this is bbc world news, the headlines... russia has acknowledged the deaths of 63 soldiers in a ukrainian attack in the occupied donetsk region on new year's eve. kyiv claims hundreds were killed in the strikes on a building where russian forces were stationed. senior doctors in the uk are warning that some hospital accident and emergency departments are in a "complete state of crisis" due to the extreme pressures facing the national health service this winter. a number of hospitals have declared critical incidents. three people have died after fire broke out at a hotel in perth in scotland. emergency services — including 21 ambulance crews and nine fire trucks — were called to the incident. the vatican says at least 65,000 people have filed past the body of the former

pope, benedict xvi, on the first day of his lying—in—state. you are watching bbc news. now it's time for review 2022. and one story that's led news bulletins in the uk throughout the last 12 months has been rising prices and their impact. victoria valentine, along with our team of economics and business correspondents, have been reflecting on the causes and consequences of the squeezed economy and the cost of living. big ben tolls. when big ben brought in the new year, few of us would have expected the year that was to follow. remember, in 2022 we started off very much in the grip of a global pandemic. who would have thought that another worldwide story

would dominate the news agenda? tonight at 10, we are live in ukraine, a country at war, after a huge russian military offensive by land, sea and air. prices quickly rose to their fastest rate in over a0 years, and inflation touched everything, from our household bills to our wages and our hopes for the future. the global economy was already suffering from a long covid, with hold—ups in supply chains causing headaches and higher bills for business. countries from france to finland faced a double blow of rising inflation, and at best, slowing growth, but a war in europe and the sanctions that followed changed everything. and at home, westminster struggled to provide the answer. or a team sheet. this is it, folks. with no fewer than three prime ministers in less than two months, this year, britain's seen its fastest turnover at number ten for nearly a century, and it was hardly quieter at number”.

and you will be chancellor and liz truss will be prime minister this time next month? absolutely, 100%. i'm not going anywhere. less that 2a hours after kwasi kwarteng insisted he was 100% safe in hisjob as chancellor, he has gone. three weeks of turmoil on the financial markets has culminated in this, another dizzying day in politics. jeremy hunt is now tasked with bringing the financial turmoil under control. what can he do? it's third year unlucky for many firms. when our business editor went to visit south shields beach in march, just a few weeks after russia invaded ukraine, he found one fish and chip shop already feeling the hit. the war in ukraine seems a long way away from this beach in south shields, but the soaring price of potato, fish, oil, the energy to cook them, is in part due to that conflict. it is causing a cost of living and cost of doing business emergency, which has very much arrived on these shores

and the firms we work for, its products and services we buy are desperate for some kind of financial lifeline. simon, the energy to cook that meal is up 400%, and that is at the heart of the story, isn't it? yes, the story of 2022 has definitely been energy and inflation. we were already seeing inflation this time last year, as the world economy emerged from a covid—induced coma. you had economies coming back from a deep freeze, some supply chain issues, prices beginning to rise, but then the big event, which was russia's invasion of ukraine. that sent the energy markets into a tail spin, because russia is an enormous exporter of oil and gas. you saw those supplies shut off or shunned by the rest of world, who didn't want to finance the russian war effort. energy prices ballooned, particularly gas, went up fivefold and then tenfold, and that gets into everything, like electricity, because you use gas to produce electricity. and it wasn'tjust the energy prices. things like food.

ukraine and russia big exporters of wheat. and something like fertiliser. a lot of people didn't see that coming. the fertiliser which other countries use to produce their food, so you saw inflation in those areas too. and there can't be a single individual, government, business, that wasn't affected by inflation, and continues to be so. for businesses, they get a double whammy, because while their costs are going up, as you saw in that film there, their customers�* pockets are being emptied by that same inflation, that double whammy, which is why richard 0rd, in that film there, feared his business and thousands of others might not survive. seen hundreds of shops already that haven't been able to cope with the price increases, and unfortunately things are getting worse. the sooner we can get something sorted with the price increases, the better, or we will see a lot of your local fish and chip shops gone. since you made that film, the government has responded in the form of the energy support package, what kind of difference has that made?

