Rishi Sunak hints he will risk a recession to curb inflation after the OECD warns the UK will have the highest price rises of all G7 nations
- The OECD warned the UK will see average inflation of 6.9 per cent this year
- Sunak agreed with Chancellor Jeremy Hunt to risk a recession to bring it down
Rishi Sunak last night suggested he would accept a recession as the price for bringing down inflation after a warning that Britain would see the largest rise in prices in the G7 this year.
The Organisation for Economic Cooperation and Development (OECD) yesterday became the latest forecasters to banish fears of a recession, saying it expects UK GDP to grow by 0.3 per cent this year.
That was up from a prediction in March that the economy would shrink by 0.2 per cent, and puts Britain ahead of Germany, which has just entered recession and which the OECD predicts will see zero growth overall in 2023.
But the OECD also warned that the UK will see average inflation of 6.9 per cent this year – the highest rate of all G7 countries.
Mr Sunak was asked on a visit to Washington yesterday if he agreed with Chancellor Jeremy Hunt when he said he was prepared to risk a recession if interest rates were increased to bring inflation down.
Rishi Sunak last night suggested he would accept a recession as the price for bringing down inflation (pictured in Washington DC today)
Mr Sunak was asked on a visit to Washington yesterday if he agreed with Chancellor Jeremy Hunt when he said he was prepared to risk a recession. L to R: Penny Mordaunt, Oliver Dowden, Jeremy Hunt
He told the BBC: ‘Yeah, I think what the Chancellor was saying is that inflation is the challenge that we must confront.
‘Obviously, monetary policy interest rates are a decision for the Bank of England, so it wouldn’t be right for me to comment on that. But I set out five priorities – halve inflation, grow the economy, reduce debt, cut waiting lists, and to stop the boats.
‘The first of those is to halve inflation. That’s the thing that I want to make sure we deliver, because that’s what will help. In the long term, that is the best way to help British families.’
The OECD is the latest institution to tear up doom-laden predictions that the UK was heading for a recession, after the International Monetary Fund and the Bank of England.
But there was a sting in the tail as it warned that interest rates would have to keep going up in order to bring inflation down, while households would be squeezed as frozen income-tax thresholds drag millions into paying more to the Treasury.
And the report added that the public finances left ‘little fiscal space’ for Mr Hunt – who is likely to be hoping for some room to enable him to cut taxes ahead of a general election next year.
The upgrade was revealed as part of the OECD’s latest Economic Outlook, which said the global economy was ‘turning a corner but faces a long road ahead to attain strong and sustainable growth’. It forecast world GDP growth of 2.7 per cent, slightly up from a previous prediction of 2.6 per cent.
The report said Britain’s ‘modest’ growth of 0.3 per cent would pick up pace to 1 per cent in 2024.
The OECD also warned that the UK will see average inflation of 6.9 per cent this year. Pictured: Andrew Bailey, Governor of the Bank Of England
It said government spending to alleviate the cost of living squeeze, as well as more childcare help and investment tax breaks, would help to prop up the economy.
Private expenditure will then improve, helped by falling gas prices, the report added.
Mr Hunt said: ‘Today’s report boosts our growth forecast, praises our action to help parents back to work with a major expansion of free childcare, and recognises our cuts to business taxes which aim to drive investment.
‘But while inflation is still too high, we must stick relentlessly to our plan to halve it this year.
‘That is the only long-term way to grow the economy and ease the cost of living pressures on families.’
Source: Read Full Article
