Chancellor recognises pain caused by inflation and says UK must not deviate from plan
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00:00 Chancellor, so the Bank of England has just said that it looks like you might just about
00:05 make that pledge of halving inflation by the end of the year. Is this kind of the moment
00:09 to say, you know, victory, mission accomplished?
00:12 No, I don't think we will have met the pledge until we've halved inflation. It's encouraging
00:18 that the Bank of England thinks that we'll not just meet that pledge, but this time next
00:23 year inflation will be about 2.8%. But we should recognise that there is a lot of pain
00:29 for families, for businesses. The process of getting there is very tough. And so what
00:34 we have to do is to stick to the plan to get there as quickly as possible, because once
00:40 we get inflation down, you can start to see a path where interest rates will come down
00:46 and that will relieve the pressure on families with mortgages. And that's what obviously
00:50 we want to happen as soon as possible.
00:51 But it is taking quite a lot of pain to get there. I mean, does that surprise you? Is
00:55 that just the logic of wanting to fight these inflationary forces?
01:00 Well, we have had some huge global shocks, you know, 1970s energy crisis, a once in a
01:07 century pandemic. And that has had lots of knock-on effects. But what we know is that
01:14 if you look at other countries, America's got inflation down to 3%. In the Eurozone,
01:20 it's just over 5%. So we know the approach we're taking works. And the quicker we don't
01:28 deviate from that plan, the quicker we can relieve the pressure on families.
01:32 Talking about the US, actually, one of the striking things about the economic forecasts
01:35 rather than just the inflation forecast, but growth forecast, is that, you know, in the
01:38 US, they have pretty much regained that pre-financial crisis trend. So they've bounced back really
01:45 fast. When you look at the numbers here from the back of England, it is pretty bleak. You
01:49 know, we are basically flatlining. We're nowhere near getting back to the pre-COVID trend,
01:53 let alone the financial crisis trend. Does that worry you? Because the UK, on that front,
01:59 it does look like an outlier. You know, we are really weak compared with so many other
02:03 economies out there.
02:04 Well, there are definitely things we can learn from the US. There's a dynamism in the US
02:09 economy, which we think we have the potential to match, which is why we say we want to be
02:12 the world's next Silicon Valley. With the incredible growth in technology and life science
02:17 and clean energy businesses that you see in the US. But actually, if you look at those
02:23 statistics, what you see is that not just the UK, but Europe, the US, Canada, Japan,
02:30 we're all in a low growth trap that we need to get out of. And our long-term growth rates
02:37 are actually high. If you look at what the IMF say, they are higher than France or Germany
02:42 or Japan, but they're not high enough. And what you'll see from me in the autumn statement
02:48 coming up is a plan that shows how we break out of that low growth trap and make ourselves
02:54 into one of the most entrepreneurial economies in the world. That's what we want.
02:58 I'm curious about your take on North Sea oil, because we've just had this statement from
03:04 the Prime Minister. He wants more exploration in the North Sea. Actually, when you look
03:07 at the numbers, and I know you do like to look at these numbers, it won't make that
03:11 much difference. It's still going to be declining. We're not going to become energy independent
03:15 any time soon. So isn't this all just like a bit of a political sideshow rather than
03:20 something that fundamentally matters?
03:22 No. And you just asked me why it was that our inflation is higher than other countries.
03:28 And one of the reasons is because we have higher gas dependency. About three quarters
03:34 of our homes are connected to the gas grid that's higher than many other countries. So
03:39 the more we import gas in the shrinking period that we're still going to need it as we move
03:44 to net zero, the more dependent we are on a country on what someone like Vladimir Putin
03:50 does. So of course it makes sense to develop our own gas reserves rather than import it.
03:57 And that is important for the transition because it's more carbon efficient.
04:01 We're still going to be importing it. This is not going to change that in the slightest.
04:04 It is going to change it.
04:05 It's going to change it by the teeniest, tiniest bit.
04:08 Well you know I would just say that you look at what's happened in the last year and the
04:13 impact that the invasion of Ukraine had on families up and down the country and every
04:19 single thing we can do to improve our energy independence.
04:21 But you have to admit it's marginal. That's the thing is this is not going to change that
04:26 as much. We will still be a massive importer of gas.
04:29 We will still be a bigger importer of gas. And that's why we've got big clean energy
04:34 projects to try and reduce that over time. But whilst we're importing it, it uses three
04:41 times less carbon to use our own gas to import it from the other side of the world.
04:46 And that's why this is the right thing to do for the planet as well as for our energy
04:50 security.
04:51 Do you have a sense at the moment as to how much net zero is going to cost?
04:55 Well I think there are clearly costs in the transition. But in the end if we're going
05:02 to be a successful economy, we talked earlier about the problem of low growth facing Western
05:07 economies, what we need is abundant cheap energy.
05:11 Now our plan is that a quarter of our energy will come from nuclear and that will be very
05:18 abundant and very cheap. And the rest of it we'll get from renewable sources over time.
05:24 Again very cheap going forward.
05:27 So I think of course there's a lot of investment that's needed. That investment in turn creates
05:33 jobs. Six thousand jobs at the gigafactory that JLR announced a few weeks ago in Somerset.
05:40 So I think there are opportunities. But yes there are costs as well. But this is very
05:45 very important.
05:46 Do you have a sense as to how big they are?
05:49 Well the costs are well documented but I think it's also important that we talk about the
05:54 opportunities.
05:55 If they're well documented then how much is it?
05:57 Well the Climate Change Committee talk about the costs of moving to net zero. But I think
06:02 we also need to talk about the opportunities and the benefits in terms of the jobs it creates
06:07 and remember our responsibilities to the planet.
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