Jeremy Hunt to defend autumn statement amid warning of record fall in living standards

Published

2 years ago

November 18, 2022

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Jeremy Hunt will continue to defend his autumn statement today as experts warn of a record fall in living standards across the country.

The chancellor presented his economic plan to parliament on Thursday, littered with stealth taxes and curbs on government spending amounting to £55bn in an attempt to plug the black hole in public finances.

But the independent Office for Budget Responsibility warned the disposable incomes of UK households would fall by 7.1% over the next two years – the lowest level since records began in 1956/7, and taking incomes down to 2013 levels.

Politics live: Top Tory warns ‘jury is out’ on chancellor’s plans

As a result of the Mr Hunt’s announcements, the tax burden in the UK will also now be at its highest since the Second World War, and there are stark warnings about increased bills and higher unemployment as the recession takes hold – as well as predictions the economy will still shrink 1.4% in 2023.

But most of the difficult decisions on spending have been postponed until after the next general, due in 2024.

Both the Resolution Foundation and the Institute for Fiscal Studies will lay out their own analysis of the plans later this morning, but Treasury analysis already suggests around 55% of households will be worse off as a result of the measures.

Meanwhile, Labour has blamed “12 weeks of Conservative chaos” and “12 years of Conservative economic failure” for the bleak outlook.

Shadow chancellor Rachel Reeves accused the government of forcing the UK economy into a “doom loop where low growth leads to higher taxes, lower investments and squeezed wages, with the running down of public services”.

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During his statement, Mr Hunt distanced himself from the philosophy of Liz Truss’s short-lived government – which promised billions of unfunded tax cuts and sent the markets into turmoil.

Yet, while the chancellor froze tax thresholds, lowered the point the higher rate of income tax kicks in and extended the windfall tax on energy firms (the latter, a Labour policy) amid other measures, he also promised more spending on the NHS, social care and education, as well as re-committing to uprating pensions and benefits in line with inflation.

Mr Hunt also pledged to continue support for energy bills from April next year – though raising the cap to £3,000 for the average household.

Speaking to reporters after the announcement, he said the government was “helping every bit as much as we can” to reduce the impact of the recession on households and businesses, as well as protecting public services.

But he pointed to those spending decisions, adding: “As soon as the recession is behind us, then, yes, we will consolidate to make sure that we’re balancing our books – and I think that’s what people would want.”

While many in his party were supportive of the “difficult decisions”, the chancellor made in light of the energy crisis, the war in Ukraine and the fallout from the pandemic – as well as Ms Truss’s tenure in office – other Tories warned against hiking taxes while the country is in a recession.

Former party leader Sir Iain Duncan Smith told Sky News: “My worry is they’ve estimated that they will get certain revenues from their tax rises [but] those tax rises could end up damaging the economy and they won’t get the revenues thereafter, which means they’ll be back again looking for more.

“[There] is every chance that tax increases don’t yield what you think they will, so this could lead to a deeper recession. We need to watch that very carefully and see where it goes.”

And former Wales Secretary David Jones told the Telegraph that the if high taxes continue, “the prospects of Tories winning the next election… are going to become more remote”.

Opposition parties were also quick to condemn the plan, with Liberal Democrat MP Sarah Olney saying it will “cause untold pain for everyone”, and the SNP’s Kirsty Blackman saying it “ushered in a new era of damaging austerity cuts”.

MPs will debate the measures in the Commons on Monday and Tuesday next week.

Chancellor Jeremy Hunt will be talking to Sky News at around 7am this morning about his autumn statement announcement

Business

Former Tory minister Heaton-Harris eyes top job at football regulator

Published

9 hours ago

November 16, 2024

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Former Tory minister Heaton-Harris eyes top job at football regulator

A former Conservative cabinet minister has thrown his hat into the ring to become the inaugural chair of Britain’s new independent football regulator.

Sky News has learnt that Chris Heaton-Harris, who stood down as an MP at July’s general election, is among those who applied for the role ahead of a deadline on Friday.

Mr Heaton-Harris is himself a qualified football referee who has officiated at matches for decades.

