Jeremy Hunt has warned he will be making “eye-watering” decisions after the economy shrank in what is feared to be the beginning of the longest recession on record.
The Chancellor warned on Friday of a “tough road ahead” for the UK as gross domestic product, the measure of national income known as GDP, contracted by 0.2 percent.
Mr Hunt said that he will be working to make a possible recession “shallower and quicker” in his autumn budget, which he will unveil on Thursday.
But this will include painful public spending cuts and tax hikes, as he insisted there is a so-called black hole in the nation’s finances.
Jeremy Hunt
Victoria Jones
The economic figure for between July and September could mark the start of a recession, which is defined as two three-month periods of economic contraction in a row.
Labour accused the Conservatives of leaving the economy exposed to the international economic shocks by leading the country through a decade of weak growth and inequality.
But Mr Hunt insisted the problems were largely due to Russian President Vladimir Putin’s “weaponisation” of gas supplies during his war in Ukraine.
“I am under no illusion that there is a tough road ahead – one which will require extremely difficult decisions to restore confidence and economic stability,” the Chancellor said.
“But to achieve long-term sustainable growth, we need to grip inflation, balance the books and get debt falling. There is no other way.
“While the world economy faces extreme turbulence, the fundamental resilience of the British economy is cause for optimism in the long run.”
He said the Bank of England’s warning that the nation is likely in a recession is “disappointing but not entirely unexpected news”.
The Chancellor warned on Friday of a “tough road ahead” for the UK as GDP contracted by 0.2 percent
Dominic Lipinski
But when pressed on how the UK is currently the only G7 economy currently shrinking, he sought to largely blame rising energy prices.
“What we need is a plan that shows how we are going to get through this difficult period – if it is a recession, how we make it shallower and quicker,” he added.
Mr Hunt insisted tackling inflation is the priority when asked about whether a “winter of discontent” is coming, as nurses and civil servants prepare to join workers on strikes.
“Nurses are working incredibly hard, as is everyone on the NHS front line. It’s an area that I know well and I have a great deal of sympathy for them. The reason that they are feeling so frustrated is because inflation is more than 10%,” he said.
“The best thing I can do as Chancellor is to produce a plan that brings down inflation, brings down the upward pressure on interest rates.
“What we need is to put that plan in place, it’s not going to be easy, there are going to be some very difficult choices. I’ve used the word ‘eye-watering’ before, and that’s the truth.”
Mr Hunt insisted there is a black hole in the nation’s finances, warning of a “very substantial gap” as he seeks to find up to £60 billion in hikes and spending cuts.
The phrase is disputed, as it depends on the strategy used to tackle the undeniably bleak financial picture.
Labour’s shadow chancellor Rachel Reeves said: “Today’s numbers are another page of failure in the Tories’ record on growth.
“And the reality of this failure is family finances crunched, British businesses left behind and more anxiety for the future.
“Britain’s unique exposure to economic shocks has been down to a Conservative-led decade of weak growth, low productivity and underinvestment and widening inequality.
“We’re already set to be near the bottom of global league tables on growth, but all the Tories offer yet again is austerity.
“Britain has so much potential to grow. We have the talent. We have the capacity. Labour’s Green Prosperity Plan, our modern Industrial Strategy, our plan to boost skills and our active partnership with business, will get our economy firing on all cylinders.”