Senior Tories have demanded Rishi Sunak deliver “much lower taxes” and for the Bank of England to slash interest rates after revised figures showed the UK economy on the brink of recession.
The Office for National Statistics (ONS) cut its initial growth estimates for gross domestic product (GDP) for the last two quarters, revising it down by 0.1 per cent from its zero per cent growth in the second quarter. The ONS also revised its initial 0.2 per cent expansion in quarter three to zero per cent.
The new figures show the economy was close to entering a technical recession earlier this year, which is when two consecutive quarters show negative growth. Should the latest set of results for the last three months show falling GDP then the UK would officially be in a recession.
According to the ONS, overall growth for this year stands at 0.3 per cent, down from the 0.6 per cent forecast by economists earlier in the year. The economy is just 1.4 per cent larger than it was before the pandemic.
The new data has reignited calls from senior Conservatives for bigger tax cuts and lower interest rates in a bid to boost the anaemic growth stats.
Former Tory leader Sir Iain Duncan Smith told i: “The Bank has been slow to get on to inflation which is why our inflation rose higher than many countries but now the danger is they are over-tightening the economy.
“We need strong growth. To do this we need lower interest rates and much lower taxes. If we don’t get on with this we risk recession,” he added.
His comments were echoed by Sir Jacob Rees-Mogg, who said the revised growth figures only strengthened the need for a cut in interest rates.
“It also indicates that the last rise in September was unnecessary,” he told i.
Chancellor Jeremy Hunt said the economic outlook should not be dampened by the worse-than-expected figures, insisting the outlook for the economy was “far more optimistic than these numbers suggest”.
“We’ve seen inflation fall again this week, and the OBR [Office for Budget Responsibility] expects the measures in the autumn statement, including the largest business tax cut in modern British history and tax cuts for 29 million working people, will deliver the largest boost to potential growth on record.”
The Prime Minister had pledged at the start of 2023 to “grow the economy”.
Asked whether he was concerned about the risk of a recession during a visit to the headquarters of Lincolnshire and Nottinghamshire Air Ambulance on Friday, the Prime Minister told broadcasters: “Compared to the predictions at the beginning of the year, the economy has done better and we’ve actually grown faster than our European neighbours like Germany, for example.
“But of course, we want to see more growth and that’s why in the Autumn Statement a few weeks ago, the Chancellor cut taxes for businesses that are investing to help drive our future growth and the independent experts have said that that will do exactly that.
Shadow Chancellor Rachel Reeves said the revised GDP figures show he has failed to meet his promise.
She said: “Rishi Sunak is a Prime Minister whose legacy is one of failure. He failed to beat Liz Truss, he failed to cut waiting lists, he failed to stop the boats and now he has failed to grow the economy.
“Thirteen years of economic failure under the Conservatives have left working people worse off with higher bills, higher mortgages and higher prices in the shops.”
Industries including film production, engineering and design and telecommunications showed a weaker performance during the third quarter than statisticians initially thought.
Richard Carter, head of fixed interest research at Quilter Cheviot, said: “Growth is weakening and interest rates are really beginning to bite, and while a recession has just been avoided to date, there is no guarantee one will be avoided in 2024.”
He added that “Rishi Sunak’s pledge to grow the economy is now severely in doubt”.