A sluggish economy could force Rachel Reeves to break her pledge and come back with another tax raid, a leading economist has warned.
Revised figures yesterday showed the UK saw zero growth in the three months from July to September. Previously it was estimated at just 0.1 per cent.
Tory business spokesman Andrew Griffith said it was proof Labour had ‘killed, plucked and cooked the UK economic goose’.
And Paul Johnson, director of the Institute for Fiscal Studies (IFS) think-tank, told Times Radio: ‘It’s not impossible that the Chancellor will feel she needs to come back for yet more money next autumn if the economy doesn’t pick up.’
Yesterday’s figures from the Office for National Statistics (ONS) represent the latest evidence of Labour’s dismal economic record.
UK gross domestic product had grown by 0.7 per cent in the first quarter of the year and 0.4 per cent in the second quarter, putting it on a par with the US as the best performer among the G7 group of advanced economies.
But after Labour took power in July – and promptly laid on the doom and gloom about the economic legacy left by the Tories – confidence drained away and growth stagnated in the third quarter, with GDP shrinking by 0.1 per cent in October.
Worse was to come from Ms Reeves when she announced £40 billion of tax hikes in her October Budget, including a £25 billion raid on employers’ National Insurance contributions.
Businesses say the move will result in fewer jobs, lower pay and higher prices.
The Bank of England has downgraded its growth outlook for the last three months of the year from 0.3 per cent to zero.
Some experts think the UK is on ‘recession watch’. A recession would happen if the economy were to shrink for two quarters in a row.
The Chancellor promised business leaders last month that she was ‘not coming back with more taxes’, but has since repeatedly refused to reiterate the pledge, which some experts think she is increasingly unlikely to fulfil.
Mr Johnson said: ‘It’s all a bit miserable… zero for the third quarter, and it’s looking like zero for the final quarter as well, tax increases in the Budget, a general sense of gloom over the economy.’
Yesterday’s ONS figures showed that the UK’s third-quarter growth was at the bottom of the G7 pile, jointly with Italy.
They also showed that, per member of the population, the economy shrank in the third quarter by 0.2 per cent – having grown in the first two quarters of the year. Only Canada performed worse among the G7 nations. And UK household disposable income per head – adjusted for inflation – showed zero growth.
Julian Jessop, economics fellow at the Institute of Economic Affairs think-tank, said the figures ‘confirm that the UK has suffered a Manchester City-style collapse’ – comparing the economy’s performance to the alarming recent loss of form of the Premier League champions.
Shadow Chancellor Mel Stride said: ‘Growth has tanked on Labour’s watch.
‘The Labour Government must now urgently revisit their disastrous Budget and align economic policy with growth, not decline.’