Sunak must offer new ideas to avoid dreaded 1970s-style stagflation, Duncan-Smith warns

30 March 2022, 18:49 | Updated: 30 March 2022, 19:06

Rishi Sunak will need to 'come back' with new ideas on cost-of-living

By Daisy Stephens

Rishi Sunak will need to "come back" with new ideas about how to tackle the UK's cost of living crisis as we risk '1970s stagflation', Sir Iain Duncan Smith has warned.

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The former Tory leader said the Government must avoid making "the mistake" of trying to tackle immediate economic problems but ignoring the longer-term issues.

"Almost certainly, we will have to come back," he said, when asked by LBC's Andrew Marr whether Mr Sunak would need to "look at this again".

"The biggest threat that face us, and most economists now recognise this, is this 1970 stagflation problem that we hit before.

"We mustn't make the mistakes we made then."

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Stagflation is when the inflation rate and unemployment is high and the economic growth rate slows.

It is challenging for governments because actions to lower inflation may exacerbate unemployment.

The 1970s was particularly grim for stagflation, with extended periods of high unemployment and soaring energy prices hitting millions of families hard.

Sir Iain went on: "The mistake that's made is that you will deal with the stuff that you see right in front of you and not understand that it's a direction of travel that you're seeing, not an endpoint in itself.

"The direction of travel right now is heading towards high levels of inflation, absolute zero growth.

"And the only way out of that is at the moment to focus on growth.

"So all that we do must be focused about alleviating the problems of inflation, but leading us to growth."

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Chancellor Rishi Sunak has been criticised for his spring statement since he announced it last week.

Another senior Tory MP told Andrew Marr on Tuesday that it was "inevitable" the Chancellor would need to do more to help financially-squeezed Brits.

But Mr Johnson defended Mr Sunak at PMQ's on Wednesday, telling opposition leader Sir Keir Starmer: "What we have is a Chancellor who took the tough decisions to look after the UK economy throughout the pandemic, who protected people up and down the land with £408 billion worth of support."

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Sir Iain also debunked Boris Johnson's claim that his Government had introduced the biggest tax cut in 20 years.

"I'll be honest with you, taxes have gone up," he said.

"Net taxes have gone up, they may well have introduced and it's true, a single tax reduction.

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"But you have to deal with these things in net terms.

"In net terms, taxes have risen."

Andrew said: "And in common sense terms, that's what everybody can see."

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Sir Iain then went on to say that PMQs 'has become much more like a circus' where flippant claims could be made and not taken seriously.

"I think Prime Minister's Questions, personally, has become less and less relevant," he said.

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"In fact, the truth is half the time, I don't watch it - I know it's a bit of a confession - because I don't glean anything from it at the end.

"And it's only really when either side is forced to be calm and rational and respond to a very specific question that you actually get anything out of it.

"Nine times out of 10, it's probably the worst bit of Parliament."