Friday’s mini-budget that promised billions in tax cuts and a multi-billion pound energy price cap has seen the value of the pound plummet against foreign currencies.
The new prime minister and her chancellor’s decision to cut various taxes by a combined £45bn, alongside a cap on energy prices that will cost taxpayers £60bn has resulted in a loss of market confidence.
That loss of confidence in the government’s ability to pay back the billions they are spending means the Bank of England is likely to raise interest rates – in a desperate bid to bring down inflation.
This all has an effect on Britain’s day-to-day spending. Here, Sky News looks at who will suffer and who will benefit from the pound’s slump.
Petrol
Fuel is traded in dollars.
This means that a low pound will buy less fuel, forcing prices at UK forecourts to rise.
Drivers will have noticed a recent dip in prices at the pumps – compared with this summer when they approached £2 a litre for diesel.
Advertisement
But the slump in value of the pound will likely wipe out that fall, which was a welcome relief for many.
According to the AA, a pound that equals $1.08 will mean an extra 13.5p per litre of petrol.
That would add around £7.50 to the cost of filling up an average 55-litre car, when factoring in VAT.
An AA spokesman added that had it not been for former Chancellor Rishi Sunak’s decision to cut fuel duty by 5p in March, motorists would have likely seen an even bigger increase in the price per litre – of around 18.5p.
Please use Chrome browser for a more accessible video player
4:29
Why did the pound fall to a record low?
Energy
Gas is also traded in dollars and therefore also suffers from a poor exchange rate.
As with oil, wholesale prices have dropped internationally since the start of the war in Ukraine, but with a weak pound, similarly the UK won’t experience the benefits.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, tells Sky News: “At this stage, this won’t affect bill payers directly, because the energy price cap is set below international energy prices, so we’ll be paying less anyway.
“Instead it will have an impact on how much the guarantee will cost the government.”
The more the price cap costs the government, the less confidence the market will have in the government’s capacity to pay it back, causing the original problem to spiral further.
Food
Any goods imported to the UK from abroad will cost more when the pound is weaker.
According to the government’s most recent food security report, the UK imports around 45% of its food.
This has proven a major problem during the Ukraine war, with grain exports unable to leave the country for several months this year.
Along with the dollar, the pound is also faring badly against the Euro, which will mean European-grown fruit and veg prices will increase.
Produce grown further afield, such as bananas, will also go up.
Not all retailers will pass all of that cost onto their customers, however.
Supermarkets are often the last to increase their prices off the back of rising costs, as they try to remain affordable, and often buy stocks in advance to mitigate sudden market shocks.
But Ms Coles cautions: “Supermarkets have warned that although they are already absorbing a great deal of the increased costs of supply, they have to pass some of it on.”
Please use Chrome browser for a more accessible video player
1:54
Why does the weak pound matter?
Tech
Most of our tech gadgets, such as smartphones and tablets, are manufactured abroad.
Apple, for example, is based in California, but uses parts manufactured in China and Taiwan.
Again, a week pound will mean these foreign-made products cost more in the UK.
Apple has already increased the price of its latest iPhone range. The iPhone 13 started at £949 when it launched last year. The iPhone 14 range is retailing at £1,099 – a 16% increase.
Holidays abroad
The most obvious place consumers will experience the slump in the pound is at the bureau de change.
Holidaymakers bound for the US will get particularly less for their money than they used to – but with the pound also down against the Euro, holidays to Europe will also be more expensive.
With the cost of fuel also on the rise, airlines and package holiday providers may also increase their prices to mitigate costs.
Mortgages
A weak pound means inflation – which is already at 10% – getting even higher.
When inflation is high, the Bank of England tries to bring it down by increasing interest rates.
This higher price of borrowing is designed to encourage people to borrow less, spend less, and save more.
Currently forecasts predict interest rates hitting 6% by November, which will mean huge increases in people’s mortgage repayments.
