Reeves declares 13 years of Tories a “drag anchor” on prosperity after IMF forecast

Rachel Reeves has argued that 13 years of Tory government have been a “drag anchor” on prosperity after the International Monetary Fund concluded that the UK would be the only major industrialised country to see its economy shrink in 2023.

The IMF warned today that it estimates that the UK economy will contract by 0.6% this year, compared to an average of 1.2% growth across advanced economies. The organisation expects that even sanctions-hit Russia will grow by 0.3% in 2023, following an estimated contraction of 2.2% last year.

In an urgent question to parliament this afternoon, the Shadow Chancellor said: “Britain has huge potential. But 13 years of Tory failure has been a drag anchor on our prosperity. Today’s IMF assessment holds a mirror up to the wasted opportunities, and it is not a pretty sight.”

Reeves noted that the IMF singled out high mortgage costs as one of the reasons for the UK’s low growth projection and declared that a “Tory mortgage penalty” is “devastating family finances and holding back our economy”.

She told MPs: “It will fall to Labour to clean up this mess. Now, if the Chancellor had ideas, answers or courage – he would be here today. But he is not. The question that the people of our country are now asking is this: ”Are me and my family better off after 13 years of Tory government?” The answer is no.”

Responding to Labour’s urgent question, James Cartlidge said the IMF figures confirm that the UK is “not immune to the pressures hitting nearly all advanced economies”, adding that the government agrees with the IMF’s focus on the UK’s high level of inflation.

The Treasury minister argued that “short-term challenges” should not “obscure our long-term forecast”, adding: “If we stick to our plan to halve inflation, the UK is still predicted to grow faster than Germany and Japan over the coming years.”

The IMF’s economic counsellor Pierre-Olivier Gourinchas said the coming year would be “quite challenging” for the UK after the country fell from the top to the bottom of the G7 league table, in what he described as a “sharp correction”.

Gourinchas said a combination of the UK’s dependence on expensive natural gas, the impact of the Covid pandemic on the size of the workforce and higher mortgage costs would affect growth, saying: “All together these factors will lead to a fairly sharp retrenchment in activity this year.”

Commenting on the IMF’s figures, Chancellor Jeremy Hunt said: “The governor of the Bank of England recently said that any UK recession this year is likely to be shallower than previously predicted, however these figures confirm we are not immune to the pressures hitting nearly all advanced economies.”

Reeves said the Tories “have no plan for now and no plan for the future” after Hunt set out the “four pillars” of the government’s plan to promote economic growth in a speech last week.

In a speech to City executives in London, the Chancellor outlined a plan based on “four E’s” – enterprise, education, employment and everywhere – which he claimed would make it possible to “unlock our national potential to be one of Europe’s most exciting, most innovative and most prosperous economies”.

The Shadow Chancellor accused the government of putting a “lasting premium” on people’s mortgages in October last year as a result of the Prime Minister Liz Truss’ disastrous mini-Budget the previous month.

The Labour frontbencher urged Truss and Hunt to apologise for the impact of the fiscal statement on household finances, stressing that it had caused “damage” that government U-turns would not rectify.

Following the mini-Budget, the pound crashed to its lowest level to date against the dollar, and government borrowing costs soared. Mortgage rates reached their highest level since the 2008 financial crisis in early October last year.

Hunt’s predecessor Kwasi Kwarteng was sacked as Chancellor amid the economic turmoil that followed his fiscal statement. He had faced criticism for not providing an Office for Budget Responsibility analysis of the government’s plans alongside his address to MPs.