As the UK teeters on the brink of what could be a long recession, the chancellor Jeremy Hunt has once more warned he will be making “eye-watering” decisions. Mr Hunt said there was a “tough road ahead” as new figures revealed gross domestic product, the measure of national income known as GDP, contracted by 0.2%.
Economists fear the UK is at the beginning of what could turn out to be the longest recession on record. Technically, a recession is defined as two quarters of decreasing GDP – the figures for July to September could mark the start of one..
Mr Hunt said that he will be working in next week's autumn budget to make a possible recession “shallower and quicker”. Details of the Government's approach will be unveiled on Thursday.
The budget is likely to include painful public spending cuts and tax hikes, with Mr Hunt insisting there is a "black hole" in the nation’s finances. Labour, meanwhile, has 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.
Mr Hunt has insisted the problems are 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.”
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."
On Friday, the CBI urged the Government to “learn the lessons” of the last decade. Lead economist Alpesh Paleja urged the chancellor to “safeguard capital spending and investment allowances to drive private sector growth”.
