Next two years will be ‘challenging’, says Chancellor Jeremy Hunt – as disposable incomes are set to fall to record lowest level
The UK’s economic outlook will be “challenging” for the next two years, Jeremy Hunt says.
The chancellor presented his autumn statement 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 the public finances.
But the independent Office for Budget Responsibility (OBR) 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: Tax burden reaches highest level since WWII
Speaking to Sky News, Mr Hunt said it was “a difficult time for everyone” but tax hikes and spending cuts are needed to get the economy “on an even keel”.
“Over the next two years it is going to be challenging,” he said.
“But I think people want a government that is taking difficult decisions, has a plan that will bring down inflation, stop those big rises in the cost of energy bills and the weekly shop, and at the same time is taking measures to get through this difficult period.”
The chancellor insisted that his autumn statement is a “very Conservative package” following criticism from some Tory MPs.
“The Office for Budgetary Responsibility said yesterday that what we’re doing is actually recession shallow, it’s saving jobs,” he said.
“But what I would say to my Conservative colleagues is there is nothing Conservative about spending money that you haven’t got, there is nothing Conservative about not tackling inflation, there is nothing Conservative about ducking difficult decisions that put the economy on track.
“And we’ve done all of those things and that is why this is a very Conservative package to make sure we sort out the economy.
“None of this is easy, but it’s the right thing to do.”
Former business secretary Jacob Rees-Mogg accused the chancellor of taking the “easy option” in Thursday’s autumn statement rather than bearing down harder on public spending.
He said the country needed lower taxes to drive up growth.
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Hunt questioned over autumn statement
Probed on how it can be fair that pensions will go up by inflation when public sector workers will not see pay increase alongside prices, Mr Hunt said the elderly do not have the ability to work more to improve their take home pay.
“Well, I think the truth is, first of all, pensioners have retired. They don’t have the ability to work more or work longer hours in the way that people of working age do,” the chancellor said.
“But I think it is wrong to say that only the poorest pensioners are feeling the squeeze at the moment.
“I think this is something that’s affecting everyone and I think it’s right.
“Having made that promise to pensioners in our manifesto that we would have this triple lock, I think this is exactly the kind of tough time that people want it to kick in.
“And so that’s why I think it’s the right thing to do.”
The chancellor added: “We’re not pretending that this isn’t going to be a difficult time for everyone. But what we have is a plan.”
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’12 weeks of Conservative chaos’ – Rachel Reeves
In yesterday’s autumn statement, Mr Hunt announced economic policies which the government hopes will help to rebalance the nation’s finances after the economic turmoil which followed former chancellor Kwasi Kwarteng’s mini-budget.
These included:
• Income tax thresholds being frozen for two more years until April 2028
• Top level of income tax now being paid on earnings over £125,140 instead of £150,000
• Pensions triple lock will remain – with pensioners to see a 10.1% increase in weekly payments in line with inflation
• Benefits to also rise in line with inflation – by 10.1%
• Energy cap to rise from £3,000 a year to £2,500 a year beyond April
• UK minimum wage to rise from £9.50 to £10.42 an hour for those aged over 23
• Windfall tax on oil giants’ profits to rise from 25% to 35% and be extended by two years until March 2028
• Additional cost of living payments of £900 for those on benefits and £300 for pensioners
• Spending on public services in England to rise slower than planned
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As a result of 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 election, due in 2024.
Treasury analysis suggests around 55% of households will be worse off as a result of the measures.
Read more: Jeremy Hunt’s autumn statement had all the hallmarks of a Labour budget
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”.
Ms Reeves told Sky News she is “really worried about what’s going to happen to people’s living standards next year from April” and said a Labour government would have done more “to alleviate some of that pressure on the ordinary working person”.
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What does the autumn statement mean?
As Mr Hunt took part in the broadcast round Friday morning, economic think-tank the Resolution Foundation published analysis suggesting his autumn statement’s tax rises would deliver a 3.7% income hit to typical households.