i think it's made a massive difference. i think the government realised that, without that, people were looking at energy bills of £5,000—£6,000 a year, and that would derail the economy completely, so they had to step in. so they have been subsidising bills since then, and it has cost them tens of billions of pounds, but i don't think they felt they had any choice. and if you look around the world, other governments have done similar things. the question is — how long can they afford to keep doing that? and that depends on how long we see energy prices this high. i think that is the big imponderable of next year is — where does this end? even before the war started, inflation was beginning to seep into many aspects of british life, and the bank of england was already beginning to raise rates. and the governor? well, he was telling our economics editor that we should be restraining what we can do is try to prevent it becoming, it spreading, inflation spreading,

inflation becoming more engrained. are you trying to get into peoples' heads and ask them for them not to ask for too high pay rises? broadly, yes. really? in the sense of saying we do need to see moderation of wage rises. now, that is painful. an unusually blunt acknowledgement of yet another battle raging in the british economy. after a decade of stagnation, many workers, including those in the public sector, are unlikely and unwilling to allow another fall in their living standards. a fresh wave of strike action on the railways, causing huge disruption. we understand the anger caused by the disruption of the stoppages, of course, but we are getting a lot of support from the public. there isn't a bottomless pit- of money to pay increased salaries. i think there's a fair offer on the table. i 40,000 members of the rmt are

walking out for four days this week. this year, britain has faced its biggest set of rail strikes in 30 years, affecting england, scotland and wales. i do hope the reasons why the strike is on is being looked into already, and hopefully we should get back, because it is really exhausting. if we are going to strike about something, you can negotiate first and negotiate, negotiate until conclusion. if it doesn't come to anything, then strike at a time that causes the least disruption to people. so there has been public support for industrial action, but not everyone is sympathetic, and it often comes at a cost, doesn't it, katie? yes, there is a cost to the economy and also to the workers themselves, because they lose pay when they are on strike. and this dispute has been going on for months, no obvious end in sight. the unions say rail workers just haven't had a pay rise in far too long, and the cost of living is increasing.

the government and the rail industry say they want to give a pay rise but changes to working practices have to happen, because they say covid has presented such a big financial challenge to the railway. these days, of course, more people can work from home than in the past, so the impact on commuters is perhaps a bit less than it would have been in years gone by, but the passengers ultimately who do need to travel, and a lot of businesses, are the ones caught in the middle, and back injune i went and spoke to the manager of a pub in portsmouth about the difficult choices he has had to make. i think we will lose 30% of normal trade. a lot of that is because a big part of our trade is commuters. unfortunately, i will have to cut back on my staffing levels, that is another hit for my staff. we have been hearing about the impact of transport chaos on city centres here in the uk and the toll it is taking on pubs and restaurants. what we have seen is footfall in city centres down by 30—40%, but in central london and in the city it has been down as low as 50—60%,

and on top of the cancelled christmas parties and bookings, you have seen walk—in trade also decimated. it is hitting retailers too, but there is a warning for anyone tempted to skip the late christmas shopping trip and buy online. according to the british independent retailers association, if you want gifts in time for christmas, you will have to go shop in person, because of the ongoing strike disruption to postal services. more sectors have joined the picket lines — teachers and university lecturers. and for the first time in 106 years, the royal college of nursing decided to strike this year. we are operationalising plans, we have a great team, cobra team, doing this every day, so whether it is our military personnel we have trained up, or a surge capacity, that we can actually make sure things like borders are safe and protected, and of course people's lives are not disrupted.

