Jeremy Hunt today issued a bleak warning about the health of the economy saying that a recent deterioration in the public finances would force him to make “difficult decisions” in next month’s Autumn Statement.
The Chancellor said that borrowing is likely to be £20 to £30 billion higher than forecast in the Budget in March making it even less likely that he will have wiggle room for any tax cuts.
He was speaking at the annual meeting of the International Monetary Fund in Marrakech Governor of the Bank of England, Andrew Bailey, also said that interest rates were likely to stay high.
The Chancellor said: “The fiscal position has worsened since the spring and I will have to take difficult decisions in the autumn statement.
“The main reason things are more challenging is because interest rate projections for all economies have gone up. The UK is not immune to those changes. We are likely to see an increase in debt interest payments of £20bn-30bn and that’s a huge challenge.”
He added: “I have to make sure the UK is resilient to shocks going forward. Increasing borrowing would be reckless and the wrong thing to do”.
His comments the day after the Office for National Statistics said GDP rose only 0.2% in August, making it likely that the economy shrank over the third quarter as a whole and raising the prospect of an Autumn recession,
Bailey echoed the sombre message saying there was “an awful lot left to do” to bring inflation back down to its 2% target rate.
He added: “The last mile is going to be the hardest to get us back to target. Policy is acting in a restrictive manner, and it needs to do so. That does have an impact on the outlook for the economy, which is pretty subdued.”