Autumn Statement: Jeremy Hunt warns of challenges as living standards plunge

Families face “real challenges”, Jeremy Hunt has warned, as government forecasters predict the biggest drop in living standards since records began.

The Office for Budget Responsibility says household income will fall by 7% over the next 18 months.

The chancellor said tax rises and a spending squeeze in his Autumn Statement would help tame inflation which he said had caused the drop.

But Labour said he had picked the nation’s pockets with “stealth taxes”.

Shadow chancellor Rachel Reeves described the emergency budget measures as “an invoice for the economic carnage” created by the policies of former Prime Minister Liz Truss.

In a sombre statement lasting just under an hour, Mr Hunt undid much of the tax-cutting mini-budget unveiled by his predecessor as chancellor, Kwasi Kwarteng, only 55 days ago.

It was deliberately stripped of surprises and political theatre, with many of the announcements having been trailed in the media beforehand.

BBC economics editor Faisal Islam said the statement was comprised of two halves – the first covering the years until the next general election in which there would be further support for households, and the second coming after 2025 when spending cuts would kick in.

The key measures were:

Speaking afterwards, Mr Hunt told the BBC’s political editor Chris Mason his plan would bring down inflation, while protecting public services.

“These are real challenges for families up and down the country,” he said adding: “I’m not pretending these aren’t going to be difficult times, but there’s a plan, there’s hope – and if we follow this plan, if we stick with it, we can get through to the other side.

“We need to be sensible about the way we do this. We don’t want to make the recession worse.”

The chancellor announced extra money for schools, the NHS and social care in England for the next two years.

Mr Hunt denied that he had been forced to raise taxes and reduce spending because of the turmoil caused by Ms Truss’s mini-Budget.

He said there had been mistakes, but insisted the government had “corrected those within weeks”.

He argued that other countries, such as Germany, France and America were all facing similar problems as a result of the conflict in Ukraine and rising energy prices.

But, Mr Hunt denied he’d postponed difficult decisions, with the squeeze on government departments to come.

The Chancellor’s tone was sober; the facial expressions of Conservative MPs business-like rather than emblazoned with smiles.

Even the opposition parties were relatively muted too: times are and will continue to be very difficult for millions of households.

For all of the numbers, the forecasts, the rhetoric, the standout statistic comes from the government’s independent analysers, the Office for Budget Responsibility: Living standards are falling further right now than at any point since the 1950s.

Bad news.

Add to the mix a chancellor wrestling with a recession; responding with tax rises – taxation levels are their highest for 75 years – and government spending below what it was expected to be.

He argues that protecting the state pension, benefits, and the announcements on spending for education and health shield the government against the suggestion this is another era of austerity.

But lots of government departments face lean years, inflation pickpocketing their spending power.

And Mr Hunt has also postponed the big spending squeezes until after the next election.

That could turn out to be a hospital pass to the future and, after an election, to the next government, whatever its political colour.

The OBR, which produced an economic forecast to accompany Mr Hunt’s Autumn Statement, says high inflation and rising interests rates will lead to consumers spending less, tipping the UK’s economy into a recession “lasting just over a year”.

It predicts the economy will shrink by 1.4% in 2023 before growth slowly picks up again.

Attacking his plans in Parliament, Ms Reeves said Mr Hunt had introduced “a Conservative double whammy that sees frozen tax thresholds and double-digit inflation erode the real value of people’s wages”.

She accused the government of increasing taxes by “stealth” arguing that freezing the personal allowance – the amount of income someone does not have to pay tax on – would cost an average earner more than £600 per year.

The Liberal Democrats said people were “being forced to pay the price for this Conservative government’s incompetence”.

The SNP’s Treasury spokeswoman Alison Thewliss said: “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.”

There was also an attack from the chancellor’s own side with former cabinet minister, Conservative MP Jacob Rees-Mogg arguing that the measures announced were based on unreliable economic forecasts.

“I’m particularly concerned about the tax rises, when an economy is going into recession. You have to be slightly easier in a fiscal sense, than you do when you’re at the peak of a boom.”