The foundation said the statement had piled further pressure on the “squeezed middle” and that the focus on “stealthy” tax threshold freezes to raise revenue would extend far beyond high earners.
The think tank also found that the budget would reverse much of the government’s levelling up agenda.
“The £15 billion of cuts to capital investment announced yesterday will undo 80% of the remaining increases in public investment announced by previous chancellor Rishi Sunak, which underpinned the levelling-up agenda,” it said.
Russia is finding it “significantly” harder to conduct combat operations against Ukraine because of a rise in Ukrainian long-range drone strikes on Russian weapons supplies, ammunition depots and fuel refineries, a senior commander has said.
Brigadier General Yuriy Shchygol signalled these attacks would grow, revealing that his country plans to more than quadruple the production rate of deep strike drones – with a range of hundreds of miles – to more than 2,000 aircraft a month.
Brigadier General Yuriy Shchygol
Ukraine has been intensifying the tempo of its long-range drone strikes against targets inside Russia and Russian-occupied territory since late December – demonstrating what defence sources say is a world-leading capability that the Kremlin is struggling to counter.
The mission is an example of how Kyiv remains focused on combatting Moscow’s invasion even as world attention fixates on the fallout from a row between Donald Trump and Volodymyr Zelenskyy, as well as efforts by Europe to prepare a plan for peace.
Live updates: Ukraine war latest
The comments by Brigadier Shchygol, who coordinates long-range drone strikes for Ukraine’s Defence Intelligence, offer a rare insight into the impact of the covert mission, which is also carried out by other branches of the Ukrainian military and security services.
“Russia is finding it increasingly difficult to conceal the extent of the damage,” the commander told Sky News in an interview at an undisclosed location in Kyiv.
“Headquarters have been hit, command structures weakened, and panic is spreading among their officers. Compared to a year ago, conducting full-scale combat operations has become significantly more challenging for [the Russians].”
Ukraine’s drone technology is considered to be world-leading
Sky News analysis of long-range drone strikes last month found that since December, there had been a ramping up of attacks against oil refineries in Russia that are used to fuel Russian tanks, jets and warships.
The analysis took in strikes officially confirmed by the Ukrainian armed forces. Brigadier Shchygol said “far more” drone attacks by Ukraine are not publicly confirmed.
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Ukraine ramps up attacks on oil depots
In a sign of the importance placed on long-range drones, he said Kyiv’s ability to manufacture this weapon has already jumped 100-fold since late 2022 to more than 500 per month.
While the officer would not say how many of these drones are then deployed on operations, he noted: “Nothing is just sitting in storage unused.”
He said recent operations had targeted several storage sites for Russia’s Iranian-designed Shahed one-way attack drones – used by the Russian armed forces against Ukrainian military and civilian targets.
More than 3,000 Shahed unmanned aerial vehicles were destroyed, according to the officer, who said: “As a result, their deployment of these drones has significantly decreased.”
Top secret drone mission
Sky News was given rare access to view a drone mission last week at a top-secret area.
As night fell, soldiers dressed in black – all members of the Defence Intelligence of Ukraine, an elite branch of the armed forces – prepared a line of about 10 drones.
Ukrainian drones being launched from a secret location
Each aircraft looked like a giant, grey metal mosquito.
The model is called “Lutti”, which is Ukrainian for “Fury”.
One by one, the drones burst into life, a propeller on the back whirring, pushing the aircraft forward at ever greater speed until it took off into the darkness.
We were told their target was an ammunition depot inside Russia.
Ukraine’s drone technology is considered to be world-leading
“Vector” spoke with a balaclava pulled up to his eyes to protect his identity
“Vector”, the commander on the ground, said his drones have a success rate of 70 to 80%.
He said Ukraine’s deep strike operations are “very important”.
“We change the war with these drones,” Vector said, speaking with a balaclava pulled up to his eyes to protect his identity.
