PM and chancellor on holiday as Bank of England warns UK to be hit by recession

Both Boris Johnson and his chancellor Nadhim Zahawi are away on holiday as the Bank of England hiked interest rates for 27 years and warned of the longest recession since the financial crisis.

The government is facing calls for urgent action to tackle soaring energy prices after the Bank of England governor Andrew Bailey raised interest rates to 1.75% from 1.25%, the biggest single rise since 1995, in an attempt to control the runaway inflation.

The Bank's Monetary Policy Committee (MPC) forecast inflation peaking at 13.3% in October, the highest for more than 42 years.

It warned the dire economic conditions will see real household incomes drop for two years in a row, the first time this has happened since records began in the 1960s.

But as the grim economic outlook was unveiled, both the prime minister and Mr Zahawi were away from Westminster on holiday.

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The chancellor is believed to be working remotely while away for a few days.

"There is no such thing as a holiday and not working," the chancellor said.

"I never had that in the private sector, nor in government. Ask any entrepreneur and they can tell you that.

"Millions of us dream about getting away with our families, but the privilege and responsibility of public service means that you never get to switch off, that's why I have had calls and briefings every day and continue to do so."

The PM's official spokesperson confirmed last week that Mr Johnson would be going on holiday from Wednesday despite only having a little over a month left in office.

The prime minister will remain in charge of the country, receiving updates as required, he told reporters.

Downing Street would not give details of where the prime minister would be spending the period of annual leave, until the end of the week, and insisted he would still be running the country.

Asked who would be in charge while Mr Johnson was away, the prime minister's official spokesman said: "It will be the standard pattern.

"The prime minister will be updated as required. The deputy prime minister and, as ever with a cabinet government, other ministers, will be on hand to support as needed."

Mr Zahawi has however responded to the Bank of England's announcement.

"Along with many other countries the UK is facing global economic challenges and I know that these forecasts will be concerning for many people," the chancellor said.

"Addressing the cost of living is a top priority and we have been taking action to support people through these tough times with our £37bn package of help for households, which includes direct payments of £1,200 to the most vulnerable families and a £400 discount on energy bills for everyone.

"We are also taking important steps to get inflation under control through strong, independent monetary policy, responsible tax and spending decisions, and reforms to boost our productivity and growth.

"The economy recovered strongly from the pandemic, with the fastest growth in the G7 last year, and I'm confident that the action we are taking means we can also overcome these global challenges."

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The Treasury later released a readout of a call Mr Zahawi had with the governor of the Bank of England on Thursday afternoon which said the two discussed the actions they are taking to combat high inflation and overcome the economic challenges the country faces.

Energy minister Greg Hands claimed the government is working "flat out" on what is ministers' "number one priority" despite both Mr Johnson and Mr Zahawi being away from Westminster.

Pressed on how the PM and chancellor can be working flat out while abroad, Mr Hands replied: "Because we have taken the decisions already in terms of the package of support that is in place at the moment.

"A number of those measures are still to come in - like the £400 bill support will start in October, like those payments to those on disability benefits which will start in September.

"So all of this is panning out a series of supportive measures for consumers and bill payers.

"But that situation will remain under constant review and I am sure whoever the next prime minister, is this is going to be absolutely their number one priority as it is for the current and outgoing prime minister."

Labour leader Sir Keir Starmer is also currently away on holiday.

But Rachel Reeves, shadow chancellor, said the forecast was "further proof that the Conservatives have lost control of the economy".