Labour have suggested Chancellor Jeremy Hunt’s comments on the UK entering technical recession meant he and his party were “out of touch” with voters, and demanded a general election.
In comments after figures showed the UK economy was in recession, Hunt told broadcasters:
We always expected growth to be weaker while we prioritised tackling inflation, that means higher interest rates, and that is the right thing to do because you can’t have long-term healthy growth with high inflation.
But also for families when there is a cost-of-living crisis, when the cost of their weekly shop is going up, their energy bills are much higher, it is the right thing to do.
The underlying picture here is an economy that is more resilient than most people predicted, inflation is coming down, real wages have been going up now for six months.
If we stick to our guns, independent forecasters say that by the early summer we could start to see interest rates falling and that will be a very important relief for families with mortgages.
Hunt also said that “there are signs the British economy is turning a corner”, claiming:
Forecasters agree that growth will strengthen over the next few years, wages are rising faster than prices, mortgage rates are down and unemployment remains low. Although times are still tough for many families, we must stick to the plan – cutting taxes on work and business to build a stronger economy.
In his January 2023 pledges, prime minister Rishi Sunak promised “We will grow the economy, creating better-paid jobs and opportunity right across the country.”
A spokesperson for the Labour Party said: “Jeremy Hunt’s comments are as insulting as they are out of touch. The Conservatives’ failure to take any responsibility for Rishi’s recession show why we need an election.”
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With the caveat that the Guardian has not independently verified the timing and location of this photograph, we appear to have our first dog at a polling station social media post from Wellingborough. This is, apparently, Monty.
On Sky News this morning Jeremy Hunt claimed that he would “only cut taxes in a way that was responsible” in the March budget, and the chancellor refused to be drawn on specific measures.
He told viewers:
You will know that chancellors don’t talk about budgets just a few weeks before and that is for a very good reason, because I don’t yet know the final numbers that I will receive from the office for budget responsibility.
I would only cut taxes in a way that was responsible, and I certainly wouldn’t do anything that fuelled inflation just when we are starting to have some success in bringing down inflation.
Inflation has dropped over the last year from 11% to 4%, but is still running much higher than the Bank of England’s target of 2%.
Questioned if tax cuts would come at the expense of cutting public services, Hunt said:
I am a passionate supporter of the NHS and all our public services, but in the long-run the best thing that I can do as chancellor for the NHS is to make sure that our economy is growing healthily. So what you will see in everything I do in the Budget on March 6 is prioritising economic growth.
He suggested that countries with “lighter taxes” did “tend to grow faster”. Earlier in February the prime minister acknowledged that he has failed to keep his promise to cut healthcare waiting lists in England.
Keir Starmer has used today’s GDP figures as another opportunity to call for change, saying that it is working people who are paying the price for what he described as “14 years of Tory economic decline”.
Larry Elliott is the Guardian’s economics editor
In one sense, there is no comparison between 2009 and 2023. The former was a severe recession, with output declining by about 6% over a protracted period. In 2023 the economy has essentially stagnated: growing by 0.2% in the first quarter, remaining unchanged in the second quarter and then shrinking slightly in the second half of the year.
That said, even a technical recession is a headache for Rishi Sunak, the economy showed across-the-board weakness in the fourth quarter, with all three main sectors – services, manufacturing and construction – going backwards. There was also evidence that households had been cutting back on their spending as a result of cost of living pressures and the squeeze from higher interest rates.
Governments facing the prospect of a general election always want to generate a feelgood factor before polling day. Britain, in the last three months of 2023, had the opposite: a feel-bad factor.
The picture would have been even worse had it not been for a rising population. Gross domestic product per head of population has not risen for seven straight quarters (six falls, one quarter unchanged) stretching back to early 2022.
Jeremy Hunt put a brave face on what was clearly unwelcome news for a government. The economy was “turning a corner”, the chancellor said, and forecasters were predicting stronger growth over the coming years. Hunt may well be right. The worst for the economy is now probably over.
Read Larry Elliott’s full analysis here: Even a technical recession is a headache for Rishi Sunak
Because the amount of growth or shrinkage in the economy is small, you will see the phrase “technical recession” being bandied about a lot today –and I already note some questions about the term in the comments. See, I do read them.
Look at this way, a recession is defined as two consecutive quarters of negative growth, so if you have quarters where the economy grows by 0.2%, 0.1%, -0.2%, -0.1% you would have technically entered a recession. However, four quarters where growth was 0.1%, -0.5%, 0.1%, -0.5% wouldn’t be a recession, even though the economy had shrunk by more. Essentially when we are dealing with very small changes, you can fall into a recession which is in effect a flatline.
The ONS said growth over the course of 2023 as a whole was estimated at 0.1%, the weakest year since 2009 during the financial crisis, excluding the economic collapse in 2020 during the Covid pandemic.
The ONS have an explainer on recessions here – The ‘R’ Word: What exactly is a ‘recession’ anyway? – in which Darren Morgan, ONS Director of Economic Statistics is quoted as saying:
A technical recession is widely regarded as two consecutive quarters of negative growth. You could get a -0.1% or +0.1% change, but how different really was the economy at that point in time? I would say it was broadly flat, but some people do get excited about it.
Chief economist at the ONS, Grant Fitzner, adds – and I will try not to take this personally:
I think journalists need something quick and simple to understand, and I guess this [technical recession] meets the bill. But I don’t think anyone would seriously call that a ‘recession’. The common sense understanding of a recession is a prolonged and significant downturn in economic activity. So not just one or two quarters, and not just a 0.1% change, but actually something a bit more substantial.
Jeremy Hunt is considering making billions of pounds of spending cuts to fund pre-election tax cuts in the next budget, according to a report.