A former Northern Ireland secretary and chief whip under Rishi Sunak and Boris Johnson respectively, he said in 2022 of his part-time career as a football official: “I took a [refereeing] course and that was it, I’ve been going ever since.

“Football has done wonders for me throughout my life so I would recommend it to everybody.”

Mr Heaton-Harris is among a large number of people who have applied for the role of chair at the Independent Football Regulator (IFR), according to officials.

A publicly available timetable for the search says that interviews for the £130,000-a-year post will end on 11 December, with an appointment expected in the new year.

It is the second time that the government has embarked on a search for a chair for the IFR after an earlier hunt was curtailed by the general election.

The role will be based at the watchdog’s new headquarters in Manchester and will require a three-day-a-week commitment.

The Football Governance Bill had its second reading in the House of Lords this week, as part of a process that will represent the most fundamental shake-up in the oversight of English football in the game’s history.

The Labour administration has dropped a previous stipulation that the regulator should have regard to British foreign and trade policy when determining the appropriateness of a new club owner.

The IFR will monitor clubs’ adherence to rules requiring them to listen to fans’ views on issues including ticket pricing, while it may also have oversight of the parachute payments made to clubs in the years after their relegation from the Premier League.

The top flight has issued a statement expressing reservations about the regulator’s remit, while it has been broadly welcomed by the English Football League.

The IFR’s creation will come with the Premier League embroiled in a civil war over Manchester City‘s legal battles emanating from allegations that it breached the competition’s financial rules.

Next week, the 20 Premier League clubs will meet for a lengthy shareholder meeting, with a vote on amended Associated Party Transaction rules hanging in the balance.

The league needs 14 clubs to vote in favour for the rule changes to be passed.

Contrary to earlier expectations, however, a detailed discussion on a financial distribution agreement between the Premier League and EFL is unlikely to be on the agenda.

A Department for Culture, Media and Sport spokesperson said: “The process for recruiting the Independent Football Regulator chair is under way but no appointment decisions have been made.

“We do not comment on speculation.”

This weekend, Mr Heaton-Harris could not be reached for comment.

Business

Pizza Hut UK hunts buyer amid Budget tax hike crisis

Published

12 hours ago

November 16, 2024

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Pizza Hut UK hunts buyer amid Budget tax hike crisis

Pizza Hut’s biggest UK franchisee has begun approaching potential bidders as it scrambles to mitigate the looming impact of tax hikes announced in last month’s Budget.

Sky News has learnt that Heart With Smart (HWS), which operates roughly 140 Pizza Hut dine-in restaurants, has instructed advisers to find a buyer or raise tens of millions of pounds in external funding.

City sources said this weekend that the process, which is being handled by Interpath Advisory, had got under way in recent days and was expected to result in a transaction taking place in the next few months.

HWS, which was previously called Pizza Hut Restaurants, employs about 3,000 people, making it one of the most significant businesses in Britain’s casual dining industry.

It is owned by a combination of Pricoa and the company’s management, led by chief executive Jens Hofma.

They led a management buyout reportedly worth £100m in 2018, with the business having previously owned by Rutland Partners, a private equity firm.

One source suggested that as well as the talks with external third parties, it remained possible that a financing solution could be reached with its existing backers.

HWS licenses the Pizza Hut name from Yum! Brands, the American food giant which also owns KFC.

Insiders suggested that the increases to the national living wage and employers’ national insurance contributions (NICs) unveiled by Rachel Reeves would add approximately £4m to HWS’s annual costs – equivalent to more than half of last year’s earnings before interest, tax, depreciation and amortisation.

One added that the Pizza Hut restaurants’ operation needed additional funding to mitigate the impact of the Budget and put the business on a sustainable financial footing.

The consequences of a failure to find a buyer or new investment were unclear on Saturday, although the emergence of the process comes amid increasingly bleak warnings from across the hospitality industry.

Last weekend, Sky News revealed that a letter co-ordinated by the trade body UK Hospitality and signed by scores of industry chiefs – including Mr Hofma – told the chancellor that left unaddressed, her Budget tax hikes would result in job losses and business closures within a year.