a lot of us are more conscious of prices these days, and people have started trading down, and that has caused a revolution in the bottom line for discounters. what we are seeing is an unprecedented shift in customer behaviour, and we are seeing customers reprioritising value like never before, and switching their shopping to aldi. and we are winning shoppers from all of the traditional full price supermarkets. this year, we thought differently and acted accordingly. in the summer, bbc news commissioned some research looking into how inflation is affecting our behaviour. and this is what it found. eight out of ten people in that survey told us they were worried about cost of living pressures, that is up from six in ten injanuary. more than half said it was having a negative impact on their mental health. people are having to cut back, they are saying, more than half said to us they are spending less when they do their weekly shop. they are cutting back on that. they are not only spending less

on food and groceries, they are also eating less. this is the really worrying thing — more than half said they have skipped at least one meal to try and save money, and four out of ten say it is affecting their physical health. this was the situation our economics editorfound in a church in usworth, near sunderland. workers crowded round radiators to keep warm, and pensioners fearing they can't afford the most basic of foods. butter is a luxury now, for most people, i would think. it really is. we come to somewhere like this, which is a godsend, where we can have a hot meal, sit beside a nice warm radiator. literally by the radiator. that's right, yes, it's a nice warm radiator. you are here because it will save you having to... it saves a lot from home, a lot of cooking at home, which costs us money. food bill alone has come down because we come here. so, colletta, you are our bbc cost of living correspondent,

you have been up and down the country, in and out of people's homes and businesses. what is it you have found? there's two really different groups of people i have encountered. particularly in the last few months, that are quite distinctive. one is the group of people who have probably been in fuel poverty for quite some time, are potentially more used to living on a budget, perhaps they live on benefits, perhaps they have just had a limited income, and a lot of those individuals are very good at budgeting but have made all the cuts they can. so, when energy prices went up in september 2021, that was their first big shock, that many of us across the country didn't really feel that much or were able to take it in our stride. but for a lot of those individuals, they were hit with it more than a year ago. so this year has been sort of, you know, slice after slice of their income being removed, and it has been incredibly difficult for them. it has got really bad ever

since the gas went up. i'm just constantly paying gas. i'm paying triple my gas this month to the month before. like, i have put £100 a week on, and that isjust far too much, i am buying cheaper mince, cheaper chicken. how does it feel about the prospect of having to spend less on your daughter? how do you feel about that as a parent? heartbreaking, it is absolutely heartbreaking because you want to give your child the world. i suppose there is a second group of people who have become evident in the last few months, and that is people who are, i suppose very overstretched financially, but are in work. so the sort of typical example of that is two parents in work, but reasonable—sized house, they have a big mortgage, perhaps they have got two cars but they are on car finance for that, and that means that really as soon as those energy bills really went up in september, october of this year, they didn't have anywhere to go in terms of finances.

loads of people suddenly become conscious of, you know, their smart meter or the bills are coming in every month or so, and thinking what can they do to limit that use of energy in particular. for a lot of households, that has been a good wake—up call. "let's not leave the telly on, let's not turn the lights on when we don't need them, turn radiators off." there is information about ways to be more energy—efficient, but there are lots of organisations trying to help, there are charities. what are the sort of schemes that you have come across that you think have really stood out for you and are making a difference for people? we went to visit a plumber north of manchester that does a lot of work for free, we went to visit a project in liverpool teaching people how to cook on a single stove, because that is what a lot of people have in their bedsits, just one stove, or how to use a microwave effectively. and this is a chef doing this

in his free time to help out people who really need it at the moment. a lot of individuals that can't cope with being, you know... a food bankjust recently, who are really struggling with the amount of donations they are getting, because they are not being given as much, and they have double the amount of people they are trying to help and service. but so many more volunteers. it is incredible to see people just giving up their own free time to make these kind of places work. as pressure on the uk economy grew, the political landscape was changing. hasta la vista, baby. borisjohnson stood down, and after a summer of campaigning, a new leader emerged, as the threat of recession began to loom. liz truss becomes prime minister. kwasi kwarteng becomes chancellor. and they go hell—for—leather for what they said was a growth strategy, and what was interesting was what was happening internally in the treasury. i found out that a forecast, the numbers had been

prepared by the office for budget responsibility in draft form, to provide the underpinning fro any policies. they were dire numbers, and in any ordinary circumstances, an incoming chancellor may have tweaked — i say tweak, provided some pretty massive surgery to their plans. that didn't happen, those forecasts were ignored, parked, forgotten about, and they went even further in terms of tax cuts and further borrowing, and just said, "we are not going to publish a set of forecasts." that was really damaging, that decision not to publish the 0br forecast, because that is the thing that international investors, everyone else is looking at to say is this legit, does this make sense? yes. itjust shows a certain discipline of having gone through the numbers, and accepted a certain economic orthodoxy, the rules of the game.

