Ahead of Parliament returning today, the Chancellor 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.