“We can show [Russia] that the war can come in their houses, in their towns, cities.”
Russia’s sheer size makes it vulnerable
Using drones to strike targets hundreds of miles inside Russia is a complex challenge.
As night falls, members of an elite branch of Ukraine’s armed forces prepare a line of drones
But the sheer size of their enemy’s country works in Ukraine’s favour. The Russian military has weapons sites, ammunition storage areas, oil refineries and military headquarters dotted across its territory and lacks the air defences to be able to protect them all.
“We are reaching those targets. The slowing pace of their offensives – and in some places, even Ukrainian counter-offensives reclaiming territory – proves that our strikes are effective and growing more so,” Brigadier Shchygol said.
Read more:
Which countries could send peacekeeping troops to Ukraine?
In the room with Volodymyr Zelenskyy
A huge planning and reconnaissance effort underpins Ukraine’s long-range drone strikes.
It identifies targets and coordinates attacks between the different teams.
Varying volumes of drones are required for each mission – with some of the most complex strikes needing 100 unmanned aircraft.
From farm aircraft to fighter drone
The brigadier was speaking in a large room inside a disused building in Kyiv where five examples of different Ukrainian long-range drones were on display.
Brigadier Shchygol spoke to Sky News from a room where long-range drones were on display
They tell the story of the evolution of vital battlefield technology that began life on a farm.
The earliest form of the long-range drone looks like an ordinary light aircraft, with rectangular wings and two propellers. It is a lot smaller than a manned plane but much larger than a regular drone – probably about the length of a car, with a similar wingspan.
This model, fitted with a camera and a large fuel tank to fly for long periods, had been used for surveillance for agricultural purposes.
It was adapted after Russia’s full-scale invasion to conduct reconnaissance and even bombing missions.
The idea was then modified further to develop similar-sized drones that look more like fighter jets, with pointed noses and triangular wings. These were designed to hold explosives in the main body of the plane.
Some of the drones are remotely piloted, others work via autopilot.
Russia’s war has forced Ukraine to use technology and innovation to fight back against its far more powerful foe.
It has accelerated the use of autonomous machines in an irreversible transformation of the warzone that everyone is watching and learning from.
Brigadier Shchygol said: “Right now, Ukraine’s battlefield experience is essentially a manual for the world.”
A “coalition of the willing” could provide boots on the ground in Ukraine in the event of a ceasefire.
The phrase was a central theme of Sir Keir Starmer’s speech after European leaders gathered in London for crucial talks about Ukraine’s future.
Led by the UK and France, the initiative could see troops from a number of European and NATO countries deployed to Ukraine as peacekeepers in order to deter Vladimir Putin from rearming and attacking again in the future.
Follow latest: Russia not ready to negotiate, Zelenskyy says
Sir Keir said Europe “must do the heavy lifting” on defence and indicated several countries had expressed interest in being part of the coalition.
So who’s in, who’s out – and what’s behind these latest buzzwords?
The UK, France and Ukraine are leading on developing a peace deal. Pic: PA
What is a coalition of the willing?
The prime minister has said the UK, France and Ukraine will work together on a peace deal that could be presented to the US.
The countries committed to working together on this deal would form a “coalition of the willing”.
Countries in the coalition could end up sending soldiers to act as peacekeepers in Ukraine in the event of a ceasefire.
Military analyst Michael Clarke said: “It has to be a coalition of the willing because you have at least two NATO members – Slovakia and Hungary – who are vetoing anything that Putin would not like… it’s the same with the EU.”
This approach would allow NATO members to act in a group but not under the NATO umbrella, avoiding vetoes from member states who don’t approve or don’t wish to be involved.
Sir Keir’s choice of the term “coalition of the willing” is also interesting. It’s perhaps intended to remind an American audience of a previous use of the same phrase: when the UK, Poland and other countries joined the US invasion of Iraq.
