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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.”

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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.

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Primark-owner ABF gets Hovis deal oven-ready

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Primark-owner ABF gets Hovis deal oven-ready

The London-listed parent of Primark was on Wednesday applying the finishing touches to a landmark transaction that will unite the Hovis and Kingsmill bread brands under common ownership.

Sky News understands that a deal for Associated British Foods (ABF) to acquire Hovis from private equity firm Endless is likely to be announced by the end of the week.

The timetable remains subject to delay, banking sources cautioned on Wednesday.

The deal, which will see ABF paying about £75m to buy 135 year-old Hovis, is likely to trigger a lengthy review by competition regulators given that it will bring together the second- and third-largest suppliers of packaged bread to Britain’s major supermarkets.

ABF owns Kingsmill’s immediate parent, Allied Bakeries, which has struggled in recent years amid persistent price inflation, changing consumer preferences and competition from larger rival Warburtons as well as new entrants to the market.

Confirmation of the tie-up will come three months after Sky News revealed that ABF and Endless – Hovis’s owner since 2020 – were in discussions.

Industry sources have estimated that a combined group could benefit from up to £50m of annual cost savings from a merger.

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Allied Bakeries was founded in 1935 by Willard Garfield Weston, part of the family which continues to control ABF, while Hovis traces its history even further, having been created in 1890 when Herbert Grime scooped a £25 prize for coming up with the name Hovis, which was derived from the Latin ‘Hominis Vis’ – meaning ‘strength of man”.

The overall UK bakery market is estimated to be worth about £5bn in annual sales, with the equivalent of 11m loaves being sold each day.

Critical to the prospects of a merger of Allied Bakeries, which also owns the Sunblest and Allinson’s bread brands, and Hovis taking place will be the view of the Competition and Markets Authority (CMA) at a time when economic regulators are under intense pressure from the government to support growth.

Warburtons, the family-owned business which is the largest bakery group in Britain, is estimated to have a 34% share of the branded wrapped sliced bread sector, with Hovis on 24% and Allied on 17%.

A merger of Hovis and Kingsmill would give the combined group the largest share of that segment of the market, although one source said Warburtons’ overall turnover would remain higher because of the breadth of its product range.

Responding to Sky News’ report in May of the talks, ABF said: “Allied Bakeries continues to face a very challenging market.

“We are evaluating strategic options for Allied Bakeries against this backdrop and we remain committed to increasing long-term shareholder value.”

Prior to its ownership by Endless, Hovis was owned by Mr Kipling-maker Premier Foods and the Gores family.

At the time of the most recent takeover, High Wycombe-based Hovis employed about 2,700 people and operated eight bakery sites, as well as its own flour mill.

Hovis’s current chief executive, Jon Jenkins, is a former boss of Allied Milling and Baking.

ABF declined to comment, while neither Endless nor Hovis could be reached for comment.

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Chancellor warned ‘substantial tax rises’ needed – as she faces ‘impossible trilemma’

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Chancellor warned 'substantial tax rises' needed - as she faces 'impossible trilemma'

Rachel Reeves will need to find more than £40bn of tax rises or spending cuts in the autumn budget to meet her fiscal rules, a leading research institute has warned.

The National Institute of Economic and Social Research (NIESR) said the government would miss its rule, which stipulates that day to day spending should be covered by tax receipts, by £41.2bn in the fiscal year 2029-30.

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In its latest UK economic outlook, NIESR said: “This shortfall significantly increases the pressure on the chancellor to introduce substantial tax rises in the upcoming autumn budget if she hopes to remain compliant with her fiscal rules.”

The deteriorating fiscal picture was blamed on poor economic growth, higher than expected borrowing and a reversal in welfare cuts that could have saved the government £6.25bn.

Together they have created an “impossible trilemma”, NIESR said, with the chancellor simultaneously bound to her fiscal rules, spending commitments, and manifesto pledges that oppose tax hikes.

Read more:
What is a wealth tax?

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Could the rich be taxed to fill black hole?

Reeves told to consider replacing council tax

The institute urged the government to build a larger fiscal buffer through moderate but sustained tax rises.

“This will help allay bond market fears about fiscal sustainability, which may in turn reduce borrowing costs,” it said.

“It will also help to reduce policy uncertainty, which can hit both business and consumer confidence.”

It said that money could be raised by reforms to council tax bands or, in a more radical approach, by replacing the whole council tax system with a land value tax.