It also said that the scope for pubs and restaurants to pass on the tax rises in the form of higher prices was limited because of weaker consumer spending power.

That was followed by a similar letter drafted by the British Retail Consortium this week which also warned of rising unemployment across the industry, underlining the Budget backlash from large swathes of the UK economy.

Even before the Budget, hospitality operators were feeling significant pressure, with TGI Fridays collapsing into administration before being sold to a consortium of Breal Capital and Calveton.

Sky News recently revealed that Pizza Express had hired investment bankers to advise on a debt refinancing.

HWS operates all of Pizza Hut’s dine-in restaurants in Britain, but has no involvement with its large number of delivery outlets, which are run by individual franchisees.

Accounts filed at Companies House for HWS4 for the period from 5 December 2022 to 3 December 2023 show that it completed a restructuring of its debt under which its lenders agreed to suspend repayments of some of its borrowings until November next year.

The terms of the same facilities were also extended to September 2027, while it also signed a new 10-year Pizza Hut franchise agreement with Yum Brands which expires in 2032.

“Whilst market conditions have improved noticeably since 2022, consumers remain challenged by higher-than-average levels of inflation, high mortgage costs and slow growth in the economy,” the accounts said.

It added: “The costs of business remain challenging.”

Pizza Hut opened its first UK restaurant in the early 1970s and expanded rapidly over the following 15 years.

In 2020, the company announced that it was closing dozens of restaurants, with the loss of hundreds of jobs, through a company voluntary arrangement (CVA).

At that time, it operated more than 240 sites across the UK.

Mr Hofma and Interpath both declined to comment.

Business

UK economy grows by 0.1% between July and September – slower than expected

Published

2 days ago

November 15, 2024

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UK economy grows by 0.1% between July and September - slower than expected

The UK economy grew by 0.1% between July and September, according to the Office for National Statistics (ONS).

However, despite the small positive GDP growth recorded in the third quarter, the economy shrank by 0.1% in September, dragging down overall growth for the quarter.

The growth was also slower than what had been expected by experts and a drop from the 0.5% growth between April and June, the ONS said.

Economists polled by Reuters and the Bank of England had forecast an expansion of 0.2%, slowing from the rapid growth seen over the first half of 2024 when the economy was rebounding from last year’s shallow recession.

And the metric that Labour has said it is most focused on – the GDP per capita, or the economic output divided by the number of people in the country – also fell by 0.1%.

Reacting to the figures, Chancellor of the Exchequer Rachel Reeves said: “Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers,” she said in response to the figures.

“At my budget, I took the difficult choices to fix the foundations and stabilise our public finances.

“Now we are going to deliver growth through investment and reform to create more jobs and more money in people’s pockets, get the NHS back on its feet, rebuild Britain and secure our borders in a decade of national renewal,” Ms Reeves added.

The sluggish services sector – which makes up the bulk of the British economy – was a particular drag on growth over the past three months. It expanded by 0.1%, cancelling out the 0.8% growth in the construction sector

The UK’s GDP for the the most recent quarter is lower than the 0.7% growth in the US and 0.4% in the Eurozone.

The figures have pushed the UK towards the bottom of the G7 growth table for the third quarter of the year.

It was expected to meet the same 0.2% growth figures reported in Germany and Japan – but fell below that after a slow September.

The pound remained stable following the news, hovering around $1.267. The FTSE 100, meanwhile, opened the day down by 0.4%.

The Bank of England last week predicted that Ms Reeves’s first budget as chancellor will increase inflation by up to half a percentage point over the next two years, contributing to a slower decline in interest rates than previously thought.

Announcing a widely anticipated 0.25 percentage point cut in the base rate to 4.75%, the Bank’s Monetary Policy Committee (MPC) forecast that inflation will return “sustainably” to its target of 2% in the first half of 2027, a year later than at its last meeting.

The Bank’s quarterly report found Ms Reeves’s £70bn package of tax and borrowing measures will place upward pressure on prices, as well as delivering a three-quarter point increase to GDP next year.