Jeremy Hunt has been accused of “picking the pockets of working people” after announcing billions worth of tax hikes in his Autumn Statement – as Britons face the biggest fall in disposable income on record.
The Office for Budget Responsibility (OBR), which checks the government’s fiscal plans and provides economic forecasts to go alongside them, has given a bleak assessment of the UK’s economic outlook.
The country is now in a recession, with more than half a million people forecast to lose their jobs while living standards crash as a result of rising prices.
The spiralling cost of living will erode real wages and reduce living standards by 7% in total over the next two years, the OBR’s assessment said, wiping out the previous eight years’ growth, despite over £100bn of additional government support.
Paul Johnson, the head of the Institute for Fiscal Studies, said the figures were “simply staggering”.
“Simply staggering numbers in OBR report,” he said on Twitter.
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“Real Household Disposable Income per person to fall more than 7% over next two years. Biggest fall on record. Taking incomes down to 2013 levels.”
In his Autumn statement, Mr Hunt set out a package of around £30bn of spending cuts and £24bn in tax rises over the next five years.
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The measures will see around 55% of households worse off, according to the Treasury’s own analysis.
Among the “difficult decisions” Mr Hunt said he was forced to make to curb inflation, he announced the cap on average household energy bills would increase from £2,500 to £3,000 from April.
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2:52
Sky’s economics and data editor Ed Conway takes a look at the key figures from the chancellor’s autumn statement.
But Mr Hunt said “this still means an average of £500 support for every household”, while there would also be additional cost-of-living payments for people on means-tested benefits, pensioner households and those on disability benefits.
In addition to rising energy bills, millions more Britons will pay more tax due to a freeze on income tax personal allowance, national insurance and inheritance tax thresholds.
Sometimes known as a “stealth tax”, the measure will drag more people into higher tax brackets, so is effectively a tax rise.
The Federation of Small Businesses (FSB) slammed the move, calling the budget “high on stealth-creation and low on wealth-creation”.
Some of the other main announcements from the Autumn Statement include:
The higher rate of tax threshold reduced to £125,140
Benefits and state pension to rise in line with inflation
Windfall tax extended until March 2028 and increased to 35%
Electric cars no longer exempt from car tax from April 2025
An extra £2.4bn per year on schools
NHS to get £3.3bn and adult social care £1bn next year and £1.7bn in 2024
Government spending will continue to increase in real terms every year for the next five years, but at a slower rate than previously planned.
Freeze on income tax personal allowance, national insurance and inheritance tax thresholds
A former Labour economist and policymaker, Torsten Bell, who was in the Treasury during the last financial crisis, has said the autumn statement could have been announced by the opposition.
But Labour branded it an “invoice to the economic carnage the government has created”.
Hunt a ‘scrooge who has not cancelled Bankers’ Christmas’
Shadow chancellor Rachel Reeves questioned the fairness of not abolishing nom-dom status, which she called a “tax-free income for millionaires”, and of lifting the cap on bankers’ bonuses while “urging wage restraint for everybody else”.
“He’s asking working people to take the hit with less money in their pockets in the run-up to Christmas, but also for years to come,” she said.
“But if you’re a banker, a non-dom, or a private equity manager, don’t worry – Scrooge hasn’t cancelled your Christmas.
“In the last hour, the Conservatives have picked the pockets of purses and wallets of the entire country as the chancellor has deployed a raft of stealth taxes taking billions of pounds from ordinary working people.
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Rachel Reeves said all the country got today was an invoice to the ‘carnage’ created by the government
“The country is sick of being ripped off by the Tories, we want our money back.”
Mr Hunt sought to blame Russia’s invasion of Ukraine for the “global energy crisis, a global inflation crisis and a global economic crisis” and said “we have risen to bigger challenges before”.
“We aren’t immune to these headwinds, but with this plan for stability, growth and public services, we will face into the storm,” he said.
But Green Party MP Caroline Lucas said the chancellor did not acknowledge the “elephant in the room”, which she said was “the economic catastrophe of Brexit”.
SNP Treasury spokeswoman Alison Thewlis also told MPs: “This is a UK so weak that no one would wish to join it. Scotland cannot be forced to stay in broke, broken, Brexit Britain.”
