Rishi Sunak insists that Brexit is working by citing cheaper beer and sanitary products, as he admits that the economy is looking up and people’s household incomes are “much better” than expected.
Despite consumers struggling with high inflation and the cost of living crisis, the prime minister claimed there were “many signs that things are moving in the right direction” in the economy.
Rejecting claims from former Ukip leader Nigel Farage that Brexit had failed under the Tories, he cited freeports, cutting VAT on sanitary products and reforming beer duty as major success.
“Economic optimism is increasing, consumer confidence is increasing, growth estimates are being raised,” he told reporters on the way to the G7 leaders’ summit in Japan.
He said official figures for real growth in household disposable income were “very pessimistic” but were now “significantly larger” than predicted.
“That’s a very important measure of people’s living standards — a lot more than people think,” he said.
The Resolution Foundation said in March that average household disposable incomes would be lower by the end of 2027 than during the Covid pandemic, and last month Huw Pill, the Bank of England’s chief economist, said that people have to “accept” the poorer they are.
Average living standards have been largely stagnant since 2007. However, the latest figures for March 2023 show a 1.3% increase in real household disposable income after four quarters of negative numbers.
Sunak acknowledged things that felt “difficult” for families but emphasized the government’s contribution to energy bills.
He also defended the economic benefits of Brexit in the face of criticism that it is stifling the economy and not bringing the promised prosperity.
“I’m introducing freeports – a benefit of Brexit across the country that attracts jobs and investment in many different areas,” Sunak said.
“We’ve cut VAT on sanitary products, we’ve changed alcohol duties which means this summer you’ll get cheaper beer in pubs. These are all tangible benefits of Brexit that I’ve already delivered. “
Striking a positive note on the economy, he said two surveys of business leaders showed “great confidence” in the UK.
“That’s what’s really happening in the economy, that’s what global CEOs are saying who actually have money and are making investment decisions,” he said, adding that he was “happy to get that off my chest”.
Sunak acknowledged the UK was facing high inflation and high borrowing but said he remained committed to “reducing the tax burden” with tax cuts after initially dealing with the problem.
The Institute for Fiscal Studies this week said one in five people will be caught in higher tax rates by 2027, leading to pressure on Sunak from his backbenchers to cut rates.
The prime minister’s scrutiny of the UK economy comes as he prepares to head to Tokyo for meetings with world leaders on the economy and defence.
He is expected to strengthen defense cooperation with Japan at a time of concern about China’s growing militarization and aggressive stance toward Taiwan.
Before the trip, former prime minister Liz Truss heated up tensions by visiting Taiwan and calling for a tougher stance on China and for it to join the Trans-Pacific Partnership.
But Sunak said he was ignoring Truss’s trip and the UK’s approach to Taiwan was “long-standing and unchanged”.
He said western allies and Japan were “consistent” with their China policy, although the US was taking a tougher stance than some European countries. The French president, Emmanuel Macron, who is scheduled to meet Sunak in Japan this week, said last month that Europe should not involve itself as a “vassal” in the clashes between the US and China.