Britain’s economy may be suffering from a “sprained ankle”, chancellor Jeremy Hunt has suggested – as he rejected the diagnosis of a “broken leg”.
His comments came during an appearance at the Resolution Foundation conference, as the influential think tank published a report revealing the huge scale of Britain’s economic problems.
It found that the UK has seen 15 years of relative decline – with productivity growth at half the rate seen in other advanced economies.
The living standards of the lowest-income households in the UK are £4,300 lower than their French equivalents, the report said, with average workers seeing £10,700 a year in lost pay growth.
The nearly 300-page report also warned that household incomes are not expected to reach the pre-cost-of-living crisis peak until at least 2027, with income inequality in the UK higher than in any other large European country.
But Mr Hunt sought to offer a sunnier outlook during a question and answer session at the conference. One audience member asked why the think tank was “describing an economy that has a broken leg” while the “chief surgeon” disagreed.
“I’m not sure I’d describe it as a broken leg but identifying areas where we can do better,” Mr Hunt responded. “And that is a very good thing for us that we do that. But sometimes we forget that other countries also have the things that they need to improve.”
Mr Hunt added: “I think we shouldn’t lose confidence that we do some things absolutely amazingly. I know he’s controversial in other ways but when Elon Musk was here three weeks ago, he said there were only two centres in the world for AI, San Francisco and London.
“We’ve got a lot going for us – so if we’re going to go into dealing with the sprain, rather than the broken leg, then let’s do so from a perspective of positivity.”
Elsewhere in the discussion, Mr Hunt blamed Brexit and the Covid pandemic for the damaging instability at the heart of government.
“I think there’s been a very particular reason why we’ve had that political chopping and changing – I don’t think it’s a good thing,” the chancellor admitted on the Tory turmoil of recent years.”
“But we had Brexit, that led to a hung parliament, that led to a politically incredibly challenging time where the British people had voted to leave the EU but parliament couldn’t agree on how, and ultimately to the fall of Theresa May’s government,” he said.
“Then we had a pandemic; these things have led to changes in Whitehall. I hope we can have more stability going forward, absolutely, because I think it is a better thing for policy.”
“Are there more things we can do? Absolutely. I think in every fiscal event I’ve done I’ve demonstrated that I’m prepared to do big, new things,” he said. “The only way in the long run that you can raise living standards is by raising productivity.”
Meanwhile, Sir Keir Starmer told the Resolution Foundation conference that Labour won’t be able to “quickly turn on the spending taps” if it wins power next year.
“Anyone who expects an incoming Labour government to quickly turn on the spending taps, is going to be disappointed,” he said – but said he could not announce this party’s spending plans now.
Mr Starmer said Labour will be “ruthless when it comes to spending every pound wisely”, saying millions know what it’s like to “fight for every penny”.
“My sister is one of them. I will say to her – let’s go to the pub for lunch. And she will say, straightaway, ‘I’ll make sandwiches’.
“So I have said to every member of my shadow cabinet, when they are drawing up their plans for our manifesto, think carefully about how precious every pound is for the people we must serve.”
Sir Keir said Labour will be able to fund £28bn in green investment if its growth plan works. The Labour leader said it would “ramp up” in the second half of parliament, and he insisted it would be within its own fiscal rules.