Halifax, the country’s largest mortgage provider, is removing fee-paying mortgages from Wednesday. These allow people to pay a fee in exchange for a lower interest rates.
The two million people in the UK already on tracker and variable mortgages will see far more of their monthly pay packet spent on repayments.
And those coming to the end of a fixed rate or hoping to buy for the first time will have fewer, more expensive deals to choose from.
“The issue is the fact that fixed rate mortgages don’t just depend on the rate today, they also depend on rate expectation,” Ms Coles explains.
“The dramatic overnight change in market expectations of future rates has ramped up the cost of doing business, and lenders are taking a break to reassess and reprice.”
Please use Chrome browser for a more accessible video player
2:00
Why some mortgage providers are pulling products
Pensions
People approaching retirement could suffer from UK bonds – or gilts – being sold off in response to the pound’s fall.
Some investors automatically switch people’s pensions from stocks to government bonds as they get closer to retirement age, which will leave them with a smaller pot in the current climate.
Pensioners living abroad will also suffer notably – as their pensions are paid in pounds but their expenses are in stronger currencies.
UK exporters
British businesses that sell their products and services abroad will benefit from the pound’s slump as foreign buyers look to take advantage of cheaper prices.
This will see the FTSE 100 companies benefit, as much of their money is made overseas, Ms Coles says.
It could also provide much-needed help for smaller UK businesses struggling with the increased costs of Brexit.
Local tourism
More holidaymakers could be drawn to the UK from abroad by the promise of a cheaper holiday.
While Britons get less for their money at the bureau de change, inbound tourists will get more.
For example, a London hotel room that cost $200 (£186) at the start of 2022 now only costs $150.
Britons could also return to the ‘staycation’ trend seen during the COVID pandemic and also help boost the economy by supporting tourism and hospitality businesses at home.
Hedge funds
Hedge funds employ a strategy called ‘short selling’ or ‘shorting’ to take advantage of falling market prices.
It involves borrowing shares in a firm and selling them with a view to buying them back at a profit when prices fall.
Ms Coles says: “Plenty of hedge funds were shorting the pound before the fall – based on the belief that the markets had underestimated how long inflation would stick around for.
“The target was never particularly ambitious,” says the Institute for Fiscal Studies (IFS) about Labour’s plan to add two million extra NHS appointments during their first year in power.
In February, Health Secretary Wes Streeting announced they had achieved the feat early. He recently described the now 3.6m additional appointments achieved in their first eight months as a “massive increase”.
But new data, obtained by independent fact checking charity Full Fact and shared exclusively with Sky News, reveals this figure actually signalled a slowing down in new NHS activity.
There was an even larger rise of 4.2m extra appointments over the same period the year before, under Rishi Sunak’s government.
The data also reveals how unambitious the target was in the first place.
We now know two million extra appointments over the course of a year represents a rise of less than 3% of the almost 70 million carried out in the year to June 2024.
In the last year under Mr Sunak, the rise was 10% – and the year before that it was 8%.
Responding to the findings, Sarah Scobie, deputy director of independent health and social care think tank the Nuffield Trust, told Sky News the two million target was “very modest”.
She said delivering that number of appointments “won’t come close to bringing the treatment waiting list back to pre-pandemic levels, or to meeting longer-term NHS targets”.
The IFS said it was smaller than the annual growth in demand pressures forecast by the government.
What exactly did Labour promise?
The Labour election manifesto said: “As a first step, in England we will deliver an extra two million NHS operations, scans, and appointments every year; that is 40,000 more appointments every week.”
We asked the government many times exactly how it would measure the pledge, as did policy experts from places like the IFS and Full Fact. But it repeatedly failed to explain how it was defined.
Leo Benedictus, a journalist and fact-checker at Full Fact, told Sky News: “We didn’t know how they were defining these appointments.
“When they said that there would be more of them, we didn’t know what there would be more of.”