The OBR said in its forecast that the withdrawal from the EU had a “significant adverse impact” on UK trade, while a former Bank of England economist said this week that it had “permanently damaged” the economy and was the ultimate reason for many of the austerity measures announced today.
The assessments from the OBR have been long awaited after the official forecasting body was not used during the tax-slashing September mini-budget, which spooked the markets, pushed up the cost of borrowing, sent the pound falling and forced the Bank of England to intervene to stop pension funds from collapsing.
Mr Hunt’s package is in stark contrast to his predecessor’s ill-fated plan, which analysis released on Monday found cost the UK £30bn – doubling the sum the Treasury said would have to be raised to plug the “black hole”.
But the pound has still dropped sharply against the US dollar as financial markets fret over warnings the UK is already in recession.
The Lib Dems blamed the problems on government incompetence, calling today’s announcement a “cost of chaos budget (that) will cause untold pain for everyone”.
But some of the measures announced have been welcomed.
Martin Lewis, the money saving expert, said: “I am very pleased that both benefits and the state pension are being increased by the 10.1% September inflation rate.
“It only happens from next April, and it will still be hard for many, but if it was less than this it would’ve been devastating.”
Donald Trump has hit out at the Ukrainian president once again, just four days after an explosive on-camera spat between the pair.
The US president posted on Truth Social saying Volodymyr Zelenskyy made “the worst statement that could have been made” when he said the end of the war with Russia is “very, very far away”.
“America will not put up with it for much longer!” Mr Trump posted.
“It is what I was saying, this guy doesn’t want there to be peace as long as he has America’s backing,” the president added.
Mr Zelenskyy then posted on X saying Ukraine is “working together with America and our European partners and very much hope on US support on the path to peace”.
“Peace is needed as soon as possible,” he posted.
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Mr Trump also appeared to attack Mr Zelenskyy and Europe after yesterday’s Ukraine summit in London at which leaders, according to Mr Trump: “stated flatly that they cannot do the job without the US.”
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3:52
The Ukraine summit: How the day unfolded
“What are they thinking?” Mr Trump asked.
Hours later, however, during a press conference at the White House, Mr Trump praised Europe, saying its leaders have “acted very well”.
“We’re going to make deals with everybody… including Europe and European nations – and they’ve acted very well… they’re good people,” he said.
He told reporters the deal with Ukraine wasn’t dead despite the ongoing disagreements between himself and Mr Zelenskyy.
Image: Donald Trump speaking to reporters on Monday night. Pic: Reuters
“It’s a great deal for us,” he said.
“I just think he [President Zelenskyy] should be more appreciative.”
A deal to end the war was still “very, very far away”, Mr Zelenskyy said earlier, adding he expects to keep receiving US support despite the two leaders’ public spat.
“I think our relationship [with the US] will continue because it’s more than an occasional relationship,” the Ukrainian president added.
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Sky News meets Zelenskyy: The key moments
Despite the confrontation leading to Mr Zelenskyy being told to leave the White House, Reform UK leader Nigel Farage told Sky News’s chief political correspondent Jon Craig the argument may have been a “blessing”.
“Zelenskyy needed to wake up and smell the coffee,” said Mr Farage.
“And since that meeting, he’s done so, by the way, I’m told from people inside the White House that before they left the building, Zelenskyy wanted to go back in and sign the deal.”
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0:57
Pro-Ukrainian protesters gather in London
Mr Zelenskyy was in London over the weekend to meet with Sir Keir Starmer and King Charles and took part in a European summit on Ukraine convened by the UK.
Following the summit, Sir Keir announced a “coalition of the willing” to potentially provide boots on the ground in Ukraine in the event of a ceasefire.
US secretary of state Marco Rubio today thanked Foreign Secretary David Lammy for “the UK’s role in encouraging Europe to provide for its own defence and push for peace in Ukraine”, according to US state department spokesperson Tammy Bruce.
“The secretary confirmed the United States is ready to negotiate to end the Ukraine-Russia conflict and will continue working with the UK towards peace in Ukraine,” she 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.
Image: 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.
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].”
Image: 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.”
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.
Image: 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.
Image: Ukraine’s drone technology is considered to be world-leading
Image: “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.
Image: 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.
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.
Image: 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.”
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.
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.
Image: 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.
Image: 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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3:52
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.”
Image: 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.
Image: 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.
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.