Russia has so far rejected the idea of any NATO or European peacekeeping force in Ukraine.
Map of military personnel by country, based on NATO estimates.
Who’s in?
Sir Keir is being “quite coy about who the willing are”, Prof Clarke said.
The initiative is being led by the UK and France, so it seems a safe bet that both countries would be involved in the coalition.
Both have powerful militaries and the two nations are also the only countries in Europe with nuclear weapons.
“The important thing is that Britain and France are going to lead it because they are the two most important military powers in Europe,” Prof Clarke told Sky News.
It is notable that France’s President Emmanuel Macron originally raised the possibility of French troops in Ukraine last year, when he refused to rule it out.
An F-16 aircraft releases flares during a NATO exercise over Poland. Pic: Reuters
The Baltic states – Estonia, Lithuania and Latvia – are also likely to be involved, along with Finland, Prof Clarke says. All four countries are in NATO and share borders with Russia.
Italy could be involved too, Prof Clarke said, though Prime Minister Giorgia Meloni has clashed with Mr Macron over the idea last week.
Not in Europe but a NATO member, Canada seems another potential contributor to the coalition of the willing.
Prime Minister Justin Trudeau, when asked about a potential deployment of troops as part of a peacekeeping force, said yesterday: “Canada has looked at the ways it can best help and as I’ve said a few days ago, everything’s on the table.”
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The Ukraine summit: How the day unfolded
Who’s out?
Prof Clarke said Poland, Spain and Germany are not expected to send troops as peacekeepers, for different reasons.
Poland has one of the strongest militaries in Europe and aims to spend 4.7% of its GDP on defence this year, well above the NATO target.
But it also has a long border with Ukraine and Belarus and is concerned about its own security.
Polish Prime Minister Donald Tusk last month said: “We do not plan to send Polish soldiers to the territory of Ukraine.”
“We will… give logistical and political support to the countries that will possibly want to provide such guarantees in the future, such physical guarantees.”
Italy’s Giorgia Meloni has been critical of plans to send troops to Ukraine
Spain’s foreign minister Jose Manuel Albares said last month that it was “too early at the moment to talk about deploying troops in Ukraine”, in remarks quoted by AFP.
He added: “There is no peace at the moment, and the effort has to be to achieve it as soon as possible.”
Spain’s government has faced a number of crises at home and spends around 1.28% of GDP on defence, well below the NATO 2% target.
As the biggest economy in Europe, Germany is a crucial part of any united response to the Ukraine war.
But a new government has not yet been formed after last month’s elections.
Incoming German Chancellor Friedrich Merz. Pic: Reuters
Outgoing Chancellor Olaf Scholz has previously ruled out sending German troops to Ukraine as peacekeepers.
While his government has provided substantial support to Ukraine since the full-scale invasion, he has been seen by some as hesitant – for example resisting calls to send the vaunted Taurus missiles to Kyiv.
Friedrich Merz, who is expected to replace him as chancellor once the new government is in place, has taken a harder line, including on pledging Taurus missiles, so it remains to be seen if his attitude on deploying troops will also deviate from his predecessor.
‘Coalition of the willing’ is a curious term to revive
The use of the term “coalition of the willing” to describe the nations that agree to support an international force to help protect any ceasefire deal in Ukraine is interesting and notable.
It could perhaps be an attempt by Sir Keir Starmer to appeal to an American audience as this was the phrase the United States used for its “coalition of the willing” to invade Iraq more than two decades ago.
That intervention ended in disaster, triggering a bloody insurgency and locking the US and its allies into a costly war, despite the successful toppling of Saddam Hussein.
But reviving the words “coalition of the willing” will – if nothing else – remind Washington that London was its biggest and strongest backer when it turned to allies to back its 2003 invasion.
What about America?
The elephant in the room is the biggest contributor to NATO: the US.