now, they were explicit that they didn't like the existing rules of the economic game, they wanted to chuck them. the result was bedlam. i have been following budgets for 20 years, and you watch the screens for the impact on the currency markets, on the value of the pound, on the cost of government borrowing, and ordinarily it never happens, it's a bit of a non—event, even thought you're waiting. this time, right from the off, it was an extraordinary movement in financial markets. you could see it flowing tangibly into the real economy. that had started to spook the guys and girls in there, and they had to step in. with emergency intervention. doing the exact opposite of what they said they were going to do a week before, clear sign of a crisis, clear sign of emergency action, and at that point, you started to see the tanker turning round, very slowly. and then when the chancellor was in the us at the imf meetings, his budget was being effectively unpicked by his prime minister, an extraordinary situation.

very rare to get the bank of england governor coming out and talking to you on camera, but he did do it for my team in washington. he wanted to get the message across clearly that the support they put in place had to end. we are doing everything to preserve financial stability. you know, you have my assurance on that. i think there is an important task now for the funds to ensure they are done. sterling has fallen in response to what you have said, they have three days. does this complicate matters? no, i'm afraid this has to be done for the sake of financial stability. over the course of a weekend, we get a new chancellor who decides to do things differently. plans that had been laid out a few dozen days before, and all of them that hadn't already been legislated for were wiped off the slate. it lists all the measures

and their costings, and it is basically, "that's kept, gone, gone, gone, that's kept, gone, gone, gone, gone, gone, gone ,gone] right? extraordinary stuff. we have never seen anything like that. when you see how economic changes are like a giant wrecking ball changing everything, and it must be said primarily, individuals, households facing this unprecedented squeeze, that has come directly from geopolitical instability, leading to just frankly, just unfathomable rises in energy bills. but then also food bills and mortgage costs, all hitting at the same time, and the instant impact that's had on politics, essentially. then some bad calls, or some badly communicated calls,

meaning a governmentjust lasting over a0 days, all because of, essentially, economics. there is nothing like it, and we are not, kind of, through it, either. the uk is far from the only country experiencing high interest rates or borrowing costs. the economic climate is changing for everyone. britain is an island nation. it benefits from foreign direct investments and trade. here is the head of the international chamber of commerce talking to me in november, at the time of the autumn statement, and pointing to the office of budget responsibility�*s own forecasts. i would have liked to have seen a bit more honesty, to be truthful. there was no mention of the big b word, brexit, you know. we are 4% poorer as a country as a result of brexit, so that is one of the main reasons why we have a hole in our public finances, so it is notjust about international issues, it is about the decisions

we made in the past. if we are asking millions of people and businesses to pay more taxes, i think they deserve the right to be told and acknowledged that was part of the issue as to why that is happening. the big takeaway for me was there is no mention of trade. trade is 60% of the uk economy. it drives and safeguards and generates thousands ofjobs across every region in the economy, and there was no mention of it at all. the confederation of british industry is one of a growing number calling on the government to re—examine britain's post—brexit trading arrangements and the visa system supporting foreign labour. there is going to be quite a shallow recession, but the question really now facing policy makers, facing all of us, is how do we make sure it gets no worse, how do we make sure we come out of it at the end of the year? and that comes down to this serial british problem of business investment. what of energy prices and inflation? we return to our business editor, simonjack. we could be here in a few months�*

time and inflation might be zero, and the reason it might be zero is because you are comparing these high prices to the high prices of a year ago. but that doesn't mean that extra money, that money people are spending on energy, hasn't been a permanent hit to their living standards. we have seen the biggest squeeze on living standards in 70 years, and even if inflation is zero in a few months�* time, it won�*t feel like that, and a lot will depend on what happens in the russia situation. i can�*t myself see vladimir putin saying, "it was a fair fight, we came off second best, we are off home and have crimea back," which is what ukraine wants, so that stand—off is going to be all—importa nt. so that is going to be the biggest issue. the other one will be what happens to global interest rates. we have seen after years of them being almost close to zero, they have gone up very quickly to try and get inflation in check. now, when you increase interest rates from near zero to 4—5% in the space of nine months, after a decade of them being low, unexpected and bad things start

