The collapse in disposable income will be about as grim as you can imagine – so why is the government embracing it?
Let’s start with a tale of two charts. Or rather, one chart.
Be warned: it’s not a pretty chart. It shows how average household disposable income changed each year since 1955 and for the most part it’s a story of progress.
As the years have gone on, we have seen our disposable incomes rise in most years.
But here’s where it gets gritty, because that run is about to come to a crashing end. Back in March, the Office for Budget Responsibility produced this chart, and it showed the single worst year for disposable income changes since records began in the 1950s.
Back then, Rishi Sunak was chancellor and behind the scenes he was furious with the OBR. Why did they ruin his finely honed spring statement with their chart of misery?
Now roll forward to today. The OBR updated the chart for the autumn statement and the prognosis was even worse.
Now we are facing not just the worst year for household disposable income in modern history, but the two worst years, one after another. It is about as grim as you could imagine.
And if there’s one chart you want to bear in mind over the coming months as households face a squeeze the likes of which they rarely ever have, and many are pushed closer than ever before towards penury, it’s this one.
However, this time around, far from being furious about the publication of the chart, the Treasury has effectively embraced it. And this change in attitude tells you rather a lot.
Whereas Mr Sunak once wanted to play down the economic misery facing the country, today he wants to emphasise it.
The government wants everyone to know how tough things are because the fiscal remedies it’s implementing in the autumn statement would be doubly unpalatable without some sort of justification.
The rationale in Whitehall is that if people realise how miserable the economic climate is, they might be more willing to put up with another dose of fiscal contraction.
It’s worth saying, however, that the squeeze priced in within the autumn statement is not quite as tough as the pre-event leaks might have suggested
In numerical terms, at least, this is not the austerity we saw during the Osborne years. But for many government departments already cut to the bone, it will feel pretty brutal all the same.
For education and the NHS, there were unexpected increases in funding – but inflation is likely to eat into those increases very quickly indeed.
However, take a step back and look at where the public finances land in five years’ time. Back in March, the plan was to get public sector net borrowing down to £31.6bn by 2026/27. As of the autumn statement, the plan is to get it down to only £80.3bn.
Back in the day, this would have been considered a high budget deficit – above 2% of gross domestic product. Fiscal conservatism this ain’t.
But for all the talk of austerity and cuts, the reality is that the chancellor didn’t cut quite as much as some had expected.
This is not to say there is much joy coming our way from the Exchequer: there will be an average of £55bn of contraction – all to fill in the much-vaunted black hole which some economists argue never really existed.
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But had the chancellor wanted to get the public finances back to where they were supposed to end up as of March, it would have involved an extra £50bn of cuts – truly grisly austerity.
This was, in one sense, a very middle-of-the-road fiscal event: decidedly boring, decidedly unshowy and decidedly lacking in surprises. It reads less like an economic philosophy than an effort to clean up a mess.
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Hunt questioned over autumn statement
Much of the documents are devoted to accounting for how the potential promises of the Truss era ballooned the public finances in one direction, before being yanked back towards earth in the Sunak era.
The question now is whether unwinding all that spaghetti will actually help the Conservative Party rebuild its trust with the British public.
And, most of all, the question is how the public will fare over the coming months.
The OBR’s forecasts paint a picture of a recession unlike most we’ve felt for a long time – a recession not of the business sector or the financial system, but one that hits consumers square in the pocket.
It’ll be a very painful few months. The difference is that this time around, the government isn’t afraid of charts telling you precisely that.
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Woman’s body found in car boot in east London – as murder investigation launched by two police forces
UK
Police investigating criminal offence after Daily Telegraph columnist ‘dumbfounded’ by social media post probe
Essex Police say they are investigating an alleged criminal offence of inciting racial hatred, after Daily Telegraph columnist Allison Pearson said she was “dumbfounded and upset” when officers knocked on her door last Sunday.
