Wars between Israel and Ukraine mean 'difficult decisions' for Britain, warns Hunt

Mr Hunt said the UK's public finances were now «worse than they were in the spring». Photo: Holly Adams/Bloomberg

Jeremy Hunt warned of «difficult decisions» as he prepares to make an autumn statement amid wars, slowing economic growth and soaring energy prices.

The Chancellor said Higher borrowing costs killed any prospects of a tax cut in November. , warning of further cuts to the public sector to reduce debt.

Speaking on the sidelines of the International Monetary Fund's (IMF) annual meeting in Marrakesh, Mr Hunt warned that public finances are now «worse than they were in the spring» amid a surge in borrowing costs that will total £30 billion. year on Britain's debt interest rate bill.

His comments are likely to reignite anger in the Tory party over tax cuts, even though the IMF said the government was likely to «exceed indicators» and will occupy less this year than official forecasts. predicted.

It comes as the World Bank said escalating tensions in the Middle East caused by the Hamas terror attack could cause a «major shock» to the global economy.

Oil prices edged just below $90 (£74) ) in year. barrels on Friday as concerns grow over the impact of a potential Israeli ground attack on the Gaza Strip.

Gas prices also rose to their highest since February amid warnings of an explosion in the Arctic this weekend due to which the temperature will drop sharply. Western Europe.

The World Bank has signaled it will raise its oil price forecast later this month due to concerns about a “prolonged period of high prices.”

Jamie Dimon, chief executive of JP Morgan, also warned of «far-reaching consequences for energy and food markets, global trade and geopolitical relations» caused by the escalating conflict in Ukraine and the Gaza Strip, which has rocked financial markets and sent prices higher.

“This may be the most dangerous time the world has seen in decades,” Mr. Dimon said after the company released quarterly results.

Ayhan Kose, deputy chief economist The World Bank said the tension represents another shock. for the global economy in a world where oil prices are already high.

“Even before this event, we were concerned about a prolonged period of higher oil prices,” he said. «We are now of course concerned about what will happen if the crisis spreads.»

Speaking of a gloomier global backdrop, Mr Hunt said: «The financial picture I face is worse than it was in the spring And that means I will have to make difficult decisions to make sure that in the face of what is happening in Ukraine and Israel, we are resilient, and that is one of the most important things any chancellor can do.”

Mr Hunt has made it clear that any hole in public finances will be made up by efforts to improve public sector efficiency, which are currently The time is being spent by John Glen, chief secretary to the Treasury.

He said: “We'll probably see between £20 billion and £30 billion more in our debt payments this year. This is a huge change.

“And we need to respond to this in a way that does not drag us into recession, but also ensures that the UK is resilient to future shocks. So we need to make sure that our response to this is not just a massive increase in borrowing income.»

He said weaker economic growth and higher borrowing costs have «made it more difficult to reduce the tax burden.»

The Chancellor signaled that benefits would rise in line with inflation next year, stressing that the Government had «fulfill[ed] our responsibility to people with the lowest incomes». income» a year ago, when he announced a 10.1% increase in benefits, including pensions. .

Mr Hunt also opened up the possibility of further increases in defense spending if conflict in the Middle East escalates, saying: «The first priority of any government is to keep people safe.»

< img src="/wp-content/uploads/2023 /10/a4ef9718ac7611541ebed10409e3c374.jpg" /> Liz Truss held talks with Texas Governor Greg Abbott, where she called for «low taxes, smart regulation and affordable energy.» Photo: gov.texas. government

Former Prime Minister Liz Truss is among dozens of Tory MPs who are pressuring the Chancellor to pave the way for tax cuts. Ms Truss held talks with Texas Governor Greg Abbott in the US on Friday, where she called for «low taxes, smart regulation and affordable energy».

Laura Papi, deputy director of the IMF's Europe department, said that The fund expects UK government borrowing in March to be below official forecasts, «meaning the deficit may be slightly lower than expected.»

However, she added: “We believe it is appropriate to maintain this outperformance, so we are encouraged by the Chancellor's announcement that he will not include tax cuts in the autumn statement.”

This comes from Andrew. Bailey, the Bank of England governor, warned that the UK's economic outlook remained «very subdued», adding that future interest rate decisions would be «tough».

The Bank of England governor said higher borrowing costs would be will be needed in the «last mile» of the fight against inflation, adding that he remains committed to his goal of reducing price increases to 2%.

He said there had been «significant progress» in reducing inflation. inflation in recent months, but said the UK could not get carried away because there was “so much more to do.”

Mr Bailey said: “We have not forecast a recession, but it is a very subdued forecast and policy is restrictive, and it should be, because if we fail to bring inflation back to target sustainably, the outlook will be worse.”