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Britain is trapped in a cycle of decline and Rishi Sunak’s pledges to boost the economy are now “in tatters”, Labour’s shadow chancellor Rachel Reeves has warned, as the UK fell into recession.
The Office for National Statistics (ONS) revealed on Thursday a 0.3 per cent decline in gross domestic product (GDP) between October and December 2023.
The gloomy official figures mean the economy entered a technical recession, as defined by two or more quarters in a row of falling GDP, for the first time since amid the pandemic in the first half of 2020.
The news deals a blow to the prime minister, who has promised to grow the economy as one of his five priorities, especially after most economists were only forecasting a 0.1 per cent decline in GDP.
In comments Labour suggested were “out of touch”, chancellor Jeremy Hunt said low economic growth is “not a surprise”, but added that the UK must “stick to the plan – cutting taxes on work and business to build a stronger economy” despite tough times for many families.
James Moore | The ‘Rishession’ could not have come at a worse time for Sunak
In his latest column, The Independent’s chief business commentator James Moore writes:
Economists spent much of last year discussing the dreaded R-word, and whether the UK could avoid recession. Now we have the answer: it could not.
But how much does this “short, technical recession” really matter? Andrew Bailey, the governor of the Bank of England got in early, and for days has been playing down its significance ... Of course, Bailey has skin in the game here. The Bank’s rate setting Monetary Policy Committee, on which he serves, is facing pressure to reduce interest rates. Small businesses, in particular, are screaming.
Politically, it is more significant still. This could not have come at a worse time for Rishi Sunak, with an election looming ever larger. His opponents will seek to pin the blame for the downturn on him – it’s already been branded the ‘Rishession’… – and use it as a stick to beat the Tories’ record on the economy.
The latter is always a key battleground. In past epochs, it has been seen as a Tory strength. This time, not so much.
From mortgages to childcare: What does the recession actually mean for you?
For those wondering what impact the impact of entering a recession could be, Abi Jackson looks at the latest economic data from the perspective of childcare, driving, food prices and more in this explainer:
Tory election leaflet claiming economy is growing ‘delivered on day of recession data’
Voters have received an election leaflet boasting about the economy growin under the Conservatives on the day it emerged the UK had slipped into a recession, according to the Daily Mirror.
Flyers for justice secretary Alex Chalk were delivered to residents in Cheltenham, telling them to “take a look at the facts: we're making progress and strengthening our economy”.
It adds: “Economy GROWING. Official GDP data shows that the UK economy has grown more than Germany, France and Italy when recovering from the pandemic. That means more jobs, more investment and a better standard of living.”
Jeremy Hunt insists Tory party 'must stick to our guns' as UK falls into recession
Rachel Reeves insists Labour’s plans to grow economy differ significantly from government’s
Rachel Reeves rejected suggestions that Labour’s economic plans to grow the economy were not much different from the government’s.
Asked at a press conference about the plans, the shadow chancellor said: “I reject entirely that there is little difference between what Labour and the Conservatives offer.
“We have got a comprehensive plan for growth that has been drawn up with business.”
She pointed to planning reforms, as well as plans to invest in a £7.3bn national wealth fund, and new publicly owned energy company, Great British Energy, among the steps Labour had set out in its plans.
Public services ‘on their knees’, says Rachel Reeves
Labour’s Rachel Reeves said public services are “on their knees” and need an immediate injection of cash.
The shadow chancellor said: “I do recognise that our public services are under huge pressure – unlike perhaps the Conservatives do – which is why I said there does need to be an immediate injection of cash into our public services.”
She added: “If our economy had grown at the rate of other OECD countries these last 14 years, our economy would be £150bn bigger, worth £5,000 for every family in the UK and we would have tens of billions of pounds of additional tax receipts which we would be able to invest in our public services.
“That’s why it’s so important that we grow our economy.”
Tory former chancellor says room for tax cuts in Budget
Tory former chancellor Lord Lamont said he thought there was room for tax cuts in the March Budget.
He told BBC Radio 4's World at One: “I do think tax cuts have to be responsible. I think there is probably some headroom that has been created by very strong growth in tax revenues, particularly as a result of the freezing of the tax thresholds for such a long period.
“There may be some headroom. I think looking longer term though, any tax cuts have to be matched by tight control of public spending, probably financed by reductions in public spending.”
On the outlook for the UK after it slipped into recession, Lord Lamont said: “I think people ought to be realistic about this. We have an almost perfect storm. We are coming through it, I think there is light at the end of the tunnel now and we just need to hold our nerve.”
What does Britain being in a recession mean?
While a severe recession typically causes unemployment to rise, Britain’s technical recession serves more as an indicator of the pressure households and firms are already under – and as a blow to the government’s promises to boost economic growth.
The gloomy economic data is also likely to ramp up pressure on the Bank of England to start cutting interest rates from their 14-year high of 5.25 per cent, given the threat to the wider economy from painfully high borrowing costs.
You can read more about what the latest economic data means below:
Reeves defends Starmer’s handling of antisemitism row
Rachel Reeves has defended Keir Starmer’s handling of the antisemitism row that engulfed Labour this week, saying he had not let her down.
The senior frontbencher said Labour would have taken action over comments made by Azhar Ali and Graham Jones “sooner” if it had known about them and the party had intervened “swiftly”.
She also told a press conference in central London: “I only returned to the shadow cabinet because I was sure of Keir Starmer’s commitment to that (rooting out antisemitism) and he hasn’t let me down, he hasn’t let the Jewish community down, and it is right that both of them have been suspended.
“In terms of the vetting procedure, my understanding is that this was a private meeting, not a Labour Party meeting, and the recording was released much later.
“Obviously if we’d have known about these things we would have taken action sooner.
“We can’t see everything everywhere, but when we do see evidence of antisemitism, we act swiftly to ensure the highest standards and rightly so amongst our MPs and amongst our parliamentary candidates.”
Recession figures ‘don’t paint true picture of suffering’ in UK, poverty campaigner warns
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said of the new fuel poverty figures: “Even these terrible figures don’t paint the true picture of the suffering in households across the UK.
“They exclude millions of homes in certain energy performance categories and also don’t include many people who actually get a Warm Home Discount to help with their bills.
“The numbers of households paying more than 10 per cent of their income on energy is truly shocking, far exceeding previous estimates.”
And he said: “The reality is that household energy debt is now at record levels, millions of people are living in cold, damp homes and children are suffering in mouldy conditions.
“The wider impact of high energy bills is also clear to see with households having to cut back on spending so much that the UK has now entered a recession.”
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2024-02-15 17:41:51Z
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