Julian Jessop, Economics Fellow at the free market think tank, the Institute of Economic Affairs, commented on data showing that the UK entered recession in 2023
“There are plenty of excuses for the weak GDP data - many other countries have also slipped into recession, the numbers may be revised, and leading indicators are already improving. But the news is bad enough that it should have some implications for policy too.
“In particular, the Bank of England expected the economy to be flat in the fourth quarter of last year. On top of a downward revision to GDP in the first quarter, this means that the economy is already 0.4 per cent smaller than assumed in the February Monetary Policy Report.
“The MPC's job is to worry about inflation, not growth, but the case for early rate cuts is now even stronger.
“There will also be more pressure on Jeremy Hunt to cut taxes in the Spring Budget. The Chancellor needs to be careful here. There is already some additional stimulus from the cuts in National Insurance in January and from the increases in pensions, benefits and the national minimum wage in April.
“The key driver of the slump into recession is the increase in interest rates. It is important that the Chancellor avoids doing anything that might reignite inflation and encourage the Bank to keep rates higher for longer. But there is room for some well-targeted tax cuts that would both support demand and boost the productive potential of the economy.
“Nonetheless, the UK's problems clearly run deep, and a few tweaks to interest rates and tax rates won't fix them. The longer-term story is that the economy is facing two decades of stagnation. There is an urgent need for the government to pursue pro-growth policies across the board.”
Notes to Editors
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