Autumn Statement: Jeremy Hunt warns of difficulties as living standards fall

Jeremy Hunt has warned that families face “real challenges” as government forecasters predict the greatest drop in living standards since records began.

According to the Office for Budget Responsibility, household income will drop by 7% over the next 18 months.

In his Autumn Statement, the chancellor said tax increases and spending cuts would help tame inflation, which he blamed for the drop.

However, Labour claimed that fairer tax decisions could have been made.

Shadow chancellor Rachel Reeves called the emergency budget measures “an invoice for the economic carnage” caused by former Prime Minister Liz Truss’ policies.

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

Mr Hunt told the BBC’s political editor Chris Mason his plan would bring down soaring prices, 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.”

In the next two years, before the next general election is due, there will be further support for households and extra money for schools, the NHS and social care in England.

But after 2025 spending cuts are set to kick in for many departments.

The key measures were:

The Resolution Foundation think tank said the Autumn Statement piled further pressure on “the squeezed middle” earners.

But it said increasing benefits in line with prices would make a “huge difference to those on low-to-middle incomes”.

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.

However, Mr Hunt denied he had 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 statement, says high inflation and rising interest 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.

The forecaster also says that as a result of Mr Hunt’s decisions, the tax burden would rise to its highest level since the end of World War Two.

Mr Hunt described a target to reduce government debt in five years time as one of “two new fiscal rules”. But speaking on BBC Newsnight, OBR chairman Richard Hughes suggested the plan could end up only being an aspiration because the end date can be extended every year at the budget.

Attacking Mr Hunt’s plans in Parliament, Labour’s Rachel Reeves said he 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.

Speaking to the BBC on Friday, Ms Reeves said “fairer choices around tax could have been made”, criticising the Tories for not abolishing non-dom status and instead going to the “pockets of the ordinary working man and woman”.

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,” he said.

Meanwhile, a Conservative MP is seeking assurances from the chancellor that he will not increase fuel duty.

The tax is suppose to rise in line with inflation, but has repeatedly been frozen. The Treasury has said a final decision would not be taken until the next Budget in spring 2023.

Writing to the chancellor, Conservative backbencher Jonathan Gullis warned that a “substantial number” of Tory MPs would be opposed to a rise.