Speaking to the BBC Mr Sunak said: “What you’re seeing is an economy that is continuing to grow. And that is a good thing. We’re on the right path. But of course there are global challenges ahead.” Asked about predictions by the Bank of England and the Office for Budget Responsibility that living standards would decline for the next two years due to inflation and tax Mr Sunak argued the figures didn’t reflect spending on public services and the value that would bring to peoples’ lives.
The Government recently increased National Insurance contributions to pay for greater spending in health and social care however the move was met with criticism for putting more pressure on working families.
In light of the latest GDP figures released this morning Chair of the Federation of Small Businesses Mike Cherry commented that the hike in national insurance was unfortunate.
As well as tax hikes, inflation is predicted to weigh heavily on costs of living with current predictions suggesting it will peak at around five percent next year.
The OBR’s forecasts suggested the impacts on household income would continue in the years to come before incomes finally began to rise in real terms by just 1.3 percent in the mid-2020s.
In his interview, Mr Sunak also defended the Government’s plans for a high wage high skill economy stating that “wages in real terms are higher today than they were before the pandemic.”
During last month’s Budget, the Chancellor announced a rise in the national living wage equating to a 6.6 percent pay rise for the lowest paid UK workers.
However, predicted increases in inflation will increasingly erode any gains.
There are also concerns more broadly on the delivery of higher wages given the UK’s ongoing issues with productivity over the last decade.
This morning’s GDP figures which saw the UK’s bounce back from the pandemic stutter slightly in the last quarter have cast some doubts as to the strength of recovery going forward.
Head of Economics at the British Chambers of Commerce, Suren Thiru pointed out business investment still remained short of pre-pandemic levels adding this would remain a “blackspot of the recovery, limiting the UK’s ability to raise productivity and deliver a sustainably high wage economy.”
As well as GDP the ONS figures this morning also showed a growing trade deficit with exports increasing at a more sluggish pace.
Asked if he was pursuing “some sort of trade war” with the EU though Rishi Sunak was clear to point out Article 16 if “there as a safety mechanism” and that the UK is not yet at the point of using it.
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The Chancellor added: “what we should be doing and what we are doing is working constructively with European friends and partners to explore every opportunity that we have to try and resolve some of our differences around the operation of their protocol.”
“That’s very much our priority”
Reflecting on recent sleaze allegations against a number of MPs Mr Sunak also admitted “we need to do better” adding that rules must be followed “to the letter.”