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
Defiant Netanyahu sets out plan for military escalation in Gaza – and describes photographs of starving babies as ‘fake news’
Israel’s prime minister added more detail to his deeply controversial plans for military escalation in Gaza at a news conference with foreign media yesterday – despite the condemnation of the UN Security Council, which met in an emergency session and urged him to rethink.
Benjamin Netanyahu spoke of a “fairly short timetable” to establish designated “safe zones” for the one million or so set to be displaced from Gaza City.
He also vowed to seize and dismantle Hamas’s final strongholds there – in the central refugee camps, and in al Mawasi, along Gaza’s southwestern coast.
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Rare aerial footage shows scale of destruction in Gaza
This, per Netanyahu, is the only way to destroy the terror group, which he claimed “subjugates Gazans, steals their food and shoots them when they try to move to safety”.
Al Mawasi is already home to a significant displaced population, most of whom live in tents cramped up against the Mediterranean Sea, in what is already a designated humanitarian zone.
If members of Hamas live among them, rooting them out will be hugely complicated and will involve significant civilian casualties. If the residents of Gaza City can’t evacuate south to al Mawasi, where will they go?
Netanyahu’s plan is to set up more aid distribution sites through the controversial Gaza Humanitarian Foundation (GHF) and to flood Gaza with food.
He claimed his policy was not one of forced starvation – describing particular photos of starving babies as “fake news”, and accusing the media of painting a false picture.
“The only ones who are being deliberately starved in Gaza are our hostages,” the prime minister claimed.
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‘We suffer greatly’: Life in Gaza gets harder
I asked Netanyahu how he would go about preventing the kinds of daily killings taking place at aid distribution points in the months since GHF has been operating.
Doctors Without Borders has described these incidents as deliberately orchestrated.
The prime minister said increasing the amount of aid heading into the Strip was the answer.
“And by the way, a lot of the firing was done by Hamas seeking to have a response by our forces,” he added. “And very often they didn’t, they held back. They stayed their own fire even though their own lives were on the line.”
Read more:
Israeli soldier dies by suicide
The danger of aid airdrops revealed
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Gaza: Aid drops ‘killing our children’
This was Israel’s prime minister trying to get on the front foot in a propaganda war he acknowledged he was losing. He was loath to admit the presence of famine in Gaza.
It took two questions before he acknowledged there was “deprivation”, even if he would not be drawn on whether his 11-week total blockade of the strip earlier this year had played any role.
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He recognises that the appalled response of the international community to the human cost of this war, and the accusations of war crimes and genocide which Israel so vehemently rejects, are a terrible look.
This was his attempt to reclaim the narrative.
World
Journalist killed in Israeli strike feared his own assassination – as IDF claims he was a ‘terrorist’
Five Al Jazeera journalists have been killed in an Israeli strike in Gaza – including a reporter who feared he was going to be assassinated.
Anas al Sharif died alongside four of his colleagues from the network: Mohammed Qreiqeh, Ibrahim Zaher, Mohammed Noufal and Moamen Aliwa.
The Committee to Protect Journalists (CPJ) had recently expressed “grave” concerns about al Sharif’s safety, and claimed he was “being targeted by an Israeli military smear campaign”.
Gazan journalist Anas al Sharif with his two children
Israel Defence Forces confirmed the strike – and alleged al Sharif was a “terrorist” who “served as the head of a terrorist cell in the Hamas terrorist organisation”.
It claimed he was “responsible for advancing rocket attacks against Israeli civilians and IDF troops”.
Last month, the reporter had said he lived with “the feeling that I could be bombed and martyred at any moment” because his coverage of Israel’s operations “harms them and damages their image in the world”.
As of 5 August, at least 186 journalists and media workers have been killed in Gaza – but foreign reporters have been barred from covering the war independently since the latest conflict began in 2023.
Gazan journalists Anas al Sharif and Mohammad Qreiqe
The Hamas-run government has described Israel’s killing of these five Al Jazeera journalists as “brutal and heinous”.
A statement added: “The assassination was premeditated and deliberate, following a deliberate, direct targeting of the journalists’ tent near al Shifa Hospital in Gaza City.