The chancellor is looking at “further spending restraint” after 2025 if official economic forecasts suggest he does not have enough headroom to pay for “smart tax cuts”, the Financial Times reported, citing Treasury insiders.
The newspaper said Treasury officials were looking at reducing the projected rise in public spending from 2025 onwards to about 0.75% a year, which would release £5bn to £6bn for tax cuts in this spring’s budget.
The cuts would have to be made in unprotected departmental budgets such as adult social care and Ministry of Justice funding for courts and prisons. NHS and schools spending is protected.
Read more of Eleni Courea’s report here: Jeremy Hunt ‘considering spending cuts’ to fund pre-election tax giveaway
Rachel Reeves, Labour’s shadow chancellor, has said that the prime minister’s promises on the economy are “in tatters” after it was announced that the UK was in recession.
She said:
The prime minister can no longer credibly claim that his plan is working or that he has turned the corner on more than 14 years of economic decline under the Conservatives that has left Britain worse off.
This is Rishi Sunak’s recession and the news will be deeply worrying for families and business across Britain.
It is time for a change. We need an election now to give the British people the chance to vote for a changed Labour Party that has a long-term plan for more jobs, more investment and cheaper bills.
Labour have suggested Chancellor Jeremy Hunt’s comments on the UK entering technical recession meant he and his party were “out of touch” with voters, and demanded a general election.
In comments after figures showed the UK economy was in recession, Hunt told broadcasters:
We always expected growth to be weaker while we prioritised tackling inflation, that means higher interest rates, and that is the right thing to do because you can’t have long-term healthy growth with high inflation.
But also for families when there is a cost-of-living crisis, when the cost of their weekly shop is going up, their energy bills are much higher, it is the right thing to do.
The underlying picture here is an economy that is more resilient than most people predicted, inflation is coming down, real wages have been going up now for six months.
If we stick to our guns, independent forecasters say that by the early summer we could start to see interest rates falling and that will be a very important relief for families with mortgages.
Hunt also said that “there are signs the British economy is turning a corner”, claiming:
Forecasters agree that growth will strengthen over the next few years, wages are rising faster than prices, mortgage rates are down and unemployment remains low. Although times are still tough for many families, we must stick to the plan – cutting taxes on work and business to build a stronger economy.
In his January 2023 pledges, prime minister Rishi Sunak promised “We will grow the economy, creating better-paid jobs and opportunity right across the country.”
A spokesperson for the Labour Party said: “Jeremy Hunt’s comments are as insulting as they are out of touch. The Conservatives’ failure to take any responsibility for Rishi’s recession show why we need an election.”
The UK economy fell into recession at the end of last year as hard-pressed households cut back on spending in response to soaring interest rates and rising living costs.
The Office for National Statistics said gross domestic product (GDP) fell by a larger than expected 0.3% in the three months to December after a decline in all main sectors of the economy and a collapse in retail sales in the run-up to Christmas.
It followed a drop of 0.1% in the third quarter, confirming a second consecutive quarter of falling national output – the technical definition of a recession.
Official confirmation of a recession is a blow to the government with an election less than a year away and will embarrass Rishi Sunak, after the prime minister made growing the economy one of his five priorities for government at the start of last year.
Read more here: UK economy in recession as households cut spending
Polls have opened in the Wellingborough and Kingswood byelections, seen as a final chance for Rishi Sunak to buck predictions that his party is heading for a landslide defeat at the next general election.
The Conservatives are defending majorities of more than 18,000 in Wellingborough in Northants and 11,000 in Kingswood in South Gloucestershire.
But Labour is expected to win both contests. The party has pulled off a string of byelection victories, gaining four Tory seats in a row since July.
The byelection in Wellingborough was called after Peter Bone was successfully recalled by voters in the constituency in December.
Bone’s partner, Helen Harrison, was selected as the Conservative candidate for the byelection.
In Kingswood, a byelection was called after Chris Skidmore, a leading Tory voice on green issues, resigned in protest against the government’s bill to allow new oil and gas licences to be issued.
Read more here: Polls open for two byelections in testing times for Tories and Labour
Good morning. It is byelection day, against the backdrop of a UK economy that has just entered recession. Here are the headlines …
Polls have opened in the Wellingborough and Kingswood byelections. The Conservatives are defending majorities of more than 18,000 in Wellingborough in Northants and 11,000 in Kingswood in South Gloucestershire, but Labour is hoping to win both contests. We expect results between 2am and 5am.
The UK economy fell into recession at the end of last year as hard-pressed households cut back on spending. The Office for National Statistics said gross domestic product (GDP) fell by a larger than expected 0.3% in the three months to December after a decline in all main sectors of the economy and a collapse in retail sales in the run-up to Christmas. Rachel Reeves, the shadow chancellor, said: “Rishi Sunak’s promise to grow the economy is now in tatters.”
A senior German minister has suggested the UK could contribute to a new European nuclear shield if Donald Trump becomes US president again.
Home secretary James Cleverly has condemned as “utterly deplorable” a huge recorded rise in antisemitic incidents in the UK since the 7 October Hamas attack inside Israel.
I am expecting a quiet day. The Commons, Lords, Senedd and the Scottish parliament are not sitting. In Stormont there are committee meetings. That is about it for the diary.
It is Martin Belam here with you. You can email me at martin.belam@theguardian.com – especially if you have spotted an error or typo.
Reminder: I know you probably all know this, but please don’t tell us how you voted in the comments section – section 66a of the Representation of the People Act 1983 on the requirement of secrecy makes it an offence to publish information about the ballot before the polls close at 10pm. I have to be on my best behaviour too. Many thanks.
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2024-02-15 09:05:00Z
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