Jeremy Hunt will defend the government’s vision for Britain’s economic future, in a speech to City executives in London on Friday when he will lay out plans for investment and growth.
The UK chancellor will say that he wants to promote policies that allow the private sector to re-tool the UK’s industrial base and re-skill the workforce to generate strong growth over the next decade.
A low-tax base will be an essential element of the UK’s attraction for foreign and domestic businesses, he will say.
However, Hunt will warn the right wing of his party that tax cuts will need to wait while the government supports the Bank of England’s efforts to bring down inflation and get the public finances under control.
It comes amid growing criticism of the government’s approach from some in the business community. Last week James Dyson said growth “had become a dirty word” under the current leadership, and this week the CBI’s director-general, Tony Danker, said there was a “denial of where our economy is right now compared to our international competitors”.
Hunt has already signalled that he is planning a “slimmed down” spring budget in March with no immediate tax cuts as the Conservatives press ahead with attempts to win back economic credibility after the damage inflicted by the administration of Liz Truss.
Truss, the former prime minister, and her chancellor, Kwasi Kwarteng, were replaced in their roles after financial markets reacted negatively to a large increase in borrowing to fund tax cuts.
Ministers are under pressure to put forward detailed plans to boost growth and achieve net-zero targets following a slump in investment by domestic and foreign businesses since the 2016 Brexit vote.
Attempts to revitalise essential elements of the UK’s industrial base have foundered, with many economists blaming the government’s hands-off approach and modest funding proposals.
The recent collapse of the car battery developer Britishvolt, which was expected to be the cornerstone of Britain’s electric car industry, with a £3bn factory in the north east of England, has dented ministers’ claims that the UK can support the transition away from high carbon-emitting industries while under increasing pressure from foreign competition.
Hunt has commissioned Mel Stride, the work and pensions secretary, to examine the impact of raising the pension age to 68 at a faster pace – a move that will save billions of pounds in public spending over the next three decades.
Stride is also due to tell Hunt how to get many of the nine million people of working age currently not seeking a job back into the workforce. Stride has said he would pursue “quick wins” in the battle to boost the labour force.
No 11 has become increasingly alarmed by the rise in the number of economically inactive people since the Covid-19 pandemic. Some workers have been forced to quit after suffering from long Covid, but others have taken early retirement or returned to EU countries after spending many years in the UK.
The Bank of England is expected to raise interest rates again when policymakers meet in a week and to blame the move on the shortage of workers, which has pushed up wages over the last year.
Analysts expect that the interest rate rise on 2 February could be as much as 0.5%, taking it to 4%, as the Bank’s monetary policy committee seeks to raise borrowing costs and depress consumer spending.
Hunt is expected to reassure markets that government spending will remain within strict limits, in contrast to his predecessor Kwarteng, who was criticised for promising unaffordable tax cuts.
With government spending in check and consumer spending hit by the cost of living crisis, the UK is expected to enter a recession in the first half of this year.