said the Treasury had identified a £22bn gap (difference between the amount the government would have to spend, and the amount actually set aside for spending) in the in-year accounts (ie, for for the 2024-25 budget).

The £100bn black hole: At the time Reeves present the £22bn as principally a problem for the current financial year. But, as Pippa Crerar reports today, she is now telling colleagues that the £22bn gap applies in years going ahead, which adds up to a £100bn black hole over the next five years.

The up to £20bn future black hole generated by unrealistically low spending allocations for the years ahead: During the election campaign the Institute for Fiscal Studies (IFS), and other thinktanks, repeatedly warned that the pending figures set by the Tories for the next five years were implausibly low, and that in practice governments would have to spend between £10bn and £20bn a year more to stop public services collapsing. This black hole is in addition to the £22bn 2024-25 one identified by Reeves.

In an interview with the Today programme this morning, asked about the Treasury’s new £40bn funding gap figure (which government sources have confirmed to the BBC), Paul Johnson, director of the IFS, did not dispute the figure. He said that a “significant amount of additional tax” would be needed, but he said he did not expect taxes to rise by £40bn a year. He said:

If we get tax rises on that scale [£40bn], that really would be extraordinary, I mean unprecedented. That would be tax rises sort of three times as big as George Osborne, for example, introduced back in 2010 in the depths of the aftermath of a financial crisis.

But that said that, if you are as the government wanting to not just protect public services, but significantly increase spending on the health service and increase spending on other things in line with the size of the economy, yes, there is a very big hole in the public finances.

Now, of course, we’ve always known this. We’ve had this discussion through the election, when we [the IFS] were warning that there were these problems, and Keir Starmer and others were going, ‘No, no, no, there’s no such issue’.

Now, £40 billion is a big number. You can get there relatively easily, actually, in terms of the scale of additional spending that will be required down the line. Some of that be covered by slight changes in the fiscal rules. Some of that will be covered by some of the tax rises that the Labour party are already intending. But that would still leave a significant amount of additional tax revenue required.

Figures like the £40bn one don’t end up in the FT, and on the BBC, by accident, and at this stage in the budget cycle most government budget-related communication is best understood as expectation management.

But expectation management can mean two things. It can mean exaggerating how bad things are likely to be, so that on the day voters are pleasantly surprised. But it can just mean dripping out difficult news very slowly, so that when it finally does get confirmed and announced, it is not as much as a shock as it might have been. It is hard to be sure, but what the Treasury is up to now is probably more of the latter than the former.

Here is the agenda for the day.

10.30am: Robert Jenrick, one of the two Tory leadership candidates still in the contest, is giving a speech on the economy.

Noon: Keir Starmer faces Rishi Sunak at PMQs.

After 12.30pm: MPs debate a Lib Dem opposition day motion calling for various measures to end the carer’s allowance scandal, including writing off existing overpayments.

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