Jeremy Hunt explains why inflation is so high from a coffee shop
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The Chancellor is ruling out tax cuts until inflation is dramatically reduced and will insist it is vital to “stick to the plan”. He will tell public sector workers inflation-busting pay rises will not happen as they would prolong the pain for everyone.
Mr Hunt will also insist taking the tough choices is the only way to get the economy back on track.
But Conservatives urged the Chancellor to stop focusing on the negatives and instead set out a positive vision for Britain.
Sir Iain Duncan Smith said: “Unless we lower the burden of costs on people then we simply won’t get decent or sustainable growth.
“The government must make it very clear that we believe in lowering the tax, lowering costs, giving people greater choice.
“That always seems to me to be a positive message to send rather than saying simply you can’t do tax cuts, that’s a negative.
“Politics should be about accentuating the positives, understanding what your views and principles are, rather than technocratic things you don’t like.”
Sir Iain insisted Britain will grow if regulations are reduced in key areas to allow businesses to flourish in growing markets, such as medical technology.
“This is the positive message we should be talking about, that the Conservative party is the party of regulatory change to take advantage of leaving the European Union,” he added.
Sir John Hayes said he favoured a “talk up Britain” approach to the economy.
He said it is “very hard to justify” any part of the public sector buying products from overseas that can be made in Britain.
“We can make a huge difference to our country and its economy by buying British and backing Britain.”
Tory Jacob Rees-Mogg said he was “delighted” that the Chancellor will be talking about post-Brexit deregulation in the speech.
“This is a real opportunity and an exciting opportunity.”
The ex-Cabinet minister said he would encourage Mr Hunt “not to put all his eggs in the OBR basket” after the official forecaster again revised its growth predictions.
“Why does it think if it was wrong in November it would be right in January?,” he said.
“It is always wrong.”
Sir John Redwood said taxes should be cut as soon as possible to kickstart growth.
He said: “I think we should have tax cuts because inflation is going to fall a long way this year and we need to get on with them.
“The way to get the deficit down is to grow the economy. The way to get the deficit up and have a debt problem is to have a long deep recession.
“So they need to see off the recession and some tax cuts are important to achieve that.”
Sir John said he was “delighted with the general sentiment” of promises to make the most of Brexit but “we have been waiting for several years now”.
“We want some more wins,” he added.
The Chancellor updated Cabinet colleagues on his economic plans at an away day held by Prime Minister Rishi Sunak at Chequers on Thursday.
Mr Hunt is doubling down on his hardline approach to the economy until inflation is halved and debt is falling.
The Chancellor will say on Friday that means taking tough choices on public spending and resisting inflation-busting public sector pay rises.
But he will insist Britain is in a stronger position to bounce back than most competitors.
He will say the UK has fundamental strengths in high-growth sectors such as digital technology, life sciences, green industries, the creative sector and advanced manufacturing.
The Chancellor will lay out his vision for seizing on the opportunities created by Brexit and say changes to red tape on the insurance industry – known as Solvency II rules – in the coming weeks will unlock £100 billion for the economy over the next decade.
Mr Hunt will insist Britain is in a stronger position to bounce back than most competitors.
A Treasury source said: “The Chancellor wants to challenge the narrative that Britain is in decline.
“He will talk up the fundamental strengths of the British economy where we have a clear competitive advantage – from clean energy and advanced manufacturing to life sciences and creative industries.
“Our future economic growth and new jobs will come from new industries, by marrying our science base with our mammoth financial services sector to produce goods and services that are competitive in the global economy.
“We have all the ingredients for success in this country and we are in an enviable position compared to others, but we need to keep going.
“The single biggest barrier to economic growth is 10 per cent inflation – this needs to come down. It will require some tough decisions on public spending, but because of the actions the Chancellor took in the Autumn Statement, the OBR is saying any recession this year would be shorter and shallower.
“We need to stick to the plan to halve inflation this year, so we can grow the economy and get debt falling.”
Mr Hunt told Cabinet colleagues at the Chequers meeting that the rate of inflation is only predicted to fall because of the tough decisions the Government had taken at the autumn statement to stabilise the economy.
A Downing Street spokesman said: “The Chancellor said it would be necessary to retain this disciplined approach in order to reduce inflation, because it is the greatest driver of the cost of living.
On reducing debt and growing the economy, the Chancellor outlined the key factors which would deliver growth and said helping more people back into work was one of the most important steps which could have immediate benefits for everyone.”
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