Jeremy Hunt prioritises cutting inflation over tax cuts as he lays out economic growth plan

Jeremy Hunt has set out his plan to boost growth in the UK economy. Credit: Bloomberg Pool

Chancellor Jeremy Hunt said the “best tax cut right now is a cut in inflation” as he outlined how he plans to use Brexit and investment outside of London to drive UK economic growth.

In a major speech, the chancellor said reducing inflation - at around 10% - was the “only sustainable way to restore industrial harmony” in Britain as he suggested tax cuts would have to wait.

Inflation is the rate at which the prices of goods and services are rising - it directly impacts bills such as households' mortgage payments, and has knock-on effects for renters if landlords pass on the hikes to tenants.

Cutting inflation by half is one of Prime Minister Rishi Sunak’s top five priorities in the run-up to the next general election.

Mr Hunt acknowledged the UK has been dealing with economic headwinds for a decade - noting the 2008 financial crash, the pandemic and an international energy crisis - but rejected a narrative of "declinisim".

"Declinism in Britain is just wrong, it has always been wrong in the past and it is wrong today," he told an audience at Bloomberg’s London HQ on Friday morning. "Some of the gloom is based on statistics that don't reflect the whole picture. Like every G7 country our growth was slower in the years after the financial crisis than before it. "But since 2010, the UK has grown faster than France, Japan and Italy. Not at the bottom but right in the middle of the pack."

ITV News Business and Economics Editor Joel Hills brings us the latest from Central London

ITV News Business and Economics Editor Joel Hills pointed out that the UK, like many countries, has struggled with low growth, with the typical household seeing their relative incomes decline.

"If you can't see the problem chancellor, why would voters believe that you can fix it?" he asked.

Mr Hunt mounted a rigorous defence of his speech, saying that his address was about tackling productivity, which can help lead to a sustained growth in real incomes.

"I don't accept that we are towards the back of the pack compared to what other countries are saying," he said.

"I think any accurate examination of the statistics says that we have been affected in broadly the same way as our peer countries."

'I don't accept that we are towards the back of the pack,' the chancellor said

His comments come against a backdrop of public sector strikes over pay and predictions that the UK could be heading for a recession.

Mr Hunt, who did not directly address the industrial unrest, said he wanted Brexit to become a “catalyst” for economic growth in order to reduce the “weaknesses” in the UK economy. He also claimed that Brexit has provided an opportunity for the UK to change its regulations so that innovative companies can more easily access cash. The chancellor said that “Britain needs a more positive attitude to risk-taking”, as it is “too cautious compared to our US friends.” He added that scale-up companies have a “critical” need to more easily access capital, and referred to the government’s Edinburgh Reforms package which are set to make the UK a more competitive place for businesses. The reforms “could unlock more than £100 billion of additional investment into the UK’s most productive growth industries”, Mr Hunt reiterated.

What are the 'four pillars' Hunt's growth plan is based on?

Mr Hunt outlines four pillars of the government’s growth plan to become more prosperous.

The four pillars, all beginning with the letter “E” are: enterprise, education, employment and everywhere.

He said he would use the pillars as a “framework” against to assess individual policies, adding that they were “essential for any modern, innovation-led economy”.

The chancellor said his 'four pillars' can address a sustained growth in people's incomes

Mr Hunt's speech also addressed the long-term effects of the pandemic on Britain's workforce.

Mr Hunt said that one fifth of working age adults are economically inactive - and around five million people do not want to work.

He told people who left work during the pandemic and have not returned that “Britain needs you”, adding that “if companies can’t employ the staff they need, they can’t grow".

“It’s time for a fundamental programme of reforms to support people with long-term conditions or mental illness to overcome the barriers and prejudices that prevent them from working," the chancellor said. “We will never harness the full potential of our country unless we unlock it for each and every one of our citizens.”

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Unveiling proposals to drive regional economic prosperity, the Cabinet minister said the Treasury would be identifying investment zone sites that could be turned into “mini-Canary Wharfs”. The regeneration of the docklands area since the 1980s has led to the creation of a major financial centre in east London. Promising to provide “high-potential but underperforming areas” with “advantageous fiscal treatment to attract new investment”, he said work on identifying the locations would start shortly.

Having been asked twice already, Mr Hunt confirmed after the Bloomberg speech that he was willing to disclose that he has never paid a HMRC fine. Asked by BBC News to clarify whether he had ever paid a HMRC penalty, Mr Hunt said: “I don’t normally comment about my own tax records. “But, I am chancellor, so, for the record: I haven’t paid a HMRC fine.” It comes as Conservative Party chairman Nadhim Zahawi faces an ethics probe after it emerged he finalised a tax settlement with HMRC, which included a penalty, while serving as chancellor.

Despite the optimistic tone, the chancellor's speech came as the Treasury is under considerable pressure by some Tory MPs to bring in tax cuts to kick-start flagging economic growth.

The chief of the Confederation of British Industry has recently warned the UK is lagging behind international rivals on green growth, and has urged the government to take “big decisions” to boost the economy. Tony Danker called on Mr Hunt not to “shy away from the hard decisions that can reverse the UK’s trajectory” of falling investment in his spring budget.

He urged the government to seize green growth opportunities by reforming the consent process for green infrastructure and using regulation to stimulate domestic demand for green technologies, as is being done for electric vehicles.

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