The UK economy may be suffering from a “sprain”, Jeremy Hunt said, but rejected the diagnosis of a “broken leg”.
The Chancellor stressed the need for “positivity” about future growth prospects as he insisted that last month’s autumn statement would be “transformative” for reviving British productivity in the years to come.
His comments came during an appearance at the Resolution Foundation conference, as the influential think tank published a report detailing the scale of challenges facing the UK.
It found that the UK has seen 15 years of relative decline, with productivity growth at half the rate seen across other advanced economies and flatlining wages costing the average worker £10,700 a year in lost pay growth.
The living standards of the lowest-income households in the UK are £4,300 lower than their French equivalents, the Resolution Foundation report said.
The nearly 300-page report also warned that household incomes are not expected to reach the pre-cost-of-living crisis peak until at least 2027, with income inequality in the UK higher too than any other large European country.
The Chancellor sought to offer a sunnier outlook during a Q&A session with editor-in-chief of The Economist magazine Zanny Minton Beddoes.
One audience member asked why the think tank was “describing an economy that has a broken leg” while the “chief surgeon” disagreed.
“I think it’s really important not to lose our self-belief,” Mr Hunt responded.
The Chancellor, also a keen runner, suggested that UK commentators were good at identifying problems, but added: “I’m not sure I’d describe it as a broken leg but identifying areas where we can do better.
“And that is a very good thing for us that we do that. But sometimes we forget that other countries also have the things that they need to improve.
“I think we shouldn’t lose confidence that we do some things absolutely amazingly. I know he’s controversial in other ways but when Elon Musk was here three weeks ago, he said there were only two centres in the world for AI, San Francisco and London.
“We’ve got a lot going for us, so if we’re going to go into dealing with the sprain, rather than the broken leg, then let’s do so from a perspective of positivity.”
Elsewhere in the discussion, Mr Hunt blamed Brexit and the Covid pandemic for the damaging instability at the heart of government.
“I think there’s been a very particular reason why we’ve had that political chopping and changing – I don’t think it’s a good thing,” the Chancellor said.
He said “enormous benefits to ministers staying in their posts for a long period of time”.
“But we had Brexit, that led to a hung parliament, that led to a politically incredibly challenging time where the British people had voted to leave the EU but Parliament couldn’t agree on how, and ultimately to the fall of Theresa May’s government.
“Then we had a pandemic, these things have led to changes in Whitehall. I hope we can have more stability going forward, absolutely, because I think it is a better thing for policy.”
The Resolution Foundation report had backed calls for full expensing, part of a package of tax breaks for businesses, to be made permanent.
Mr Hunt insisted that it was part of a larger and unfinished project to boost productivity and growth
“Are there more things we can do? Absolutely. I think in every fiscal event I’ve done I’ve demonstrated that I’m prepared to do big, new things,” he said.
“The only way in the long run that you can raise living standards is by raising productivity,” he told the event.