“The targeting of journalists and media institutions by Israeli aircraft is a full-fledged war crime aimed at silencing the truth and obliterating the traces of genocidal crimes.”
Read more:
Netanyahu vows to defeat Hamas
UK joins four countries in condemning Israel’s plan for new Gaza operation
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Inside the room with Netanyahu
Following Anas al Sharif’s death, a post described as his “last will and testament” was posted on X.
It read: “If these words of mine reach you, know that Israel has succeeded in killing me and silencing my voice.”
The 28-year-old added that he laments being able to fulfil his dream of seeing his son and daughter grow up – and alleged he had witnessed children “crushed by thousands of tonnes of Israeli bombs and missiles”.
“Do not forget Gaza … and do not forget me in your prayers for forgiveness and acceptance,” he wrote.
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The CPJ reported that his father was killed by an Israeli airstrike on their family home in December 2023 after the journalist received telephone threats from Israeli army officers instructing him to cease coverage.
Israel shut down the Al Jazeera television network in the country in May last year.
For Ukraine – its exhausted, brave soldiers, its thousands of bereaved families mourning their dead, and its beleaguered president – it is exactly what they feared it would be.
They fear the compromise they will be forced to make will be messy, costly, unfair and ultimately beneficial to the invading tyrant who brought death and destruction to their sovereign land.
Six weeks ago, I spoke to President Zelenskyy in London.
War latest: Team Trump ‘risk being out of their depth’ at Putin meeting
I put it to him in our Sky News interview that Presidents Trump and Putin were heading towards making a deal between themselves, a grand bargain, in which Ukraine was but one piece on the chessboard.
Zelenskyy smiled as if to acknowledge the reality ahead.
He paused and then he said this: “We are not going to be a card in talks between great nations, and we will never accept that… I definitely do not want to see global deals between America and Russia.
“We don’t need it. We are a separate story, a victim of Russian aggression and we will not reward it.”
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In full: Volodymyr Zelenskyy interview
It was a response that betrayed his greatest fear – that this will become essentially a Trump negotiation in which Zelenskyy and Ukraine will be told “take it or leave it”.
And, by the way, if you “leave it”, then it will be painful.
Harsh realities
It’s the prospect that now confronts Zelenskyy as Trump and Putin plough ahead on a course that has clear attractions for both of them.
Of course, Zelenskyy is right to say there can be no deal without Ukraine. But there are harsh realities at play here.
Trump wants a deal on Ukraine – any deal – that he can chalk up as a win. He wants it badly and he wants it now.
It’s the impediment to a broader strategic deal with Putin and he wants it out of the way. It’s what he does, and it’s the way he does it. And President Putin knows it.
He knows Trump, he sees an opportunity in Trump, and he can’t get across Russia to Alaska fast enough. He will be back at global diplomacy’s top table.
Always a deal to be done
Make no mistake, when Trump says he just wants to stop the killing, he means it. Such wanton loss of young lives offends him. He keeps saying it.
He sees war, by and large, as an unnecessary waste of life and of money. Deals are there to be done. There’s always a deal.
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Is Trump out of his depth with Putin summit? – Professor Michael Clarke
Sadly for Ukraine, in this case, it is unlikely to be a fair deal.
How can any deal be “fair” when you are the victim of outrageous brutality and heinous crimes.
Read more:
Putin and Trump to meet in Alaska on Friday
Trump will have a lot of ice to break with Putin – analysis
But it may well be the deal they have to take unless they want to fight an increasingly one-sided war with much less help from Trump and America.
A senior UK diplomat told me if things turn out as feared, it should not be called a land-for-peace deal. It should be called annexation “because that’s what it is”.
Listen to The World with Richard Engel and Yalda Hakim every Wednesday
But here’s the rub.
Peace, calm, the end of the nightly terror of war has much to recommend it. In short, a bad peace can often seem better than no peace. But, ultimately, rewarded dictators always come back for more.
If Ukraine has to accept a bad peace, then it will want clear security guarantees to make sure it cannot happen again.
It is the very least they deserve.
There is much at stake in Alaska.
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