Kate Andrews

‘As we have seen across other G7 countries, inflation rarely falls in a straight line,’ said Chancellor Jeremy Hunt this morning in response to UK inflation data for September. We’ve seen this in the UK, too: at the start of the year, the rate of inflation rose from 10.1 per cent on the year in January to 10.4 per cent in February – before finally falling out of the double digits in April. And this morning we’ve seen another break in the line: the rate of inflation stuck at 6.7 per cent on the year in September, the same rate as August. Food and non-alcoholic beverages were the ‘largest downward contributors’ to this month’s figures. Having reached a high of over 19 per cent this spring, food price increases have slowed dramatically, falling to 12.

‘We are in a horrible fiscal bind’ says the Institute for Fiscal Studies this morning, as it publishes its Green Budget report ahead of the Autumn Statement. A combination of stagnant growth, stubborn inflation, rising debt interest payments and a tax burden at a postwar high has produced a grim assessment of the UK economy, which the IFS suggests will worsen in the coming years, as ‘huge fiscal pressures’ around the National Health Service and public sector pensions increase (more on that here). The report’s conclusion is that now is not the time to raise taxes. It would make terrifying reading for a Conservative prime minister and chancellor if they weren’t already aware of the dire financial state we’re in.

It was a year ago this weekend that Liz Truss sacked her chancellor, Kwasi Kwarteng, over the fallout of their ‘growth plan’. This marked the beginning of the end of Truss’s premiership: she then appointed Jeremy Hunt to the role, and he swiftly dismantled almost every part of her infamous mini-Budget. Since leaving No. 10, Truss has been quick to return to the political spotlight, writing comment pieces for national papers, giving interviews, making speeches and interventions – and launching a Growth Commission through which she continues to take the Office for Budget Responsibility to task. But just as Truss continues to make her views known, so do her critics. One of those critics is Andrew Bailey, the Bank of England’s Governor.

The International Monetary fund has published its biannual World Economic Outlook report – and it’s more bad news for the UK. While the IMF’s predictions for 2023 fall broadly in line with other forecasts – which show Germany having the most economic trouble this year – the IMF predicts that the UK will be an outlier come 2024. It expects the UK to grow by 0.6 per cent next year: the weakest growth among G7 nations and a downgrade of 0.4 per cent from its previous predictions. But there are reasons to be optimistic. Revisions to UK GDP of late has been more positive. Just last month the Office for National Statistics revealed that the UK in fact had a better pandemic bounce-back than France or Germany.

Speaking at the Centre for Policy Studies fringe event at Conservative party conference this afternoon, Jeremy Hunt reiterated once again that there would be no big tax cuts this year. ‘Debt interest payments have gone up so much in the past six months’, he told CPS director Robert Colvile, taking estimates for debt servicing payments over the £100 billion mark this fiscal year. The Autumn Statement, the Chancellor said, will lay bare just how dire the situation is: ‘It’s likely that our debt interest payments… are going to go up by more than £20bn pounds a year in the Autumn Budget compared to what was predicted in the spring.’ In other words: no tax cuts until inflation stops wreaking havoc on borrowing costs.

The Office for National Statistics has released the UK's quarterly national accounts this morning, which show growth in the second quarter of the year remains unrevised at 0.2 per cent. Meanwhile growth in the first quarter has been revised slightly upwards, from 0.1 per cent to 0.3 per cent. This means the economy is now 1.8 per cent larger than it was before the pandemic hit. This is another upward revision of growth figures, though much smaller compared to the update at the start of the month, which revealed the economy was not in fact still below its pre-pandemic levels, but had actually recovered by the time the Omicron variant hit in 2021.