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.
World
UN’s Antonio Guterres condemns ‘teaspoon’ of aid allowed into Gaza after dozens die in airstrikes
The head of the UN has said Israel has only authorised for Gaza what amounts to a “teaspoon” of aid after at least 60 people died in overnight airstrikes.
UN secretary general Antonio Guterres said on Friday the supplies approved so far “amounts to a teaspoon of aid when a flood of assistance is required,” adding “the needs are massive and the obstacles are staggering”.
He warned that more people will die unless there is “rapid, reliable, safe and sustained aid access”.
A woman at the site of an Israeli strike in Jabalia, northern Gaza. Pic: Reuters
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Gaza: ‘Loads of children with huge burns’
Israel says around 300 aid trucks have been allowed through since it lifted an 11-week blockade on Monday, but according to Mr Guterres, only about a third have been transported to warehouses within Gaza due to insecurity.
The IDF said 107 vehicles carrying flour, food, medical equipment and drugs were allowed through on Thursday.
Many of Gaza’s two million residents are at high risk of famine, experts have warned.
Meanwhile, at least 60 people have been killed by Israeli airstrikes across Gaza overnight.
Ten people died in the southern city of Khan Younis, and deaths were also reported in the central town of Deir al-Balah and the Jabaliya refugee camp in the north, according to the Nasser, Al-Aqsa and Al-Ahli hospitals where the bodies were brought.
A body is carried out of rubble after an Israeli strike in Jabalia, northern Gaza. Pic: Reuters
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‘Almost everyone depends on aid’ in Gaza
The latest strikes came a day after two Israeli embassy workers were killed in Washington.
The suspect, named as 31-year-old Elias Rodriguez from Chicago, Illinois, told police he “did it for Gaza”.
Israeli Prime Minister Benjamin Netanyahu accused Sir Keir Starmer, Emmanuel Macron and Mark Carney of fuelling antisemitism following the shootings.
The leaders of the UK, France and Canada are “on the wrong side of humanity and (…) history”, he said, after they threatened “concrete action” against Israel this week if it continues its “egregious” military operations in Gaza.
Mr Netanyahu also accused Sir Keir, Mr Macron and Mr Carney of siding with “mass murderers, rapists, baby killers and kidnappers”.
Palestinians search for casualties in Jabalia, northern Gaza. Pic: Reuters
But UK government minister Luke Pollard told Sky News on Friday morning he “doesn’t recognise” Mr Netanyahu’s accusation.
Earlier this week, Mr Netanyahu said he was recalling negotiators from the Qatari capital, Doha, after a week of ceasefire talks failed to bring results. A working team will remain.
The war in Gaza began when Hamas-led militants attacked southern Israel on 7 October 2023, killing some 1,200 people, mostly civilians, and kidnapping 251 others.
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The militants are still holding 58 captives, around a third of whom are believed to be alive, after most of the rest were returned in ceasefire agreements or other deals.
Israel’s offensive, which has destroyed large swaths of Gaza, has killed more than 53,000 Palestinians, mostly women and children, according to Gaza’s Hamas-run health ministry.
A woman has been arrested after 12 people were reportedly injured in a stabbing at Hamburg’s central train station in Germany.
An attacker armed with a knife targeted people on the platform between tracks 13 and 14, according to police.
They added that the suspect was a 39-year-old woman.
Police at the scene. Pic: AP
Officers said they “believe she acted alone” and investigations into the stabbing are continuing.
There was no immediate information on a possible motive.
The fire service said six of the injured were in a life-threatening condition, three others were seriously hurt, and another three sustained minor injuries, news agency dpa reported.
The attack happened shortly after 6pm local time (5pm UK time) on Friday in front of a waiting train, regional public broadcaster NDR reported.
A high-speed ICE train with its doors open could be seen at the platform after the incident.
Railway operator Deutsche Bahn said it was “deeply shocked” by what had happened.
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Four tracks at the station were closed in the evening, and some long-distance trains were delayed or diverted.
Hamburg is Germany‘s second biggest city, with the train station being a hub for local, regional and long-distance trains.
In mid-May, the World Health Organisation assessed that there were “nearly half a million people in a catastrophic situation of hunger, acute malnutrition, starvation, illness and death”.
“This is one of the world’s worst hunger crises, unfolding in real time,” its report concluded.
Warning: This article contains images of an emaciated child which some readers may find distressing
Israel‘s decision this week to reverse the siege and allow “a basic level of aid” into Gaza should help ease the immediate crisis.
But the number of aid trucks getting in, so far fewer than 100 per day, is considered dramatically too few by aid organisations working in Gaza, and the United Nations accuses Israel of continuing to block vital items.
Israel-Gaza latest: Gaza enduring ‘atrocious death and destruction’, UN boss warns
“Strict quotas are being imposed on the goods we distribute, along with unnecessary delay procedures,” said UN secretary general Antonio Guterres in New York on Friday.
“Essentials, including fuel, shelter, cooking gas and water purification supplies, are prohibited. Nothing has reached the besieged north.”
Nineteen of Gaza’s hospitals remain operational, all of them are overwhelmed with the number of patients and a lack of supplies.
Baby Aya at Rantisi hospital in northern Gaza is dangerously thin
“Today, we receive between 300 to 500 cases daily, with approximately 10% requiring admission. This volume of inpatient cases far exceeds the capacity of Rantisi hospital, as the facility is not equipped to accommodate such large numbers,” Jall al Barawi, a doctor at the hospital, told us.
At least 94% of the hospitals have sustained some damage, some considerable, according to the UN.
Jall al Barawi, a doctor at Rantisi hospital
Paramedic crews are close to running out of fuel to drive ambulances.
The lack of food, after an 11-week blockade, has left thousands malnourished and increasingly vulnerable to surviving injuries or recovering from other conditions.
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Children are the worst affected.
Our team in Gaza filmed with baby Aya at the Rantisi hospital in northern Gaza. She is now three months old and dangerously thin.
Her skin stretches over her cheekbones and eye sockets on her gaunt, pale face. Her nappy is too big for her emaciated little body.
Aya’s nappy is too big for her emaciated little body.
Lethal spiral
Her mother Sundush, who is only 19 herself, cannot get enough food to produce breastmilk. Baby formula is scarce.
Aya, like so many other young children, cannot get the vital nutrition she needs to grow and develop.
It’s a lethal spiral.
This is what Aya looked like shortly after she was born
“My daughter was born at a normal weight, 3.5kg,” Sundush tells us.
“But as the war went on, her weight dropped significantly. I would breastfeed her, she’d get diarrhoea. I tried formula – same result. With the borders closed and no food coming in, I can’t eat enough to give her the nutrients she needs.”
“I brought her to the hospital for treatment, but the care she needs isn’t available.
“The doctor said her condition is very serious. I really don’t want to lose her, because I lost my husband and she’s all I have left of him. I don’t want to lose her.”
Read more:
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Aya and her mother Sundush
Some of the aid entering Gaza now is being looted. It is hard to know whether that is by Hamas or desperate civilians. Maybe a combination of the two.
The lack of aid creates an atmosphere of desperation, which eventually leads to a breakdown in security as everyone fights to secure food for themselves and their families.
Only by alleviating the desperation can the security situation improve, and the risk of famine abate.
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