The chancellor has warned the British public he is preparing “for the worst” as he draws up his autumn statement.
Jeremy Hunt told Sky News the Office for Budget Responsibility’s (OBR) official economic forecasts would be considerably worse than at the budget – a signal there may be spending cuts or possibly even tax rises ahead.
“I am very much hoping for the best but I do need to prepare for the worst because I think we can see that the world is a very dangerous place right now,” he said.
“The numbers are definitely worse than what I faced in the spring.
“Debt interest is likely to be £20bn to 30bn higher this year than was predicted in spring. So yes, it’s a very challenging environment in the short term.”
The comments, delivered on the fringes of the International Monetary Fund’s annual meetings in Morocco, are particularly significant because the Treasury has now seen the OBR’s projected economic forecasts which will feed into next month’s autumn statement.
Referring both to the events in Israel and the ongoing war between Russia and Ukraine, Mr Hunt said: “from the point of view of the British economy, we have to recognise that the world is an unstable place.
“Gas prices are four times higher than they were before the invasion of Ukraine. And it isn’t just what’s happening in Israel – we have the biggest war in Europe that we’ve seen in our lifetimes. Here in Africa, there is instability just a little bit further south, over the border from Morocco.
“So when we are managing the British economy, we have to be very prudent with our public finances. Be very careful not to overextend with reckless borrowing because we need the economy to be resilient.
I’m very optimistic about our long term future, but in the short term, we have to recognise that there may be shocks.”
The chancellor’s comments come amid speculation the UK may slip into a shallow recession in the coming months, as higher interest rates continue to put pressure on household finances.
However, the IMF conference has been overshadowed by news of the atrocities in Israel and the fightback from Israeli forces.
Mr Hunt said: “This is the most appalling, brutal, murderous terrorism that I think I can remember seeing in my adult lifetime.
“There have been absolutely gruelling pictures. And I think we have to make sure as a world that we are absolutely united in our condemnation because of what has happened.
“And I think it reminds us, unfortunately, that all this horror is not something that humanity’s put behind us.”