to happen, and i think you will be basically seeing major economies, perhaps even including the us, slide into recession. the uk is predicted to be in recession for most of 2023, so it won�*t be...i can�*t give you a massive message of good will for next year. it is going to be tough, but hopefully inflation will begin to come down and that will make people feel a bit more stable. because it has been one of the greatest shocks to the system that western europe has seen since the second world war. after two years of covid, another huge, seismic shock to the world economy was something that everyone, including the uk, wanted to avoid, but of all g7 industrialised countries, britain is the only one with an economy that is smaller than before the pandemic started. yes, 0k, transport and fuel bills might start coming down, but food bills, those are still rising, and that means inflation is still comfortably

outstripping average wage increases for the public and private sector, and that is a deeply uncomfortable place for businesses and homes to close out the year. 2022 was a year of difficult questions without many answers, watched on by a nation gripped by a deep cost of living crisis, and shouldering the highest taxes since world war ii. debate, though, is beginning to shift from the scale of the economic problems we face to the nature of the solutions we must find.

hello there. today has been a largely dry day with more sunshine around, but it�*s also been colder. as we head into tomorrow, the weather�*s going to look and feel very different. temperatures will be higher, the winds will be stronger. and we�*ve got more cloud and some rain coming in as well. this was the window of calmer weather that we�*ve been in. but if we look out in the atlantic, all this cloud is massing and this is where our weather�*s coming from. a few weather fronts will bring not just thicker cloud, but some rain in from the atlantic, more visible, some stronger winds. but the winds are coming all the way from the azores, hence those higher temperatures before that cloud and rain. we�*ve got clearer skies at the moment and it will be cold with an early frost. temperatures perhaps below freezing just briefly across the midlands and east anglia and then temperatures recover later as we see the cloud coming in, the winds picking up and this rain arriving will turn to snow over higher parts of scotland as we engage what�*s left of that colder air across this part of the country.

elsewhere, though, those temperatures will be rising by the morning and we�*ve got a cloudy, wet start for many places, some snowjust for a while over higher parts of scotland. that first band of rain moves through may become a bit drier, but only briefly. but there�*s more rain coming in more widely from the west. the winds will be strengthening as well. gets particularly windy across wales, in the southwest and here will get some heavier rain over the hills. but because it�*s the south—westerly wind, it�*s going to be milder than today. temperatures in double figures for many, a little bit chillier still across parts of scotland, perhaps, but there�*s more rain to come in scotland. that�*s the main concern here, given how wet it�*s been recently, could be some further local flooding and travel disruption. western and central parts of scotland through the day and into the night could get as much as two inches of rain. we�*re all going to keep some rain going through the evening and into the night as these weather fronts continue to push their way across the uk. most of those should be out of the way by the time we get to wednesday and we�*re left with a run of west of

south—westerly winds. some sunshine perhaps, but also some showers, particularly for the western side of the uk. perhaps more sunshine arriving across the east midlands, across east anglia and the south east of england. but it will be quite windy through the day across much of england and wales. not so much for scotland and northern ireland. nine degrees in the central belt of scotland and 1a in the southeast.

this is bbc news, with the latest headlines for viewers in the uk and around the world. russia acknowledges 63 of its soldiers were killed in a ukrainian attack in the occupied donetsk region. kyiv claims the deaths run into the hundreds. a warning over the uk�*s national health service — senior doctors say some emergency departments are in a "complete state of crisis". the vatican says at least 65,000 people have filed past the body of the former pope benedict xvi on the first day of his lying—in—state. in scotland, three people have died after a fire broke out at a hotel in perth. thousands wait in line to pay their respects to football legend pele, as a public wake begins