ITV News Economics Editor Joel Hills quizzes Rishi Sunak on GDP growth, an end to furlough and Universal Credit and reports of infighting between him and the prime minister.
June was supposed to be the month we experienced “Freedom Day”. In the event, the lifting of the final round restrictions was delayed by the spread of the Delta variant but the economic recovery continued apace. Between April and June, output surged by 4.8% as businesses reopened and many consumers began to spend the savings they had accumulated during lockdowns. There is still a way to go but the Bank of England believes that unemployment has already peaked and that the economy is on course to return to its pre-crisis size before the end of the year.
The chancellor says that activity is “bouncing back” and trumpeted “the fastest quarterly growth rate in the G7 group of countries”.
This is true but, as Sam Tombs at Pantheon points out, the UK economy was also the hardest hit. The US economy has already recovered to its pre-crisis level.
Tombs described the UK as “the straggler” when compared to Japan, Canada, Germany, France and Italy.
But let’s not be churlish. The strength of the recovery is encouraging. Sufficiently encouraging for the chancellor to believe that he can rollback emergency taxpayer support as planned - and with confidence.
We’re about to bid farewell to furlough - the policy designed to avert mass unemployment and has proved hugely successful.
“There are 2 million families now in jobs that we feared would lose them,” Rishi Sunak told ITV News.
But he insisted that the scheme, which is still supporting around 1.9 million people and has cost £67.4 billion thus far, will not be extended beyond September.
Neither will there be additional financial support for those sectors of the economy who still find themselves up against it. Airports and airlines have warn thousands of jobs will be lost unless they receive more state funding. As it stands, they aren’t going to get it. “I appreciate how difficult this has been for travel industry, but they have already benefited from £7 billion of support,” Sunak said.
“The most important thing is we are now safely and securely reopening travel.”
'Not our plan' to extend furlough scheme stresses Rishi Sunak
Stronger than expected growth has brought with it higher than expected inflation. Prices are rising and the Bank of England warned last week that a squeeze on living standards looms. High inflation hurts the poorer the most, but the chancellor says he intends to press ahead with plans to end the £20 a week uplift to Universal Credit at the beginning of October.
The benefit supports more than five million families in the UK.
The Joseph Rowntree Foundations calculates that making it less generous will pull half a million people into poverty.
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Rishi Sunak challenges this analysis but didn’t say what impact the Treasury estimates the move will have. “Our track record shows most vulnerable have been looked after in this crisis. I know people have concerns about cost of living, bills, inflation, I would say one of the things I’m mindful over,” Sunak said. “We know the best way to combat poverty is to find people good work”. The chancellor also insisted his relationship with the prime minister is “very good indeed” and that he “didn’t pay much attention” to reports that he faces demotion. He denied there was disagreement between them over funding for Net Zero, social care and how “Levelling-up” can be delivered. According to a recent survey by Conservative Home, Rishi Sunak is now far more popular than Boris Johnson among Tory activists, but he refused to answer if he has any ambition to be party leader at some point in the future.
Watch Joel Hill's full report on the latest GDP figures and his interview with the Chancellor: