Families “should feel optimistic” that the worst of the cost-of-living crisis is over, the chancellor has told Sky News.
Acknowledging households have “suffered enormously” from energy, food and fuel inflation in the last 18 months, Jeremy Hunt said they should now feel some relief despite the UK economy slowing to a halt in the third quarter of this year.
The latest economic data for GDP shows the economy flatlined in the three months to September, with a slight contraction rounded up to 0% growth.
All three of the most significant sectors were almost equally moribund, with a 0.1% fall in services output cancelled out by a similar increase in construction, with production output entirely flat.
Business investment, household and public sector spending were down meanwhile, an indication that while elevated interest rates imposed by the Bank of England to tame inflation are doing their job, it is coming at the price of growth.
Despite this, the chancellor hailed the figures from the Office for National Statistics as good news, because they showed the economy was not in recession.
He said: “I think they [families] can be more optimistic.
“I know how tough it has been but you can see the progress we are making in bringing down inflation, which has been the biggest single cause of pressure as people have seen the cost of their weekly shop go up, the cost of filling up the car go up.
“But the message of today is the economy is more resilient than many people thought, and that gives us all hope for the future.
“With the Bank of England rightly keeping interest rates higher in order to bring down inflation, the number one priority, you would expect there to be some impact on growth, but in the end if we can bring inflation down that is the best possible way to secure long-term growth and that is our plan.”
Mr Hunt said his autumn budget statement in two weeks will be focused on delivering growth, but indicated most of the measures will be medium term and structural because of the fiscal constraints.
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‘Inflation is still too high’
He added: “The priority is to bring down inflation, so what you will hear in the autumn statement for growth is measures that will unlock the long-term competitiveness of the UK economy, create prosperity that will fund our NHS and public services, and bring down the tax burden over time, but we won’t do anything that compromises the battle against inflation.”
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He also again ruled out any tax cuts that would be “inflationary” – a commitment that will again disappoint some backbench Conservative MPs.
Mr Hunt said: “I can rule out any tax cut that is going to fuel inflation, it is the wrong thing to do when we are making such good progress against inflation.
“In the long run we do want to bring down the tax burden, there are no shortcuts, we have got to be smarter about how we spend taxpayers’ money, reform the welfare system, these are difficult long-term decisions that the PM and I have to make.”
The chancellor also endorsed Rishi Sunak’s decision to scrap the HS2 line from Birmingham to Manchester despite previously enthusiastically supporting the project.
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He denied cutting the UK’s largest infrastructure project sent a signal the government could not be trusted to deliver on its economic promises.
Mr Hunt said: “I think that sort of pessimism and declinism is just wrong.
“Look what’s happened since 2010, the UK economy has grown faster than Japan, France, Germany, some of the largest economies, our tech sector is double the size of Germany and three times that of France.
“There are tremendous strengths here, part of that is infrastructure, and every penny saved on HS2 will be invested in other projects, to make sure the UK delivers on the remarkable potential that we have.”