Ms Pearson revealed she was told she was being investigated over a year-old deleted post online.
She said she wasn’t informed which post had been reported, but suggested it could have been related to the 7 October attacks in Israel or pro-Palestine marches.
She claimed the officers told her she was being investigated for a NCHI (a none crime hate incident) an incident involving an act which is perceived to be motivated by hostility or prejudice towards persons with a particular characteristic, but is not illegal.
NCHI reports have long been controversial, with many citing free speech concerns, and Ms Pearson’s account of the police visit has led to widespread support from Conservatives and online commentators, including Tory leader Kemi Badenoch.
But an Essex Police spokesperson has told Sky News its investigation was never for an NCHI, and that the matter was always being treated as an investigation into an alleged criminal offence of inciting racial hatred.
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Speaking on her Planet Normal podcast on Wednesday, Ms Pearson said she found the visit “chilling”.
“I was dumbfounded, upset, it’s not very nice,” she said. “I was in my dressing gown on the step of the house, these two coppers were there just outside the door.
“There were people gathering for the Remembrance Day parade so there were people watching from the other side of the road.
“Whatever I did or didn’t tweet, if somebody found it offensive, that to me is still not a reason for two policemen to come to my house on a Sunday morning.
“You know, they don’t do that for burglars, do they? We know policing is under-resourced and they are unable to attend often quite serious crimes.
“This was the most extraordinary overreach and state intrusion into my private life and I don’t think I did anything wrong and I think their response was outrageous.”
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In a statement, Essex Police said: “Officers attended an address in Essex and invited a woman to come to a voluntary interview.
“They said it related to an investigation into an alleged offence of inciting racial hatred, linked to a post on social media.
“For clarity: a complaint of a possible criminal offence was made to the police and this is why we called; to arrange an interview.
“Everyone was polite and professional throughout the brief conversation.”
They said an officer told Ms Pearson: “It’s gone down as an incident or offence of potentially inciting racial hatred online. That would be the offence.”
Essex Police say they have complained to the Independent Press Standards Organisation (IPSO) over what they call “false reporting” regarding the ongoing investigation.
In an interview with The Telegraph published yesterday, Kemi Badenoch said police visiting a journalist over a social media post was “absolutely wrong” and that “we need to look at the laws around non-crime hate incidents”.
“There has been a long-running problem with people not taking free speech seriously,” she said.
She challenged the prime minister to review the laws, saying: “Keir Starmer says he is someone who believes in these things. Now he needs to actually show that he does believe it. All we’ve seen from him is the opposite.”
Ms Badenoch added: “We need to stop this behaviour of people wasting police time on trivial incidents because they don’t like something, as if they’re in a nursery.
“It’s like children reporting each other. And I think that in certain cases, the police do it because they’re afraid that if they don’t do it, they will also be accused of not taking these issues seriously.”
Essex Police said the officers went to the address to invite Ms Pearson to attend a voluntary interview as part of their investigation, which was passed to them by another force.
“The report relates to a social media post which was subsequently removed,” the statement read.
“An investigation is now being carried out under Section 17 of the Public Order Act.”
Essex Police also said they made attempts to contact Ms Pearson before the visit.
Other prominent Conservative voices such as Boris Johnson, Liz Truss and Chris Philp have also leapt to Ms Pearson’s defence online, as has X owner Elon Musk, who quoted a post about the incident and said: “This needs to stop.”
Police commentator Graham Wettone told Sky News the police are “duty bound to investigate allegations of crime”.
“They’ve had an allegation of crime made there,” he said. “They will investigate it. If at the end of this they decide that no criminal offence has been committed – and we’re not at that stage yet – then it can still be recorded as a none crime hate incident.”
The police, he said, are duty bound to keep a record of none crime hate incidents.
“Parliament said they want the police to do this, to investigate and record incidents like this. So they are doing exactly what parliament and society asked them to do, and they are getting criticism for doing what people want.”
