IMF Economic Outlook

Lord Fox Excerpts

Tuesday 31st January 2023 Lords Chamber

[Baroness Penn (Con)]

I must correct the noble Lord on the cause of the disappointing figures for growth this year that we have seen. The IMF emphasises that Russia’s war in Ukraine continues to weigh on economic activity, and the UK’s relatively high dependence on natural gas and, simultaneously, a near-record tightness in our labour market are dampening our outlook.

The noble Lord asked why the UK economy had not recovered to pre-pandemic levels. If we exclude the public sector, the private sector has recovered to above its pre-pandemic level and is in line with other major European economies. There is a difference in the way that the UK estimates its public sector output compared to many other countries, and the ONS has said that international comparisons are difficult to make.

On the point about the optimism that my honourable friend expressed about the UK economy, the Government make no apologies for pointing out our underlying strengths. Last year’s growth rate was uprated by the IMF to one of the highest in Europe, and if we look over the cumulative period 2022 to 2024, growth is predicted to be higher than in Germany and Japan and similar to that of the US. That will happen if we stick to our plan for growth and tackle inflation.

[Lord Fox (LD)]

My Lords, there is no harm in people being optimistic if there are grounds for optimism. Rather than taking this report as a very worrying indicator, the Government are spending their energy downplaying and discounting the bad news in it. Let us look at another indicator that points in the same direction: the ONS statistics on company insolvencies. Its survey, published today, shows a 57% rise in the number of companies going bust; that is more than at any time since the 2009 crisis.

Will the Minister now acknowledge that, as well as the problems that our competitor countries have, with which the Government seek to associate us, there are other problems that are unique to us? The Minister acknowledged the extraordinary problems we are having with skills and the lack of people to work, and the fact that our exports to the European Union have plummeted. Will the Government acknowledge that there is a problem so that they can start solving it?

[Baroness Penn (Con)]

I made it clear that the number one problem facing the UK is our high level of inflation, and that is why the Government have put it at the heart of our economic plans. We are determined to get inflation down. That is why we remain steadfast in our support for the independent MPC of the Bank of England, why we have made difficult but responsible decisions on tax and spending so that we are not adding fuel to the fire, and why we are tackling high energy prices by holding down energy bills for households and businesses this year and next and investing in long-term energy security. I fully acknowledge the challenges the UK is facing, and that is why we have a plan to deal with them.