David Davis warns Jeremy Hunt on brink of ‘deeper, longer recession’

Jeremy Hunt must be able to strike a balancing act in his mini-budget to avoid a prolonged recession, David Davis warns. The Chancellor, expected to lay out his economic recovery plan on Thursday, faces two economic pressures that will determine the country’s economic recovery in the next fext years. While he must present a fully-budgeted financial plan to the OBR, he also has to deal with the Bank of England, which has been squeezing on money supply.Instead of trying to tackle the problem in the short-run, David Davis said the Chancellor should have more time and leeway to progressively bring the country’s economy back on track.The former Brexit Chancellor told Times Radio: “What the Chancellor has to do is persuade the markets rebalance the books over a few years’ cycle – not over one year. “That’s where the balancing act comes. How much is too much? This is a fine judgement.  I don’t envy him at all. He’s on a complete razor-edge with this in making that judgement. “And if he gets it wrong, then there will be a deeper and longer recession than is necessary to correct this.” David Davis warns Jeremy Hunt of potential prolonged recession (Image: YOUTUBE/@SKy News GETTY) David Davis spoke to Times Radio about the economic challenges facing Jeremy Hunt (Image: TWITTER/@TimesRadio)Should he fail to strike that balance correctly, the recession will be prolonged with a galloping inflation and Britons’ purchase power diminishing. “In fact, they will collect even fewer taxes because the country will suffer for it,” David Davis said.Among the two key pressures on Mr Hunt’s budget are the Office for Budget Responsibility (OBR) and the Bank of England. Unlike other Western European countries like France and Germany, the UK must produce and present case scenarios to a third-party regulatory body – the OBR – which determines what budget is appropriate. But that task has been complicated by the Bank of England’s decision to reduce money supply to to control the galloping inflation.Mr Davis said: “We have a particular problem here – and it’s almost unique to the United Kingdom. We have to produce an outcome that they [OBR] think is okay. The markets look at that.”READ MORE: Jeremy Hunt may ‘tinker’ with Capital Gains Tax in his autumn budget David Davis says Jeremy Hunt must balance the OBR and Bank of England (Image: YOUTUBE/@SKYNEWS) Jeremy Hunt told Laura Kuenssberg there is a ‘tough road ahead’ (Image: TWITTER/@BBCPolitics)”That comes at the same time as the Bank of England squeezing the money supply, putting the pressure on to reduce inflation,” David Davis said.”So, those two things together are going to make it very tough [for Jeremy Hunt], and there is a real risk – and I’m sure the Chancellor understands this – that the combination of the two actually worsens the recession or make it longer. “All countries have recognised that when you go into a recession, you have to some extent a deficit and the deficit helps moderate the recession. “The idea of completely balancing the books is a falacious one, frankly.”DON’T MISS:Rishi Sunak says taxes must rise to avoid economic suffering [REPORT]     Millions of Britons braced for Hunt’s ‘horrible decisions’ [REPORT]    Jeremy Hunt’s economy-saving budget this week will be dead on arrival [REPORT]     Jeremy Hunt warned of ‘eye-watering’ decisions needed on public spending and taxation (Image: TWITTER/@BBCPolitics)Britain appears to be heading for what is expected to be its longest recession on record, as the economy contracted by 0.2 percent in the three-month July-September period. Another quarter (three-month period) of economic contraction would mean the country is in recession. The Bank of England has forecast a “very challenging” two-year recession due to the soaring prices of goods such as food, fuel and energy, which are caused by a series of factors, including the Ukraine war, the Covid-19 pandemic and Brexit. Speaking to BBC’s Kuenssberg Sunday show, Chancellor Jeremy Hunt said he would try to make any recession “shallower and quicker” than predicted. But he has warned of “eye-watering” decisions needed on public spending and taxation to “restore confidence and economic stability”.