Rachel Reeves was yesterday warned that she was damaging the UK economy as growth slowed to a crawl.
The Chancellor was blamed for the slowdown during her first three months in office, with critics saying she had talked down the economy, leaving businesses and households hesitant to spend.
Business groups lined up to say she was only making things worse after her shock £25 billion tax raid on employer National Insurance contributions (NICs) in the Budget.
The British Chambers of Commerce said many firms ‘will not be able to stomach’ the higher costs, while analysts at Deutsche Bank said the move could cost 100,000 jobs.
Figures from the Office for National Statistics yesterday showed gross domestic product grew by just 0.1 per cent in the third quarter from July to September. That was worse than economists predicted, leading Ms Reeves to admit she was ‘not satisfied’.
Sir Keir Starmer said the figures were ‘not good enough’.
Growth had enjoyed a strong start to the year yet, upon taking power, the Chancellor repeatedly insisted that the economic inheritance from the Tories was the worst for any new government since the Second World War.
That claim was widely derided in the City – and backfired on Ms Reeves as evidence mounted that her doom-and-gloom comments were damaging business and consumer confidence.
The Chancellor was blamed for the slowdown during her first three months in office, with critics saying she had talked down the economy, leaving businesses and households hesitant to spend
Figures from the Office for National Statistics yesterday showed gross domestic product grew by just 0.1 per cent in the third quarter from July to September with the PM saying the figures were ‘not good enough’
Ms Reeves – who visited an energy firm in Didcot yesterday – said: ‘Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers.’
Shadow Chancellor Mel Stride told Times Radio: ‘I’m afraid they’re reaping to a degree what they’ve done in terms of talking the economy down.
‘And of course now what they’ve done is follow it up with a Budget that has indeed ramped up taxes, particularly taxes that are going to bear down on growth.’
Ms Reeves – who visited an energy firm in Didcot yesterday – said: ‘Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers.’
In an interview with Channel 4 News, she responded to a suggestion that the economy was ‘in a hole’ and she should ‘stop digging’ with her tax on jobs by seeking to blame the Conservatives. She said she had ‘wiped the slate clean and drawn a line under the economic mismanagement and incompetence of the previous government’ and put the economy in a position to grow.
The disappointing ONS figures came as a blow to Ms Reeves the day after a keynote speech in which she outlined a plan to boost growth by creating Australian and Canadian-style pension ‘megafunds’ to unlock £80 billion for investment.
The changes form part of Labour’s ambition to lift growth to the strongest level among all of the G7 advanced economies.
But Britain is now further away from that ambition than when the party took office in July.
In the first half of this year, under the Tories, the UK economy was the strongest in the G7.
The disappointing ONS figures came as a blow to Ms Reeves the day after a keynote speech in which she outlined a plan to boost growth by creating Australian and Canadian-style pension ‘megafunds’ to unlock £80 billion for investment
Shadow Chancellor Mel Stride, pictured, told Times Radio: ‘I’m afraid they’re reaping to a degree what they’ve done in terms of talking the economy down’
Growth of 0.7 per cent in the first quarter and 0.5 per cent in the second quarter as it bounced back from a mini-recession at the end of 2023 led it to being described as ‘going gangbusters’ by the ONS. Under Labour, however, it is flailing at the back with its third-quarter growth the second worst in the G7, with only Italy performing worse.
Meanwhile, in a blow to borrowers yesterday, experts at Goldman Sachs became the latest to predict that interest rates are likely to fall more slowly than they previously expected.
And in an analysis of the NICs raid, Sanjay Raja, senior economist at Deutsche Bank, said it would mean ‘declines in hiring and employment growth, with some firms adjusting more immediately to the increase in tax’. Mr Raja said that – including future roles not created – it would mean the loss of ‘a little over 100,000 jobs’.
Sir Keir will today insist the Chancellor’s decisions were necessary. ‘I will defend our decisions in the Budget all day long,’ he will tell the Welsh Labour conference.