Jeremy Hunt has warned of a “tough road ahead” after the UK economy shrank in what is feared to be the beginning of the longest recession on record.
Gross domestic product, the measure of national income known as GDP, contracted by 0.2% between July and September, new figures from the Office for National Statistics (ONS) show. A country is in recession when its economy shrinks for two consecutive three-month periods.
A recession has been widely expected in the UK due to the cost of living crisis, which has seen the prices of goods such as food, fuel and energy skyrocket. This has been caused by several factors, such as Vladimir Putin’s invasion of Ukraine, and has prompted the Bank of England to forecast a “very challenging” two-year recession.
The Chancellor has said he will be working to make a possible recession “shallower and quicker” in his upcoming autumn budget, which will be unveiled on 17 November, but forewarned that this means he will have to make “eye-watering” decisions - such as painful public spending cuts and uncomfortable tax hikes.
It comes after he previously spoke of a “black hole” in the nation’s finances, which means he will have to find up to £60 billion in these spending cuts and tax rises.
Hunt said: “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. But to achieve long-term sustainable growth, we need to grip inflation, balance the books and get debt falling. There is no other way.”
The South West Surrey MP added that the “fundamental resilience” of the UK’s economy is a “cause for optimism”, but reinforced that the “truth” is that “there are going to be some very difficult choices”.
Following the release of the new figures, Labour slammed the Conservative Party’s handling of the country’s finances and said a decade of austerity and weak growth had left the economy exposed to the impacts of international crises.
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.”
She added that Labour’s Green Prosperity Plan would boost Britain’s potential and get the economy “firing on all cylinders”.
However, Hunt insisted that the problems were not due to governmental decisions and that Putin’s “weaponisation” of gas supplies - which has caused rising energy prices - is to blame for the current crisis.
Meanwhile, Liberal Democrat Treasury spokesperson Sarah Olney commented: “Today’s figures show the Conservative Government is leaving our economy smaller and all of us poorer. People will never forgive this Government for crashing our economy during a cost-of-living crisis and putting up their mortgages by hundreds of pounds a month.”
One of the topics of concern that the Chancellor addressed was the NHS. Professionals have predicted a “winter of discontent” as waiting lists spiral and nurses prepare to join workers on strikes.
Hunt said: “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.” He argued that the reason for frustration is that “inflation is more than 10%”, meaning “the best thing” he can do as Chancellor is “produce a plan that brings down inflation” and “brings down the upward pressure on interest rates.”
The government’s autumn budget will be revealed next week, and only then will we know what decisions have been made in terms of spending cuts and tax hikes. Ahead of the announcement, the Confederation of British Industry urged the government to “learn the lessons of the last decade”.
Alpesh Paleja, a CBI lead economist, said: “The autumn statement must learn the lessons of the 2010s: fiscal sustainability and lifting trend growth are both immediate priorities.”