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.
One of Britain’s biggest housebuilders is exploring a £1bn takeover bid for Cala Group, a rival player in the sector which has been put up for sale.
Sky News has learned that Persimmon, which has a market value of £4.74bn, is leaning towards submitting an offer for Cala ahead of a bid deadline next week.
City sources said it would be a strong contender to buy Cala, whose homes have a significantly higher average sale price than those of Persimmon.
Insiders expect Cala, which is being auctioned by Legal & General (L&G), to command a price tag of about £1bn.
If Persimmon is successful in the auction, it would mark the York-based company’s biggest acquisition for years.
Under Roger Devlin, its chairman, and chief executive Dean Finch, the company’s share price has rallied by over 20% in the last year.
In a trading update last month, Persimmon said it was on track to deliver growth in new home completions this year to up to 10,500.
The Cala auction comes amid a general election campaign in which new home provision is expected to figure prominently.
Both main parties are likely to set out new policies to stimulate housebuilding growth, according to sources.
Analysts said this weekend that other housebuilders were also expected to consider bids for the L&G-owned company.
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These could include, they said, Persimmon’s larger rival, Taylor Wimpey, and Avant Homes, which is owned by Elliott Advisors and Berkeley DeVeer.
Persimmon is the UK’s third-largest housebuilder by market capitalisation, behind Taylor Wimpey and Barratt Developments.
Both Persimmon and Taylor Wimpey were among eight housebuilders named by the Competition and Markets Authority in February over suspicions they had exchanged commercially sensitive information.
A takeover of Cala by another major housebuilder would underline fresh momentum in the industry’s consolidation, after Barratt Developments unveiled a £2.5bn deal to acquire rival Redrow.
The prospective sale of Cala represents the first significant strategic move by its new chief executive, Antonio Simoes.
Bankers at Rothschild are overseeing the auction.
Mr Simoes described Cala as “a very strong business” during an earnings call earlier this year on which he was quizzed about the housebuilder’s future ownership.
L&G took full control of the business in 2018.
Cala reported a slide in half-year profits last autumn, citing a “challenging market”.
The company has a long-term goal to build 3,000 homes annually.
Persimmon and L&G declined to comment on Saturday.
Business
Ex-Post Office boss Paula Vennells admits removing reference to Horizon IT system from Royal Mail prospectus
Former Post Office boss Paula Vennells has admitted to amending the legal document Royal Mail issued to would-be investors before it became publicly owned to remove mention of the flawed Horizon IT system.
Data from the accounting software created by Fujitsu was used to prosecute more than 700 sub-postmasters for theft and false accounting.
Many more victims lost their homes, livelihoods and good reputation to repay non-existent shortfalls.
Now the inquiry set up to establish a clear account of the introduction and failure of Horizon has heard during Ms Vennells’s third and final day of questioning that she removed “at the very last minute” reference to Horizon from the prospectus Royal Mail issued before it was listed on the London Stock Exchange.
A prospectus is a legal and financial document detailing key information for potential company investors.
It was the first time the issue was raised with Ms Vennells.
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Paula Vennells breaks down in tears again
She said: “It was flagged to me that in the IT section of the Royal Mail prospectus, there was reference to – I can’t remember the words now – but risks related to the Horizon IT system… the line that was put in said that no systemic issues had been found with the Horizon system.”
Ms Vennells wanted the reference removed as, “the Horizon system was no longer anything to do with the Royal Mail group” she said, and contacted the company secretary to have the reference removed.
Based on this action Ms Vennells wrote to a colleague “I have earned my keep on this”.
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She was at the top of Post Office for 12 years and served as its chief executive for seven of those, from 2012 to 2019.
In at times emotional testimony, Ms Vennells said she “loved the Post Office” and worked “as hard as I possibly could to deliver the best Post Office for the UK”.
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