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.
An emergency measure has been triggered by the Ministry of Justice to deal with prison overcrowding in England.
Operation Early Dawn will see defendants in police custody remain there – and not be transferred to magistrates’ courts for bail hearings – in case there is no space in jail cells for that prisoner if they are remanded into custody.
Sky News understands the measure is just being used in London and the North East, at the moment.
The Law Society, which represents solicitors in England and Wales, says many magistrates’ court cases will be delayed as a result, with the most serious cases given priority.
Defendants who are not prioritised will be released on police bail, the Law Society added.
Read more: Early prison release scheme causing ‘high-risk’ offenders to be let out
At Prime Minister’s Questions, Sir Keir said the “prison system is in chaos” and asked the prime minister if his decision to “let prisoners out 70 days early makes our country more secure”.
A Ministry of Justice spokesman said: “This government is categorical that the most dangerous offenders should stay behind bars for longer, which is why new laws will keep rapists locked up for every day of their prison sentence and ensure life means life for the most horrific murderers.
“We continue to see pressure on our prisons following the impact of the pandemic and barristers’ strike which is why we have initiated a previously used measure to securely transfer prisoners between courts and custody and ensure there is always a custody cell available should they be remanded.”
The Law Society said it was “crystal clear” the prison space crisis “is a consequence of the government’s approach to justice including over a decade of underfunding of our criminal justice system”.
A spokesman added: “Victims, witnesses, defendants and lawyers will today turn up at magistrates’ courts across England only to find out that their cases have been delayed due to a crisis in prison and police cell capacity outside of their control.
“As of now, we understand that this pattern will be repeated every day that this emergency measure is in place.”
File pic: iStock
High-risk offenders being released early
In February, a separate scheme – the End of Custody Supervised Licence (ECSL) – to allow prisoners to be released early due to a lack of space was extended indefinitely. Those convicted of serious offences are not eligible for early release.
A row broke out over the scheme during Prime Minister’s Questions on Wednesday after Labour leader Sir Keir Starmer accused Rishi Sunak of allowing sex offenders to be released early.
Sir Keir quoted a report published on Tuesday by HM Chief Inspector of Prisons about Lewes prison in East Sussex, after he found a “high-risk prisoner had his release date brought forward under the ECSL scheme, despite having a history of stalking, domestic abuse and being subject to a restraining order”.
“He was a risk to children and subject to an exclusion zone that included the local authority responsible for trying to house him,” the report said.
But the prime minister said: “As I’ve said, no one should be put on this scheme if they are a threat to the country.
“And let me be crystal clear… it does not apply to anyone serving a life sentence.
“Anyone convicted of a serious violent offence, anyone convicted of terrorism, anyone convicted of a sex offence, and crucially, in contrast to the system that Labour had put in place, governors and the prison service have an absolute lock so that no one is put on this scheme who shouldn’t be.”
The owner of Royal Mail has said it is “minded” to accept a revised takeover bid by Czech billionaire Daniel Kretinsky.
The latest offer from Mr Kretinsky’s investment firm EP Group values the Royal Mail parent company International Distribution Services (IDS) at £3.5bn.
Money latest: UK economy in safe hands ‘whoever wins’ election, top bank chief says
Mr Kretinsky’s firm already owns most of IDS as a 27.6% shareholder but wishes to buy the remaining shares.
An earlier offer of £3.20 a share had been rejected last month for being too low.
But now he has offered to pay £3.60 for each share. The day before the original offer was made a share in IDS cost £2.14.
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An extra shareholder pay out of 8 pence a share has been offered by EP Group, if the deal closes, as has a 2 pence per share payment to every stakeholder, expected to be paid in September.
It would bring the total value of an IDS share to 73% more than it cost before the prospect of a buyout was raised.
‘Good value’
“Having considered the proposal, the board has indicated to EP Group that it would be minded to recommend an offer to IDS shareholders”, the IDS board said.
The price is “fair” and reflects the value of current growth plans, the IDS chairman said.
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Royal Mail could be allowed to deliver letters just three days per week, under a series of options outlined by the industry regulator.
Consideration was given by the board to the national significance of Royal Mail as the operator of the postal network.
“The board is particularly mindful of Royal Mail’s unique heritage and responsibilities as the designated universal service provider in the United Kingdom and a key part of national infrastructure”, it said.
In assessing the proposal, the board has also been very mindful of the impact on Royal Mail and GLS and their respective stakeholders and employees, as well as broader public interest factors”.
EP Group has until 29 May to advance or withdraw its takeover bid.
Who is Daniel Kretinsky?
There has already been scrutiny of Mr Kretinsky’s part ownership in the postal company but a government national security concerns review into his investment led to no intervention.
He also owns parts of West Ham Football Club and Sainsbury’s.
EP Group, which he controls, has financial interests in energy, logistics, and food retail.
The King and Queen have arrived at St Paul’s Cathedral in central London for a service of dedication for the Order of the British Empire.
Established by King George V in 1917 to reward outstanding contributions to the war effort – it now recognises the work of people from all walks of life.
Pic: PA
Around 2,000 people who are holders of the royal honours such as MBEs and OBEs – from the UK and Commonwealth – formed part of the congregation.
The King is the Sovereign of the Order of the British Empire, and the Queen is the Grand Master of the Order of the British Empire.
Pic: PA
It comes after the King carried out his first investiture in five months – and his first since his cancer diagnosis – at Windsor Castle yesterday.
Archbishop of Canterbury Justin Welby, who conducted the service for the coronation, was one of the 52 recipients of an investiture – and was given the Knight Grand Cross of the Royal Victorian Order.
Awards of the Royal Victorian Order are in the King’s gift and are bestowed independently of Downing Street to people who have served the monarch or the Royal Family in a personal way.
He said the King seemed in “very good spirits indeed” and was “looking very well” as they spoke during the ceremony.
The monarch, who is receiving treatment for an undisclosed form of cancer, was given permission by his doctors to return to public duties last month.
Keep up with all the latest news from the UK and around the world by following Sky News
Dean of Westminster Abbey Dr David Hoyle was among the other people honoured at the ceremony, as he was made a Knight Commander for his own role in the coronation.
He revealed there were plans for a building in the King’s honour to be built on the side of Westminster Abbey.
“We have already done the archaeology, so the site is prepared. We have plans which the King has seen. We hope we might have it built in the next two to three years,” he said.
Read more:
King’s first official painted portrait since coronation unveiled
King discusses cancer treatment and losing sense of taste
The King has invested a handful of people with honours over the past few months.
However, these ceremonies took place in private during individual audiences at royal residences.
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