Image: Leo Benedictus
Even once in government, initially Labour did not specify their definition of “operations, scans, and appointments”, or what the baseline “extra” was being measured against.
This prevented us and others from measuring progress every month when NHS stats were published. Did it include, for instance, mental health and A&E appointments? And when is the two million extra comparison dating from?
Target met, promise kept?
Suddenly, in February, the government announced the target had already been met – and ever since, progress on appointments has been a key boast of ministers and Labour MPs.
At this point, they did release some information: the definition of procedures that allowed them to claim what had been achieved. They said the target involved is elective – non-emergency – operations excluding maternity and mental health services; outpatient appointments and diagnostic tests.
Please use Chrome browser for a more accessible video player
3:05
Why has Starmer axed NHS England?
However, we still did not have a comprehensive baseline to measure the two million increase against.
The government data instead relied on a snapshot: comparing the number of appointments carried out from July to November 2024 with the number from July to November 2023, and adjusted them for the number of working days in each period.
This did not tell us if the NHS had already been adding appointments under the Conservatives, and at what pace, and therefore whether this target was a big impressive ramping up of activity or, as it turns out, actually a slowing down.
Since then, a number of organisations, like Full Fact, have been fighting with the government to release the data.
Mr Benedictus said: “We asked them for that information. They didn’t publish it. We didn’t have it.
“The only way we could get hold of it was by submitting an FOI request, which they had to answer. And when that came back about a month later, it was fascinating.”
This finally gives us the comparative data allowing us to see what the baseline is against which the government’s “success” is being measured.
A Department of Health and Social Care spokesperson said: “On entering office last July, the secretary of state [Wes Streeting] was advised that the fiscal black hole meant elective appointments would have to be cut by 20,000 every week.
“Instead, this government provided the extra investment and has already delivered 3.6 million additional appointments – more than the manifesto commitment the British public voted for – while also getting more patients seen within 18 weeks.
“In the nine months since this government took office, the waiting list has dropped by over 200,000 – more than five times as much as it had over the same period the previous year – and also fell for six consecutive months in a row.”
Image: Health Secretary Wes Streeting. Pic: PA
We put this to Jeremy Hunt, Rishi Sunak’s chancellor during his last two years as prime minister, and health secretary for six years under David Cameron and Theresa May.
He said: “What these numbers seem to show is that the rate of appointments was going up by more in the last government than it is by this government. That’s really disappointing when you look at the crisis in the NHS.
“All the evidence is that if you want to increase the number of people being treated, you need more capacity in the system, and you need the doctors and nurses that are there to be working more productively.
“Instead what we’ve had from this government is the vast majority of the extra funding for the NHS has gone into pay rises, without asking for productivity in return.”
Image: Jeremy Hunt speaks to Sky’s Sam Coates
Edward Argar, shadow health secretary, accused the government of a “weak attempt […] to claim credit for something that was already happening”.
“We need to see real and meaningful reform that will genuinely move the dial for patients,” he added.
Is the NHS getting better or worse?
New polling carried out by YouGov on behalf of Sky News this week also reveals 39% of people think the NHS has got worse over the past year, compared with 12% who think it’s got better.
Six in 10 people say they do not trust Keir Starmer personally on the issue of the NHS, compared with three in 10 who say they do.
That is a better rating than some of his rivals, however. Just 21% of people say they trust Nigel Farage with the NHS, and only 16% trust Kemi Badenoch – compared with 64% and 60% who do not.
Ed Davey performs better, with 30% saying they trust him and 38% saying they do not.
Ms Scobie of the Nuffield Trust told Sky News “the government is right to make reducing long hospital treatment waits a key priority […] but much faster growth in activity is needed for the NHS to see a substantial improvement in waiting times for patients.”
The government is correct, however, to point out the waiting list having dropped by more than 200,000 since it’s been in office. This is the biggest decline between one July and the following February since current waiting list statistics were first published under Gordon Brown.
