- Ahead of the next fiscal event, Chancellor reassures that
inflation is on track to be halved this year
- Recognises that household budgets are still stretched but is
confident that the plan is working and pressure will ease on
families
- Reiterates commitment to public sector reform to help keep
taxes down for working families
Chancellor is confident that the plan to
halve inflation this year is working and that pressure on
household budgets will begin to ease.
Ahead of Parliament returning tomorrow (Monday 3 September), the
Chancellor has recognised that household budgets are still
feeling stretched, and has impressed the need to stick to the
plan to halve inflation as the best way to help ease the
pressure. Despite the Bank of England expecting a rise of
inflation to 7.1 percent in figures released this month,
forecasts still expect it will fall to around five percent at the
end of the year.
It comes as the UK’s growth figures have been substantially
upgraded by the ONS, showing the UK economy recovered from the
pandemic far more rapidly than previously thought, returning to
its pre-pandemic size almost two years ago. The revision proves
the resilience of the UK economy, which has already grown faster
than Germany, Italy, Japan and France since 2010. The UK
recovered from the pandemic faster than any country in Europe and
only behind Canada and the US in the G7, and is second only
to France for foreign investment.
The government will build on this momentum in the coming months,
with the PM travelling to India to cement his already-strong
relations with G20 allies, hosting the international Artificial
Intelligence Summit to pioneer investment in AI and the Trade
Secretary pursuing trade talks with Gulf Cooperation Council
economies.
Over the summer, inflation fell to 6.8 percent, GDP figures
showed the economy grew by 0.5 percent in June – beating
forecasts, and business confidence in the UK soared to an
18-month high.
It comes as the government continues to drive economic growth,
establishing 12 investment zones across the country to support
growth industries, with the first investment zone in South
Yorkshire already securing more than £80 million of private
investment – helping to create 8,000 jobs by 2030. We are also
investing billions in freeports and transport to boost
connectivity across the country, such as the Teesside Freeport,
which is bringing millions of pounds of new investment into the
area, creating 40,000 jobs. And we have introduced full expensing
for businesses to drive investment in the UK, equivalent to a
£27bn tax cut.
The government has already taken decisive action to limit
inflation by supporting households with the cost of living, the
Energy Price Guarantee and by extending the cut to fuel duty. The
Chancellor has also avoided inflationary spending, including by
asking departments to fund public sector pay rises from existing
budgets.
The Chancellor said:
“As we move into autumn, I know family budgets are still
stretched, but inflation is coming down and now is the time to
see the job through. We are on track to halve inflation this year
and by sticking to our plan we will ease the pressure on families
and businesses alike.
“And it should be no surprise, despite the doubting from
some, latest figures show we have bounced back better than many
other G7 economies and are one of the most attractive countries
in the world to invest.
“This government is unlocking the UK’s potential – attracting
more investment, creating new jobs and growing the economy.”
With progress made on the PM’s priorities to halve inflation and
grow the economy, the Chancellor is working with the public
sector to improve productivity to ease the pressure on the public
purse and keep taxes low for working families.
He will commission departments to provide up to date analysis of
the time frontline staff are spending on administration and
non-core work, and for plans to significantly reduce it as part
of the Public Sector productivity programme.
Keeping spending under control is also important to keep interest
rates down. External evidence suggests from the OBR and IMF that
£25 billion of additional borrowing could push up interest rates
by as much as 0.5%, reinforcing the need to carefully manage
public sector spending.
Notes to editors
"External evidence from the IMF and OBR suggests that every
extra £25 billion of government borrowing could push up
interest rates by as much as 0.5%, reinforcing the need to
carefully manage public sector spending"
[1] Shared Problem, Shared Solution: Benefits from
Fiscal-Monetary Interactions in the Euro Area (imf.org)
[2] Working-paper-No4-A-small-model-of-the-UK-economy.pdf
(obr.uk)