To reduce spending pressures, NIESR called for a greater focus on reducing economic inactivity, which could bring down welfare spending.

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What’s the deal with wealth taxes?

Growth to remain sluggish

The report was released against the backdrop of poor growth, with the chancellor struggling to ignite the economy after two months of declining GDP.

The institute is forecasting modest economic growth of 1.3% in 2025 and 1.2% in 2026. That means Britain will rank mid-table among the G7 group of advanced economies.

‘Things are not looking good’

However, inflation is likely to remain persistent, with the consumer price index (CPI) likely to hit 3.5% in 2025 and around 3% by mid-2026. NIESR blamed sustained wage growth and higher government spending.

It said the Bank of England would cut interest rates twice this year and again at the beginning of next year, taking the rate from 4.25% to 3.5%.

Persistent inflation is also weighing on living standards: the poorest 10% of UK households saw their living standards fall by 1.3% in 2024-25 compared to the previous year, NIESR said. They are now 10% worse off than they were before the pandemic.

Professor Stephen Millard, deputy director for macroeconomics at NIESR, said the government faced tough choices ahead: “With growth at only 1.3% and inflation above target, things are not looking good for the chancellor, who will need to either raise taxes or reduce spending or both in the October budget.”

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Ofwat chief Black to step down ahead of watchdog’s abolition

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Ofwat chief Black to step down ahead of watchdog's abolition

The chief executive of Ofwat is to step down within months as Britain’s embattled water regulator prepares to be abolished by ministers.

Sky News has learnt that David Black is preparing to leave Ofwat following discussions with its board, led by chairman Iain Coucher.

The timing of Mr Black’s exit was unclear on Tuesday afternoon, although sources said he was likely to go in the near future.

An official announcement could come within days, according to industry sources.

Insiders say the relationship between Mr Coucher and Mr Black has been under strain for some time.

Water industry executives said that Steve Reed, the environment secretary, repeatedly referred to the regulator’s leadership during a meeting last month.

It was unclear on Tuesday who would replace Mr Black, or whether an interim chief executive would remain in place until Ofwat is formally scrapped.

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The complexity of the impending regulatory shake-up means that Ofwat might not be formally abolished until at least 2027.

Mr Black took over as Ofwat’s permanent boss in April 2022, having held the position on an interim basis for the previous 12 months.

He has worked for the water regulator in various roles since 2012.

If confirmed, Mr Black’s departure will come with Britain’s privatised water industry and its regulator mired in crisis.

Water companies are under increasing pressure from Mr Reed, the environment secretary, over their award of executive bonuses even as the number of serious pollution incidents has soared.

The UK’s biggest water utility, Thames Water, meanwhile, is on the brink of being temporarily nationalised through a special administration regime as it tries to secure a private sector bailout led by its creditors.

In a review published last month, the former Bank of England deputy governor Sir Jon Cunliffe recommended that Ofwat be scrapped.

He urged the government to replace it with a new body which would also incorporate the Drinking Water Inspectorate and absorb the water-related functions of the Environment Agency and Natural England.

Speaking on the day that Sir Jon’s recommendations were made public, Mr Reed said: “This Labour government will abolish Ofwat.

“Ofwat will remain in place during the transition to the new regulator, and I will ensure they provide the right leadership to oversee the current price review and investment plan during that time.”

A white paper on reforming the water industry is expected to be published in November with the aim of delivering a reset of the industry’s performance and supervision, according to industry sources.

A handful of water companies have challenged Ofwat’s price determinations, which in aggregate outlined £104bn in spending by the industry during the 2026-30 regulatory period.

Anglian Water, Northumbrian Water and Southern Water are among those whose spending plans are now being assessed by the Competition and Markets Authority.

Responding to the Cunliffe report last month, Ofwat said: “While we have been working hard to address problems in the water sector in recent years, this report sets out important findings for how economic regulation is delivered and we will develop and take this forward with government.

“Today marks an opportunity to reset the sector so it delivers better outcomes for customers and the environment.

“Ofwat will now work with the government and the other regulators to form this new regulatory body in England and to contribute to discussions on the options for Wales set out in the report.

“In advance of the creation of the new body, we will continue to work hard within our powers to protect customers and the environment and to discharge our responsibilities under the current regulatory framework.”

Ofwat has been contacted for comment about Mr Black’s future, while the Department for Environment, Food and Rural Affairs (DEFRA) has also been approached for comment.

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