Chancellor Jeremy Hunt is confident that the plan to halve inflation this year is working and that pressure on household budgets will begin to ease. 

Ahead of Westminster returning on Monday, the Chancellor has recognised that household budgets are still feeling stretched but has stressed the need to stick to the plan.

This is against calls for tax cuts from backbenchers anxious that the recovery might not come soon enough before the general election.

Despite the Bank of England expecting inflation to increase to 7.1% this month, forecasts still expect it will fall to around 5% at the end of the year. 

The Chancellor’s message comes as the UK’s growth figures have been substantially upgraded by the ONS, showing the UK economy recovered from the pandemic far more rapidly than previously thought, returning to its pre-pandemic size almost two years ago.

The Treasury says the revision proves the resilience of the UK economy, which has already grown faster than Germany, Italy, Japan and France since 2010. The UK recovered from the pandemic faster than any country in Europe and only behind Canada and the US in the G7, and is second only to France for foreign investment.

The government said it will build on this momentum in the coming months, with the PM travelling to India to cement his relations with G20 allies, hosting the international Artificial Intelligence Summit to pioneer investment in AI, while the Trade Secretary is pursuing talks with Gulf Cooperation Council economies.

Over the summer, inflation fell to 6.8%, GDP figures showed the economy grew by 0.5% in June – beating forecasts, and business confidence in the UK soared to an 18-month high. 

Mr Hunt is determined to keep spending under control as external evidence suggests from the OBR and IMF that £25 billion of additional borrowing could push up interest rates by as much as 0.5%.

He said: “I know family budgets are still stretched, but inflation is coming down and now is the time to see the job through. We are on track to halve inflation this year and by sticking to our plan we will ease the pressure on families and businesses alike.

“And it should be no surprise, despite the doubting from some, latest figures show we have bounced back better than many other G7 economies and are one of the most attractive countries in the world to invest. 

“This government is unlocking the UK’s potential – attracting more investment, creating new jobs and growing the economy.”