UK
Sir Keir Starmer vows to defend budget decisions ‘all day long’ as farmers slam ‘disrespectful’ PM
Sir Keir Starmer has said he will defend the decisions made in the budget “all day long” amid anger from farmers over inheritance tax changes.
Chancellor Rachel Reeves announced last month in her key speech that from April 2026, farms worth more than £1m will face an inheritance tax rate of 20%, rather than the standard 40% applied to other land and property.
The announcement has sparked anger among farmers who argue this will mean higher food prices, lower food production and having to sell off land to pay for the tax.
Sir Keir defended the budget as he gave his first speech as prime minister at the Welsh Labour conference in Llandudno, North Wales, where farmers have been holding a tractor protest outside.
Sir Keir admitted: “We’ve taken some extremely tough decisions on tax.”
He said: “I will defend facing up to the harsh light of fiscal reality. I will defend the tough decisions that were necessary to stabilise our economy.
“And I will defend protecting the payslips of working people, fixing the foundations of our economy, and investing in the future of Britain and the future of Wales. Finally, turning the page on austerity once and for all.”
He also said the budget allocation for Wales was a “record figure” – some £21bn for next year – an extra £1.7bn through the Barnett Formula, as he hailed a “path of change” with Labour governments in Wales and Westminster.
And he confirmed a £160m investment zone in Wrexham and Flintshire will be going live in 2025.
‘PM should have addressed the protesters’
Among the hundreds of farmers demonstrating was Gareth Wyn Jones, who told Sky News it was “disrespectful” that the prime minister did not mention farmers in his speech.
He said “so many people have come here to air their frustrations. He (Starmer) had an opportunity to address the crowd. Even if he was booed he should have been man enough to come out and talk to the people”.
He said farmers planned to deliver Sir Keir a letter which begins with “don’t bite the hand that feeds you”.
Farmers’ tractor protest outside the Welsh Labour conference in Llandudno, North Wales
Mr Wyn Jones told Sky News the government was “destroying” an industry that was already struggling.
“They’re destroying an industry that’s already on its knees and struggling, absolutely struggling, mentally, emotionally and physically. We need government support not more hindrance so we can produce food to feed the nation.”
He said inheritance tax changes will result in farmers increasing the price of food: “The poorer people in society aren’t going to be able to afford good, healthy, nutritious British food, so we have to push this to government for them to understand that enough is enough, the farmers can’t take any more of what they’re throwing at us.”
Mr Wyn Jones disputed the government’s estimation that only 500 farming estates in the UK will be affected by the inheritance tax changes.
“Look, a lot of farmers in this country are in their 70s and 80s, they haven’t handed their farms down because that’s the way it’s always been, they’ve always known there was never going to be inheritance tax.”
On Friday, Sir Keir addressed farmers’ concerns, saying: “I know some farmers are anxious about the inheritance tax rules that we brought in two weeks ago.
“What I would say about that is, once you add the £1m for the farmland to the £1m that is exempt for your spouse, for most couples with a farm wanting to hand on to their children, it’s £3m before anybody pays a penny in inheritance tax.”
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Welsh farmer Gareth Wyn Jones
Ministers said the move will not affect small farms and is aimed at targeting wealthy landowners who buy up farmland to avoid paying inheritance tax.
But analysis this week said a typical family farm would have to put 159% of annual profits into paying the new inheritance tax every year for a decade and could have to sell 20% of their land.
Keep up with all the latest news from the UK and around the world by following Sky News
The Country and Land Business Association (CLA), which represents owners of rural land, property and businesses in England and Wales, found a typical 200-acre farm owned by one person with an expected profit of £27,300 would face a £435,000 inheritance tax bill.
The plan says families can spread the inheritance tax payments over 10 years, but the CLA found this would require an average farm to allocate 159% of its profits each year for a decade.
To pay that, successors could be forced to sell 20% of their land, the analysis found.
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