UK Economy

Rachel Reeves Excerpts

Monday 19th February 2024 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on the UK economy entering recession.

[The Economic Secretary to the Treasury (Bim Afolami)]

High inflation remains the biggest barrier to growth, which is why halving it is still our top priority. Thanks to decisive action supported by the Government, inflation has fallen from over 11% to 4%. The Bank of England is forecasting that it will fall to around 2% by early summer, in only a matter of months, which is much faster than previously thought.

It is important to put all this in context. Just over a year ago, the Bank of England was forecasting the longest recession in 100 years. That has not happened, and the British economy has proved resilient in the face of unprecedented shocks. Forecasters, including the Bank of England and the International Monetary Fund, agree that growth will strengthen over the next few years, with the IMF forecasting that we will grow faster than Japan, Germany, France, Italy and many others, on average, over the next five years. Wages have been higher than inflation for six months in a row, unemployment remains very low, and we are backing British business by delivering the biggest business tax cut in modern British history and rewarding work by cutting taxes for working people.

These are all reasons to be positive about the economy turning a corner. If we stick to our plan, we can be confident of seeing pressures reduce for families and of achieving healthy economic growth. At the autumn statement, we unveiled 110 growth measures, including unlocking £20 billion of business investment. This includes a substantial labour market package, delivering a tax cut to national insurance for 27 million people, as well as reforming pensions and extending investment zones. The real risk to economic growth and prosperity in this country is the fact that the Labour party has no plan for growth—no plan at all. While they may pretend that they have abandoned their £28 billion pledge, they are still committed to their damaging 2030 energy policy, which, as the Leader of the Opposition has said, costs £28 billion. All of us across this House know what that means: higher taxes and lower growth with Labour.

[Rachel Reeves]

The Chancellor should be here explaining why Britain has fallen into recession. Will the Minister explain why he has been left to answer these questions, and where exactly the Chancellor is? The Chancellor should be accountable to MPs and to our constituents, and answer for his failure in the House. What an insult to all those people who go to work every day and experience the reality of 14 years of Conservative economic failure that he has simply failed to turn up.

Does the Minister accept that the Prime Minister’s promise to grow the economy is now in tatters? Will the Minister explain why the economy is now smaller than when the current Prime Minister entered 10 Downing Street? Does the Minister accept the misery that this Government have caused homeowners with their kamikaze Budget, leaving a typical family renewing their mortgage paying an additional £240 every single month?

The Chief Secretary is also notable for her absence today, and was last seen refusing or simply failing to recognise that their target measure of debt as a share of GDP is rising, not falling. Following her rebuke this morning from the chair of the UK Statistics Authority about misleading the public, can the Minister inform the House whether the Chief Secretary will again be relying on incompetence as her best defence?

It is not good enough. The whole country knows that the economy is not working for working people under the Conservatives. It is time for change. If the Government seriously think everything is fine, why do they not take their record of failure and let the British people decide?

[Bim Afolami]

I thank the shadow Chancellor for her questions.

[Rachel Reeves]

Answer them.

[Bim Afolami]

I am coming to that.

The right hon. Lady started by talking about the Chancellor; as Economic Secretary, I am perfectly entitled to answer on behalf of the Department and I will do so today. The main thrust of her remarks was on growth; let me deal with that in detail.

The first point to recognise is the international context that we all find ourselves in. [Interruption.] It happens to be true. For example—to describe that international context—10 EU countries were in recession in 2023. In relation to forecasts, the Office for Budget Responsibility’s original forecast was that there would be a contraction of 1.5% in the economy; we have significantly outperformed that. As I have said, the Bank of England forecast the longest recession in 100 years; we have significantly outperformed that. On wages, I think this is the sixth month in a row when wages have been higher than inflation, which, as I have said, we have more than halved.

On the Chief Secretary, what she was explaining is that we were and are meeting our fiscal rule, which is that debt will be falling in the fifth year of the forecast excluding the Bank of England. That is what she explained, and that is what I am reiterating for the House. [Interruption.]

Labour Members do not like hearing this, but they have absolutely no plan on the economy. We have been clear about our plan, and it is starting to bear fruit with wages, with cutting taxes for working people starting in January, with higher business investment as a result of our full expensing in the autumn statement. The shadow Chancellor does not have to take it from me; the Office for Budget Responsibility said that the two fiscal events in 2023—the Budget and the autumn statement—would represent the largest increase to GDP that it has ever scored. What I say to her and the House is this: our plan is working; stick with the plan and do not throw it away with the Opposition.