Rishi Sunak faces growing pressure to act to stop the economy shrinking
(Picture: PA Wire)Rishi Sunak was warned on Thursday that “recession is the new enemy” as sky-high inflation hits millions of families and many businesses.
The Chancellor faced growing pressure to act to stop the economy shrinking.
Business chiefs in London warned they were facing the “worst economic environment in decades”.
Leading economists at the Organisation for Economic Co-operation and Development are forecasting that the UK economy will grind to a halt next year and be the worst performing among the G7 group of wealthy nations (the US, UK, Germany, France, Italy, Japan and Canada).
Richard Burge, chief executive of the London Chamber of Commerce and Industry, said: “Data released on Wednesday showed that inflation in the UK has reached a new 40-year high of over 9 per cent. With the cost of doing business skyrocketing, businesses – especially those in London – risk unsustainable trading conditions. A combination of spiralling energy prices, high rent and tax, crippling workforce shortages, and supply chain issues mean that business face the worst economic environment in decades.
He added: “We need decisive action from the Government which will support businesses. In this climate, the Government must reverse its decision to put up National Insurance and halt the corporation income tax rise.”
Former Cabinet minister John Redwood tweeted: “UK inflation will come down next year. Recession is the new enemy. Cutting VAT on fuel would help with both problems. The Treasury needs an urgent change of policy.”
Mr Sunak has so far resisted pressure to fast-track any further measures to prop up the economy and help struggling families, with more announcements instead expected in the autumn, and the threshold for paying National Insurance contributions rising to £12,570 next month.
The Government recently announced a further £15 billion of support for households struggling with soaring energy, fuel and food bills.
After the publication of the latest public finance figures on Thursday, the Chancellor said: “Rising inflation and increasing debt interest costs pose a challenge for the public finances, as they do for family budgets.
“That is why we are taking a balanced approach - using our fiscal firepower to provide targeted help with the cost of living, while remaining on track to get debt down.
“Being responsible with the public finances now will mean future generations aren’t burdened with even higher debt repayments, and we can secure our economy for the long term.”
However, the outgoing boss of Britain’s largest business group has called for tax cuts to soften the feared recession.
The head of the Confederation of British Industry Lord Bilimoria said it was “absolutely wrong” to have the “highest tax burden in 70 years”.
In an interview with The Daily Telegraph, the peer said: “It is absolutely wrong to put up corporation tax in one swoop from 19pc to 25pc.
“National Insurance is a tax on jobs - to put that up by 2.5pc, which affects both employers and employees with 1.25pc (each), this is the wrong thing to do.”
Lord Bilimoria added: “This is the time we have got to cut taxes to generate investment and generate growth, because that is what is going to get us out of this.
“We need the VAT reduction now to help us and help consumers - the Government can help more right now,” he says, praising actions “which helped save businesses” in 2020 and also in 2021.
“The danger of not helping is far worse than the cost of helping.”
However, cutting taxes is likely to hit the Treasury coffers, with less revenue and fewer billions to spend on public services and other direct support for families.