For example, of the 5,015 fighter and fighter ground-attack aircraft in NATO, 2,951 of them are from the US, and a further 1,108 are US-made, according to the International Institute for Strategic Studies thinktank.
And America’s military is not just the largest in the world, but its ability to support troops in the field in terms of logistics is very hard to replace.
The coalition of the willing initiative seems designed to show President Donald Trump that Europe is serious about shouldering the defence burden and taking on more responsibility for the defence of Ukraine.
It should be pointed out that while the US is the single biggest donor to Kyiv, Europe as a whole has pledged more, according to the Kiel Institute for the World Economy thinktank.
Read more:
Trump and Zelenskyy’s body language analysed
Inside a Ukrainian titanium mine
The hope seems to be that the coalition of the willing initiative would persuade the US as the world’s most powerful military to pledge support as a backstop, to underwrite the peace deal.
It’s unclear so far what Washington’s response will be, particularly after the fiery recent meeting between Mr Trump, vice president JD Vance and Mr Zelenskyy.
At least one person has died after a car was driven into a group of pedestrians in the western German city of Mannheim – with a large police operation under way.
Several people have been “seriously injured” after the black vehicle rammed into crowds, according to German police, with a witness telling Reuters they saw people lying on the ground and two being resuscitated.
People seen ‘lying on ground’; Germany latest
A suspect has been taken into custody, police spokesperson Stefan Wilhelm added, warning people who live nearby to stay inside their homes.
Mr Wilhelm said that the “incident” unfolded on Monday at around 12.15pm local time in a pedestrianised part of Mannheim’s Paradeplatz area.
Forensics officers examine the damaged car near Mannheim’s Rhine Bridge. Pic: DPA/AP
Armed police examine the scene where the car was abandoned. Pic:DPA/AP
Mannheim is around 50 miles south of Frankfurt
“We can confirm that one perpetrator was arrested,” he said. “We can’t yet give information on whether there were further perpetrators.”
A spokesman for the German interior ministry said: “The focus is now on saving lives, treating the injured and the initial investigations by the authorities in Mannheim.”
Armed police and forensic investigators were seen examining a black vehicle with smashed windows near the city’s Rhine bridge.
Emergency services in the Paradeplatz area of Mannheim. Pic: AP
Pic: DPA/AP
Paradeplatz, Mannheim. Pic: Reuters
Emergency services patrol the scene after the incident. Pic: Reuters
Mannheim is around 50 miles south of Frankfurt
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Police described it as “a life-threatening deployment situation”, saying in an initial statement: “Currently, a police operation is taking place in the city center of Mannheim, in the area of Wasserturm/Plankenkopf.
“Police and rescuers are on the way. Further information is not yet available. In this context, there may be temporary traffic disruptions in the inner city.”
An alert was issued on the Katwarn smartphone app – used in major emergencies – telling people in Mannheim to avoid the city centre due to a big police deployment.
Police vehicles at the scene. Pic: Reuters
Mannheim University Hospital said it is prepared for a possible “mass casualty incident”, implementing its disaster and emergency plan, and increasing intensive care capacity, according to German news agency DPA.
A total of eight trauma teams have been made available – for both adults and children, according to the agency.
“Postponable operations that had not yet begun were immediately removed from the operation plan in order to create additional operating capacity,” the hospital said in a statement.
Emergency workers stand by in Mannheim city centre. Pic: DPA/AP
Crowds have been gathering in cities across Germany, including its Rhineland region, for parades to mark the carnival season.
Police were on high alert after social media accounts connected to Islamic extremist groups called for attacks on events planned in Cologne and Nuremberg.
Interior minister Nancy Faeser said she cancelled her appearance at the Cologne parade due to the events in Mannheim.
Today’s incident follows other similar ones in recent weeks, including a deadly car attack at a Christmas market in Magdeburg in December and another in Munich last month.
Mannheim has a population of 326,000 people and is around 50 miles south of Frankfurt.
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