Reeves demands Sunak “face up” to mistakes as Bank warns of recession

Rachel Reeves has demanded that Rishi Sunak “face up to his mistakes” that have led to a “vicious cycle of stagnation” after the Bank of England warned that the UK may face its longest period of recession since records began.

The Bank announced today that it was raising interest rates to 3% – the highest level since the 2008 financial crisis – in an attempt to bring down inflation. It said inflation is now expected to rise to 11% during this quarter, up from 10.1% in September.

The Bank estimates that the UK entered a recession in the third quarter of this year and that the downturn will last until mid-2024. It predicts that unemployment will rise to 6.5% by late 2025, up from its current level of 3.5%.

Commenting on the Bank’s announcement, the Shadow Chancellor said: “Families now face higher mortgages and more anxiety after months of economic chaos.

“Today’s recession warning lays bare how 12 years of Tory government have weakened the foundations of our economy and left us exposed to shocks, lurching from crisis to crisis with falling living standards and low growth.

“As Chancellor and now Prime Minister, Sunak must face up to his mistakes that have led to the vicious cycle of stagnation this Tory government has trapped us in. Working people are paying the price for Tory failure. Britain deserves more than this.

“Labour will provide the economic responsibility we need and bring forward a proper plan for growth across our country, investing in jobs in renewables, nuclear power and in insulating homes, fixing business rates and driving forward a modern industrial strategy.”

The Bank said: “Inflation is too high. It is well above our 2% target. High energy, food and other bills are hitting people hard. If high inflation continues, it will hurt everybody. Low and stable inflation helps people plan for the future. Raising interest rates is the best way we have to bring inflation down.”

Its statement continued: “It’s our job to make sure that inflation returns to our 2% target. This month we have raised our interest rate to 3%. In total, since December 2021, we have increased our interest rate from 0.1% to 3%.

“What will happen to interest rates will depend on what happens in the economy. At the moment, we expect inflation to fall sharply from the middle of next year.”

TUC head of economics Kate Bell said: “Workers are paying a high price for the Conservatives crashing the economy. Today’s interest hike will increase the risk of a bleak recession this winter. And it will hammer businesses and people paying a mortgage.

“We need a new economic plan with growing wages and strong public services at its heart. And we need a general election now to replace the party that created this crisis.”

Unite general secretary Sharon Graham said: “It remains remarkable that, despite all the evidence, the Bank of England is refusing to acknowledge that profiteering must be tackled to deal with inflation. The Bank of England and the Treasury want workers and communities to pay the price every time.

“They attack wages, they line us up for another round of austerity and now they pile on more misery for those already with personal debt burdens. These are choices, and they don’t have to make them. We have to ask again – who is benefiting from this broken economy?”

GMB general secretary Gary Smith said: “Today, the Bank of England has been forced to step in again to try and salvage some stability from this train wreck of an economy the Conservatives have created

“The end result: we all end up suffering thanks to the Tory’s terrible economic experiment. People desperately need a grown-up government to help them survive this self-made Conservative crisis.”

Chancellor Jeremy Hunt said the government’s number one priority was to “grip inflation”, adding: “The most important thing the British government can do right now is to restore stability, sort out our public finances and get debt falling so that interest rate rises are kept as low as possible.”