The big question is: When will we all start to feel better off again?

As the UK suffers more from inflation than any other G7 country, Chancellor Jeremy Hunt told ITV News that he is committed to tackling inflation but can't promise that living standards will improve. Business and Economics Editor Joel Hills reports

Japan is a country that knows all about lacklustre growth.

Once Upon A Time in the 1980’s this country’s future looked golden but the bubble went on to burst.

The UK would kill for Japanese levels of inflation - the current headline rate is 3.3% - but we would not want Japanese levels of pay growth.

Adjusted for inflation, household incomes have been falling for a year now but even before COVID living standards were barely rising.

Average nominal wages in Japan rose by just 4% between 1990 and 2019, according to the OECD.

ITV News' Joel Hills asks Jeremy Hunt when the UK economy will return to pre-pandemic levels

The G7 meeting of finance ministers here in Niigata is a reminder that all advanced economies face struggles of one sort or another.  

Today we learned that, although the UK economy contracted in March, Gross Domestic Production (GDP) rose by 0.1% between the last three months of last year and the first three months of 2023.

“These are much better figures than anyone would possibly have predicted even three months ago,” Jeremy Hunt pointed out. “But there is still much work to do. We still have inflation that is much too high that's causing a lot of pressure for families up and down the country.” 

Joel Hills reports live from Japan

Not so long ago the consensus was the UK was heading for recession so the resilience of the economy is encouraging but growth of 0.1% is still pretty miserable. 

The big question is when will people start to feel better off again?

The government has pledged to halve inflation by the end of this year. Earlier I asked the chancellor if he could also promise that living standards will be rising again before the year is out. He couldn’t.

The Chancellor is currently in Japan for the G7 summit. Credit: HM Treasury

“I hope they will,” Jeremy Hunt told ITV News. “I but know those things are subject to lots of factors that are not under the direct control of the government.”

His hesitancy is understandable. 

Inflation in the UK is falling more slowly than either hoped for or expected and economic growth is forecast to remain weak in the short-term.

The UK economy is one of the last in the G7 to return to pre-2020 levels of GDP Credit: Pantheon

On a quarterly basis, the UK economy is still not back to the size it was before the pandemic and Brexit three years ago.

With the exception of Germany, the rest of the G7 countries have regained the ground they lost.

The chancellor insists the UK is not an outlier. 

“If you look at the overall picture, everyone is suffering. Everyone is facing this big problem with inflation,” he told me. “We are all in the same boat. The question is do you have the right plan?”

Despite strong evidence to the contrary, Jeremy Hunt also maintains that Brexit is not holding the economy back.

Jeremy Hunt insists Brexit is not a "drag" on the economy

“Since we left the Single Market, we’ve grown faster than France or Italy, so I don’t think Brexit is a factor,” he said.

The Chancellor does have a plan to revive our prosperity. He says he wants to turn to the UK into the next Silicon Valley. 

Two weeks ago the President of Microsoft told the BBC that the European Union is currently a more attractive place to start a business than the UK but Jeremy Hunt is undeterred. 

“Microsoft were cross because our independent competition regulator made a decision they didn't like said that they couldn't buy a company that they wanted to buy,” said Hunt. "But just a week before that, Google said that they were going to make London the global centre for their artificial intelligence research.“

Like Japan, the UK is a big importer of energy. Like Japan, our workforce is smaller than it used to be.

There are reasons why our economy still feels stuck in low gear. But if we are to improve living standards, we need to find a way to raise growth.

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