Rachel Reeves yesterday tried to blame global turmoil after official figures raised fears that the economy is heading for recession under Labour.
The Chancellor declared that ‘the world has changed and we are feeling the consequences’ after the Office for National Statistics said the economy unexpectedly shrank by 0.1 per cent in January.
Ms Reeves said: ‘That’s why we are going further and faster to protect our country, reform our public services and kickstart economic growth to deliver on our plan for change.
‘And why we are launching the biggest sustained increase in defence spending since the Cold War, fundamentally reshaping the British state to deliver for working people and their families; and taking on the blockers to get Britain building again.’
Yet she made no acknowledgment of the effect of the Government’s tax raid on employer National Insurance and a raft of new workers’ rights.
While even Downing Street slapped down her suggestion that Donald Trump was effectively to blame.
Tory leader Kemi Badenoch accused Labour of ‘trashing our economy’.
She said: ‘This is not unexpected. [Sir Keir] Starmer and his Government are choking the life out of business. Yet again, our country is getting poorer under Labour.’
The figures will add to Ms Reeves’s headache as she prepares to address Britain’s darkening economic outlook in a mini-Budget on March 26.
Shadow Chancellor Mel Stride labelled the Government a ‘growth killer’. He said: ‘Labour inherited the fastest growing economy in the G7 but since they arrived, business confidence and jobs are being lost.’
Despite the growth weakness, the Bank of England looks unlikely to provide any relief by cutting interest rates next week, as rate-setters wait to assess the impact of Ms Reeves’s NI hike on inflation.
Asked if US President Donald Trump’s trade wars were to blame for the economy shrinking, a spokesman for the Prime Minister said ‘no’.
Although he added that global uncertainties were ‘undoubtedly having an impact’.
A deepening deterioration in the economy would add to fears of a recession – defined as two quarters in a row of negative growth.
Nicholas Hyett, of investment firm Wealth Club, said: ‘This is not the news the Chancellor would have wanted before this month’s Spring statement. We could be at the start of a long slow slide into recession.’
While Julian Jessop, from the Institute of Economic Affairs, warned that tax hikes and spending cuts in the mini-Budget could aggravate the weakness.