The former chancellor told Sky News that the country is facing a “very, very difficult period ahead of the short-term horizon”. He said he believed the UK economy would slow down sharply in the autumn. Lord Hammond said it was “the next part of the cycle that began with the COVID pandemic” when a “huge government response” was given. “To think that we can somehow move on from this, to leave the card on the table and act as if nothing had happened is unrealistic, it is naive,” he said. “It simply came to our notice then. “And a lot of what we’re seeing right now in terms of inflationary pressures in the domestic economy is the result of people saving a lot during the lockdown period and that savings have been released into the economy over the last six months.” Use the Chrome browser for a more accessible video player 2:49 The UK economy shrank 0.3% in April He said that although the war in Ukraine was one of the drivers of inflation, the issue started long before the conflict, which was fueled by COVID stimulus packages provided by the United Kingdom, the United States and other countries. He said Brexit also had an impact on rising prices because it led to changes in supply chains. “As we emerge from the coronavirus crisis, supply and demand have slipped away,” he said. He said that there are many parts of the economy that “have not yet returned to normal operation”, so “there will undoubtedly be an impact there”. Use the Chrome browser for a more accessible video player 1:34 CBI Director: Government can prevent recession Asked if the government should increase spending or reduce taxes, he said people were “looking for immediate and painless solutions”. “During the COVID crisis, they were called upon to believe that the government could always offer immediate and painless solutions,” he said. “But you can not solve an inflation problem by injecting more liquidity into the economy – that is to add fuel to the fire. “And unfortunately, the issue we are facing right now is not about the short-term pain of 10% inflation. We have to live with it. “The question is whether we can now manage inflation below next year or so, to get back to something like normal.” Listen and subscribe to The Ian King Business Podcast here. He said the government “can not compensate people for all the inflationary pressure” because short-term relief would lead to long-term inflation. Lord Hammond said an economic slowdown in the autumn was “rather good”. He said he knew “people would not see it that way”, but “by removing the simulation before it is integrated, we have a real chance of returning to a much better state next year”. He expressed support for the Bank of England’s decision to raise interest rates in recent months.
