Rachel Reeves has urged the Tory leadership candidates to “stop playing to the gallery” and come up with a “serious plan” for the economy after it was revealed that the UK’s gross domestic product (GDP) had fallen by an estimated 0.6% in June.
The Office for National Statistics (ONS) released its latest GDP figures today. Its estimates found that GDP had fallen by 0.6% in June, following a downwardly revised 0.4% increase in May. Overall, the ONS estimated that the economy had contracted by 0.1% in the period April to June.
Commenting on the figures, the Shadow Chancellor said: “The economy shrinking. Inflation skyrocketing. It is clearer than ever that the Conservatives have lost control of the economy.
“With the Bank of England forecasting a recession lasting the whole of next year, the Conservative leadership contenders need to stop playing to the gallery and start coming up with a serious plan to get Britain’s economy back on track.
“Labour will take the action that’s needed now to get people through the cost-of-living crisis and build the stronger, more secure economy Britain deserves.”
The National Institute of Economic and Social Research (NIESR) think tank declared in its initial reaction to the figures: “It now looks like the UK economy entered a recession in the second quarter of this year as GDP fell by 0.1%, and we expect output to continue falling over the next three quarters.”
In an interview with Sky News this morning, Nadhim Zahawi admitted: “There is no doubt these are challenging times.” The Chancellor said he is focused on dealing with what Russian President Vladimir Putin is doing, “which is effectively using the gas price as a tool to hit back at us for the help that we’re putting into Ukraine”.
Zahawi added that the cost-of-living support the government has already pledged for households “has to be the focus”, along with economic growth.
He told viewers: “Growth comes from private investment, from private business, which is why we’ve got to look at how we can encourage the private sector to make that investment in the economy.”
The Bank of England has projected that the UK will enter recession from the fourth quarter of the year and that real household post-tax income will “fall sharply in 2022 and 2023”.
The Bank raised interest rates last week by half a percentage point – the largest increase in the cost of borrowing for 27 years. The latest increase takes the UK’s rates to 1.75%. It predicted that inflation will rise even higher in the coming months, to around 13%, largely as a result of increases in the price of gas.
TUC head of economics Kate Bell said at the time: “Working people need an approach to inflation that protects jobs and that helps pay keep up with prices.
“But a rate rise does nothing about the current causes of inflation – global energy, commodity and food prices. It will only add to our problems, making a recession very likely and putting lots of people’s jobs at risk.”
Chief economist at the Joseph Rowntree Foundation Rebecca McDonald said: “Staggeringly high inflation is going to hit low-income families hard. We already know seven million low-income families had to sacrifice food, heating, even showers this year because they couldn’t afford them.
“Many also took on credit to pay their bills and are falling behind on their payments. This will be much harder to pay off with higher interest rates putting more families in financial peril.
“While the government might have taken a break from acting on the cost-of-living emergency, these families can’t take a holiday from the year of financial fear. They will be wondering why further urgent solutions needed to shore up family finances ahead of the winter are not yet being put in place.”