Chancellor Jeremy Hunt has expressed confidence in his strategy to address the rising UK costs and believes that it’s beginning to yield results that will soon ease the financial strain on households. Acknowledging the continued financial challenges many households face across the country, Hunt emphasized the need for persistence with the inflation-curbing plan as the most effective way to provide support. As Parliament reconvenes this upcoming Monday, he focuses on relieving struggling households.
UK could see inflation declining to 5%
While the Bank of England has projected an inflation rate of 7.1%, experts anticipate a decline to around 5% by the end of this year. Inflation, which reached a staggering peak of 11.1% in October of the previous year, has now moderated to 6.8%, although it remains significantly higher than the Bank of England’s target of 2%.
Meanwhile, the Office for National Statistics (ONS) has substantially revised the UK’s growth figures upwards. These revisions reveal that the country’s recovery from the COVID-19 pandemic happened more swiftly than previously believed, with the economy surpassing its pre-pandemic size almost two years ago. The latest figures show that by the final quarter of 2021, the UK’s economy is estimated to have exceeded its 2019 levels by 0.6%, significantly contrasting to the previous estimate of a 1.2% contraction.
This revision means that the UK’s economy is believed to have grown by 8.5% throughout 2021, in contrast to the earlier estimate of 7.6%, according to the ONS. The ONS, however, did not revise its estimate that GDP shrank by 5.8% in 2020.
Consequently, Hunt noted that as we move into the autumn, it’s evident that many families are still grappling with tight budgets. However, inflation is declining, and now is the time to stay the course. He added that we are making progress in halving inflation this year, and by sticking to our plan, we can relieve the pressure on both households and businesses.
Hunt also emphasized that despite doubts from some quarters, the latest data demonstrates a robust rebound compared to several other G7 economies, making the UK an attractive destination for investment. He stated that the government is actively unlocking the UK’s potential, attracting more investment, generating new job opportunities, and strengthening the economy.
Reeves says that low growth is not a reason to celebrate
In response to Hunt’s comments, Rachel Reeves MP, the shadow Chancellor for Labour, accused him of being disconnected from the economic challenges faced by families in Britain. She argued that transitioning from no growth to low growth is not a reason for celebration and shouldn’t be the ultimate goal.
Reeves highlighted that Labour’s economic strategy revolves around “investing in Britain” to stimulate growth, reduce household expenses, and improve working people’s financial well-being across the nation.
Rupert Harrison, who served as George Osborne’s chief of staff during his tenure as Chancellor, pointed out that compared to the United States, British statistics often appear less favorable in their initial release. He noted that the recovery following the 2010 period, for instance, saw repeated upward revisions in the UK, while the US experienced downward revisions. In hindsight, it’s known that both countries had similar growth rates from 2010 to 2016, although the narrative at the time was different.
This trend of revisions has been a long-standing feature in transatlantic economic data. Before the financial crisis, Goldman Sachs calculated that, on average, annualized quarterly growth figures were revised upward by 0.7 percentage points in the UK and by 0.5 points in the eurozone. In contrast, these figures were revised downward by 0.3 points in the United States.
