The federal government is prepared to just accept short-term harm to the economic system from public sector strikes slightly than give in to pay calls for and threat a longer-term hit from persistently increased inflation, Jeremy Hunt has insisted.
Talking in Washington, the chancellor mentioned he “fully understood” public anger on the excessive price of residing however mentioned the influence of rising costs could be longer lasting and extra damaging if ministers acceded to “arduous to justify” pay calls for.
The chancellor accepted that public sector strikes had been an element within the flatlining of progress in February and mentioned the present four-day strike by junior medical doctors was “extremely regrettable”.
Hunt, who’s attending the spring conferences of the Worldwide Financial Fund and World Financial institution was talking after it emerged that the economic system recorded progress of 0.0% in February.
A wave of public sector strikes weighed on exercise, offsetting a restoration in client spending regardless of the price of residing disaster, in response to figures from the Workplace for Nationwide Statistics (ONS) on Thursday.
The influence of strikes meant the economic system failed to satisfy Metropolis expectations for a 0.1% month-on-month rise in gross home product (GDP), the full worth added by the manufacturing of products and companies throughout the economic system.
Requested what the federal government was doing to forestall additional harm to the economic system, Hunt mentioned he was not concerned about a “short-term repair” that may entrench inflation.
“We’ve got to get this proper. I fully perceive how the price of residing going up sooner than wages makes individuals indignant.
“Inflation is the foundation explanation for that anger. We should certain we don’t have the identical inflation issues and the identical arguments in a yr’s time. The worst attainable factor for junior medical doctors, nurses, lecturers and rail staff could be if there was nonetheless concern about inflation this time subsequent yr.”
Hunt, a former well being secretary, hinted that the federal government could be prepared to open pay discussions with junior medical doctors in the event that they lowered their demand for a 35% pay enhance.
“I believe it is vitally arduous to justify a 35% enhance given the financial pressures we face,” Hunt mentioned. “The nurses began on 19%. After they had been publicly prepared to decide to a decrease quantity it was an excellent place to begin for discussions.”
February’s sluggish GDP efficiency adopted progress of 0.4% in January, as revisions to earlier estimates pushed the economic system again above pre-pandemic ranges. Nevertheless, the UK’s restoration to pre-Covid ranges remained slower than that of some other G7 economic system.
The ONS mentioned development grew strongly after a poor begin to the yr, with elevated restore work going down, alongside a lift from retail as many outlets had a robust month for gross sales.
Nevertheless, it mentioned this had been offset by civil service and lecturers’ strikes, hitting exercise within the public sector, whereas unseasonably delicate climate led to a fall in using electrical energy and gasoline.
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Hunt was upbeat concerning the economic system’s prospects regardless of the zero progress in February and a forecast from the IMF earlier this week that Britain could be the worst performing member of the G7 group of huge industrial nations this yr.
“The IMF have undershot on the UK economic system for fairly a very long time,” the chancellor mentioned. “It has undershot in yearly bar one since 2016. It’s one in every of many forecasters.”
Hunt mentioned the federal government was exploring the potential of consolidating native authorities pension schemes to create larger swimming pools of capital to put money into progress sectors of the economic system.
“We want pension fund reform,” Hunt mentioned. “An excessive amount of of pension fund funding goes into very low price funding autos which aren’t going to offer pensioners the very best returns.”
Hunt is eager to see a better share of pension fund funding supporting unquoted however fast-growing firms slightly than being channelled into ultra-safe bonds.
Britain had a weaker funding file than its rivals however was making up for it by means of increased innovation. “We have to be sincere about our weaknesses,” he mentioned.
