Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Does Sunak's stance on inflation crisis lay bare a leadership ambition?

Does Sunak's stance on inflation crisis lay bare a leadership ambition?

Sky's Paul Kelso finds a chancellor unwilling to tell private firms they should not be raising wages to meet higher living costs, in direct contradiction to the governor of the Bank of England and his own Treasury deputy.

Since COVID-19 punched a hole in daily life and the global economy two years ago, the question for economists and those that run economies is how long it would take to recover.

Friday's figures for GDP growth in 2021 suggest that in the UK at least the worst is over, though that is not to say the future outlook is bright.

Despite a late kick from the Omicron wave and Plan B restrictions that caused a 0.2% contraction in December, figures for the fourth quarter of the year show the economy ended 2021 at about the same size as it was in February 2020.

Hospitality was particularly badly hit in December as Christmas parties were widely cancelled because of Omicron


And looking at the year as a whole, the British economy grew a whopping 7.5%, the fastest on record largely because of the catastrophic 9.4% fall in output in 2020.

The numbers prompted chancellor Rishi Sunak to highlight the resilience of the economy, his wisdom in "getting the big calls right", and most importantly the £400bn of support that he directed at businesses and households during the course of the pandemic.

All true, up to a point.

Mr Sunak also repeated the claim that the UK had the fastest growing economy in the G7 in 2021, which is true but needs the less-often mentioned context that it had the biggest contraction in 2020. And based on figures for the third quarter of last year, Britain's growth is ranked only fifth.

What matters to most people is not squabbling over figures but what they mean for household incomes, and the gap between economic theory and the reality is never more sharply felt than when times are hard.

For while the chancellor may be able to hope that the worst of COVID may be in the past for the economy, the year ahead looks grim for family budgets.

Inflation is rampant and will nudge 7%, according to the Bank of England.

Energy prices are soaring more than 50% and the UK faces a partly self-inflicted labour shortage as the jobs market adjusts to Brexit.

Despite these pressures, Mr Sunak has pressed ahead with a 10% increase in National Insurance (NI) contributions to fund health and social care while freezing income tax thresholds.

Speaking to Sky News, he defended the NI rise as the only way of "fixing" social care and clearing the NHS backlog.

"Those are huge challenges and the only way to do that is to provide significant funding. It would be wrong and irresponsible and dishonest, actually, of me to say that we can fix those problems without putting in more funding. Anyone who says you can isn't being straight to the British people."

He was much less enthusiastic about engaging with the issue of wages, which are falling behind steep consumer inflation and contributing to a record squeeze on real living standards.

Last week, the governor of the Bank of England said employees should show restraint in pay demands to help prevent triggering a domestic inflationary spiral that could persist long after international factors, such as wholesale gas prices, abate.

"I don't think it's the government's role to get involved in conversations between private businesses and their employees about their wages," the chancellor said. "I just don't think that's what a government in this day and age should be doing."

His answer makes political sense - no potential PM wants to be heard telling people their wages should rise less than the cost of living - but the economic rationale is less obvious.

Indeed his deputy Simon Clarke, chief secretary to the Treasury, said earlier this week that everyone - employers and employees - had a duty to suppress inflation by holding prices, profits and wages down.

As for his next job, Mr Sunak tried not to further stir an already febrile atmosphere in Westminster.

He says he is yet to receive a questionnaire about potential lockdown breaches from the Metropolitan Police, does not expect to, and doesn't believe he broke any rules.

As for whether the prime minister retains his confidence, he said only that he "has my total support".

The meaning of which, as with the economic data, depends on how you choose to interpret it.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
France, at an Impasse, Heads Toward Another Government Collapse
The Country That Got Too Rich? Public Spending Dominates Norway Election
EU Proposes Phasing Out Russian Oil and Gas by End of 2027 to End Energy Dependence
More Than 150,000 Followers for a Fictional Character: The New Influencers Are AI Creations
EU Prepares for War
Trump Threatens Retaliatory Tariffs After EU Imposes €2.95 Billion Fine on Google
Tesla Board Proposes Unprecedented One-Trillion-Dollar Performance Package for Elon Musk
Gold Could Reach Nearly $5,000 if Fed Independence Is Undermined, Goldman Sachs Warns
Uruguay, Colombia and Paraguay Secure Places at 2026 World Cup
Trump Administration Advances Plans to Rebrand Pentagon as Department of War Instead of the Fake Term Department of Defense
Big Tech Executives Laud Trump at White House Dinner, Unveil Massive U.S. Investments
Tether Expands into Gold Sector with Profit-Driven Diversification
‘Looks Like a Wig’: Online Users Express Concern Over Kate Middleton
Florida’s Vaccine Revolution: DeSantis Declares War on Mandates
Trump’s New War – and the ‘Drug Tyrant’ Fearing Invasion: ‘1,200 Missiles Aimed at Us’
"The Situation Has Never Been This Bad": The Fall of PepsiCo
At the Parade in China: Laser Weapons, 'Eagle Strike,' and a Missile Capable of 'Striking Anywhere in the World'
The Fashion Designer Who Became an Italian Symbol: Giorgio Armani Has Died at 91
Putin Celebrates ‘Unprecedentedly High’ Ties with China as Gazprom Seals Power of Siberia-2 Deal
China Unveils New Weapons in Grand Military Parade as Xi Hosts Putin and Kim
Rapper Cardi B Cleared of Liability in Los Angeles Civil Assault Trial
Google Avoids Break-Up in U.S. Antitrust Case as Stocks Rise
Couple celebrates 80th wedding anniversary at assisted living facility in Lancaster
Information Warfare in the Age of AI: How Language Models Become Targets and Tools
The White House on LinkedIn Has Changed Their Profile Picture to Donald Trump
"Insulted the Prophet Muhammad": Woman Burned Alive by Angry Mob in Niger State, Nigeria
Trump Responds to Death Rumors – Announces 'Missile City'
Druzhba Pipeline Incident Sparks Geopolitical Tensions
Cost of Opposition Leader Péter Magyar's Economic Plan Revealed
Germany in Turmoil: Ukrainian Teenage Girl Pushed to Death by Illegal Iraqi Migrant
United Krack down on human rights: Graham Linehan Arrested at Heathrow Over Three X Posts, Hospitalised, Released on Bail with Posting Ban
Asian and Middle Eastern Investors Avoid US Markets
Ray Dalio Warns of US Shift to Autocracy
Eurozone Inflation Rises to 2.1% in August
Russia and China Sign New Gas Pipeline Deal
Von der Leyen's Plane Hit by Suspected Russian GPS Interference in an Incident Believed to Be Caused by Russia or by Pro-Peace or by Anti-Corruption European Activists
China's Robotics Industry Fuels Export Surge
Suntory Chairman Resigns After Police Probe
Gold Price Hits New All-Time Record
UK Fintechs Explore Buying US Banks
Greece Suspends 5% of Schools as Birth Rate Drops
Apollo to Launch $5 Billion Sports Investment Vehicle
Bolsonaro Trial Nears Close Amid US-Brazil Tension
European Banks Push for Lower Cross-Border Barriers
Poland's Offshore Wind Sector Attracts Investors
×