The percentage of people waiting less than 18 weeks for treatment is also falling for the first time, other than a brief period during the pandemic, for the first time in more than a decade.
The latest figures show 6.25m people waiting for 7.42m treatments (some people are on the list for more than one issue). That means more than one in 10 people in England are currently waiting for NHS treatment.
There continues to be a fall in the number who have been waiting longer than a year. It’s now 180,242, down from almost 400,000 in August 2023 and over 300,000 in June 2024, the Conservatives’ last month in power.
But that number is still incredibly high by historical standards. It remains over 100 times higher than it was before the pandemic.
The government has a separate pledge that no more than 8% of patients will wait longer than 18 weeks for treatment, by the time of the next election. Despite improvements in recent months, currently more than 40% wait longer than this.
The Data and Forensics team is a multi-skilled unit dedicated to providing transparent journalism from Sky News. We gather, analyse and visualise data to tell data-driven stories. We combine traditional reporting skills with advanced analysis of satellite images, social media and other open source information. Through multimedia storytelling we aim to better explain the world while also showing how our journalism is done.
Sir Keir Starmer’s claim he is U-turning on cutting winter fuel payments for pensioners because he now has the money is not “credible”, Harriet Harman has said.
The Labour peer, speaking to Sky News political editor Beth Rigby on the Electoral Dysfunction podcast, said the prime minister made the move as it was so unpopular with voters.
He and his ministers had insisted they would stick to their guns on the policy, even just hours before Sir Keir revealed his change of heart at PMQs
Please use Chrome browser for a more accessible video player
1:01
Winter fuel payment cuts to be reversed
Baroness Harman said: “It’s always been contested and always been unpopular.
“But the final straw that broke the camel’s back was the elections. The council elections and the Runcorn by-election, where the voters were saying, ‘this is not the change we voted for’.
“At the end of the day, you cannot just keep flying in the face of what voters – particularly if they’re people who previously voted for you – wanted.”
Baroness Harman is unconvinced by Sir Keir’s claim he can U-turn because there is more money due to good economic management by the government.
“I don’t think that’s credible as an argument,” she said.
“It really is the fact that voters just said ‘this is not the change we voted for, we’re not going to have this’.”
The challenge for the government now, she said, is deciding who will get the allowance moving forward, when they’ll get it, and when it will all be announced.
The Institute for Fiscal Studies has looked into the government’s options after Sir Keir Starmer said he is considering changes to the cut to winter fuel payment (WFP).
The government could make a complete U-turn on removing the payment from pensioners not claiming pension credit so they all receive it again.
There could be a higher eligibility threshold. Households not claiming pension credit could apply directly for the winter fuel payment, reporting their income and other circumstances.
Or, all pensioner households could claim it but those above a certain income level could do a self-assessment tax return to pay some of it back as a higher income tax charge. This could be like child benefit, where the repayment is based on the higher income member of the household.
Instead of reducing pension credit by £1 for every £1 of income, it could be withdrawn more slowly to entitle more households to it, and therefore WFP.
At the moment, WFP is paid to households but if it was paid to individuals the government could means-test each pensioner, rather than their household. This could be based on an individual’s income, which the government already records for tax purposes. Individuals who have a low income could get the payment, even if their spouse is high income. This would mean low income couples getting twice as much, whereas each eligible house currently gets the same.
Instead of just those receiving pension credit getting WFP, the government could extend it to pensioners who claim means-tested welfare for housing or council tax support. A total of 430,000 renting households would be eligible at a cost of about £100m a year.
Pensioners not on pension credit but receiving disability credits could get WFP, extending eligibility to 1.8m households in England and Scotland at a cost of about £500m a year.
Pensioners living in a band A-C property could be automatically entitled to WFP, affected just over half (6.3m).
Chancellor Rachel Reeves has committed to just one major fiscal event a year, meaning just one annual budget in the autumn.
Autumn budgets normally take place in October, with the last one at the end of the month.
