GMB: Jeremy Hunt speaks about Labour's budget 'choices'
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Shadow Chancellor Jeremy Hunt has said the interest rate cut disproves Rachel Reeves' claims that she inherited the worst public finances since World War 2, but warned her spend-happy attitudes to pay rises may hamper further cuts.
The Bank of England voted in favour of the first interest rate cut since the Covid pandemic this lunchtime, with 5-4 agreeing to a modest 0.25 base rate cut.
The new 5% rate won't yet bring relief to those paying eyewatering mortgage sums, but does suggest a less gloomy economy on the horizon.
Reacting to the breaking news, former Chancellor Jeremy Hunt says the cut "will be welcome news for millions of homeowners".
He pointedly added that the Bank's decision "shows that Labour inherited a stronger economy which was on the right track".
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Jeremy Hunt has said Labour's pay rises this week have put further cuts at risk (Image: Getty)
However Mr Hunt warned that he is now concerned that this week's announcement by Labour of inflation-busting public sector pay rises may now delay further substantive cuts to interest rates.
He added: "In government, we took difficult decisions that cut inflation from 11.1 per cent to the Bank’s target 2.0 per cent paving the way for lower rates".
"Our concern is that further substantive cuts may now take longer because of inflation-busting public sector pay rises rushed through by the Chancellor ahead of the summer."
Earlier this week The Chancellor announced pay rises of between 5% and 6% for many public sector workers, as well as a whopping 22% rise for junior doctors.
The rises came with a bill costing more than ￡9 billion, prompting outrage that Ms Reeves is cutting financial support for the elderly to appease her party's union paymasters.
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Rachel Reeves claims she's inherited the worst public finances since World War Two (Image: Getty)
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Leader of the opposition Rishi Sunak said that while the decision proves Labour did inherit a strong economy, he is concerned Labour's public pay settledment "have put further cuts at risk".
Rachel Reeves said the interest rate decision "will be welcome news", though "millions of families are still facing higher mortgage rates after the mini-budget".
"That is why this government is taking the difficult decisions now to fix the foundations of our economy after years of low growth, so we can rebuild Britain and make every part of our country better off.”
However the Unite Union said the move by the Bank of England is "too little too late” for working families.
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General Secretary Sharon Graham said: "Interest rates still stand at historic highs and this small cut will offer little help to workers struggling with the cost-of-living crisis and record housing costs".
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"Decisive action from both the Bank of England and government is urgently needed. Including, a clear roadmap for future rate cuts and a programme of serious investment in our public services and industry to get us out of this crisis.”
Economic expert Professor Costas Milas of University of Liverpool agreed with Jeremy Hunt that this week's public sector pay agreement would hamper hopes that interests may come down quicker.
Professor Milas said that policymakers will not have long before the ￡9.4bn pay settlement that will be made to public sector workers this year leads to a “wage-price spiral”.