If this year’s budget is around the same date, it will leave little time for the extra winter fuel payments to be made, as they are paid between November and December.
Business Secretary Jonathan Reynolds told the Electoral Dysfunction podcast the economy will have to be “strong enough” for the government to U-turn on winter fuel payment cuts.
He also said the public would have to wait for the budget for any announcement.
Before that, there had been calls for festivals to reconsider booking the band over their political stances, and several have done, which prompted artists like Brian Eno, the Mystery Jets and CMAT to sign an open letter accusing Westminster and the British media of a campaign to “remove Kneecap from the public eye”.
They put their names to wording that said “in a democracy, no political figures… have the right to dictate who does and does not play at music festivals.”
So what’s the reality like for artists who are outspoken at a time when the world is so divided?
As some of the biggest names in music gathered in London for the Ivors, an annual celebration of songwriting, Self-Esteem – aka Rebecca Lucy Taylor – said the level of scrutiny can be “terrifying”.
‘The problem with the internet’
She told Sky News: “The problem with the internet is you say one thing, which gets scrutinised, and then you shit yourself, you really do… then you’re advised not to. And then you’re like ‘don’t advise me not to!’
“You second-guess anything you want to say any more… but any time I do that, I think ‘well that’s why you’ve got to say it then’.”
She said it can be frustrating that focus turns on to pop stars’ opinions instead of “the people doing the bad things”.
Former Little Mix singer Jade said: “To be a pop artist these days, it’s not just about music, it’s: ‘What’s your political stance?’
“I’ve always been quite vocal about those things, but in doing so you have even more of a scary spotlight on you, constantly assessing what your thoughts are as a human…it is scary.”
Trinidad-born London artist Berwyn, whose songs depict his struggles with UK immigration, says: “Silencing freedom of speech… is a road we don’t want to walk down.
“I’m not a politician, this is a very complicated issue, but I do absolutely believe in a human’s right to express themselves freely.”
But is that freedom of speech dependent on what side you’re coming from?
Image: Berwyn speaking to Sky News
‘Unethical investments’
Soon, an event called Mighty Hoopla will take place at Brockwell Park as part of its programme of six festivals this summer.
Artists performing at that are coming under increased pressure from pro-Palestine groups to quit because it’s owned by a company called Superstruct, which has links to an American investment firm called KKR.
Critics argue that any KKR-affiliated events should be a red flag to artists as campaigners claim it “invests billions of pounds in companies” that do things like “develop Israeli underground data centres”, and they say it has shares in companies that “advertise property on illegally occupied land in the West Bank”.
Spreaker
This content is provided by Spreaker, which may be using cookies and other technologies.
To show you this content, we need your permission to use cookies.
You can use the buttons below to amend your preferences to enable Spreaker cookies or to allow those cookies just once.
You can change your settings at any time via the Privacy Options.
Unfortunately we have been unable to verify if you have consented to Spreaker cookies.
To view this content you can use the button below to allow Spreaker cookies for this session only.
Mighty Hoopla itself has said while it “cannot control investments made in our parent companies”, it wants to “state its clear opposition to KKR’s unethical investments”.
And Superstruct – which puts on over 80 festivals around the world – says while horrified by the crisis in Gaza: “We are aware that there is a significant amount of debate… around our festivals.
“Our owners, made up of our promoters and several investment firms, support us to achieve the highest standards… fans and artists rightly expect.”
They insist that operationally, Superstruct is independently run and all its “revenue and profits… remains entirely within our business… towards the ongoing development… of our festivals.”
Even deciding where to perform can have political connotations for musicians these days.
As Tom Gray, a founding member of the rock band Gomez, now chair of the Ivors, explains: “The amount of commercial interest required to get a young artist into the public eye means they have to keep their head down a lot and that’s a terrible shame.
“It’s not just artistic expression, but personal human expression is one of the fundamental things that allows people to feel they have agency.”