Category: Economy

  • Bank of England – 2022 Statement on Interest Rate Increase (August 2022)

    Bank of England – 2022 Statement on Interest Rate Increase (August 2022)

    The statement made by the Bank of England on 4 August 2022.

    The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 3 August 2022, the MPC voted by a majority of 8-1 to increase Bank Rate by 0.5 percentage points, to 1.75%. One member preferred to increase Bank Rate by 0.25 percentage points, to 1.5%.

    Inflationary pressures in the United Kingdom and the rest of Europe have intensified significantly since the May Monetary Policy Report and the MPC’s previous meeting. That largely reflects a near doubling in wholesale gas prices since May, owing to Russia’s restriction of gas supplies to Europe and the risk of further curbs. As this feeds through to retail energy prices, it will exacerbate the fall in real incomes for UK households and further increase UK CPI inflation in the near term. CPI inflation is expected to rise more than forecast in the May Report, from 9.4% in June to just over 13% in 2022 Q4, and to remain at very elevated levels throughout much of 2023, before falling to the 2% target two years ahead.

    GDP growth in the United Kingdom is slowing. The latest rise in gas prices has led to another significant deterioration in the outlook for activity in the United Kingdom and the rest of Europe. The United Kingdom is now projected to enter recession from the fourth quarter of this year. Real household post-tax income is projected to fall sharply in 2022 and 2023, while consumption growth turns negative.

    Domestic inflationary pressures are projected to remain strong over the first half of the forecast period. Firms generally report that they expect to increase their selling prices markedly, reflecting the sharp rises in their costs. The labour market has remained tight, with the unemployment rate at 3.8% in the three months to May and vacancies at historically high levels. As a result, and consistent with the latest Agents’ survey, underlying nominal wage growth is expected to be higher than in the May Report over the first half of the forecast period.

    Inflationary pressures are nevertheless expected to dissipate over time. Global commodity prices are assumed to rise no further, and tradable goods price inflation is expected to fall back, the first signs of which may already be evident. Although the labour market may loosen only slowly in response to falling demand, unemployment is expected to rise from 2023. Domestic inflationary pressures are therefore expected to subside in the second half of the forecast period, as the increasing degree of economic slack and lower headline inflation reduce the pressure on wage growth. Monetary policy is also acting to ensure that longer-term inflation expectations are anchored at the 2% target.

    The risks around the MPC’s projections from both external and domestic factors are exceptionally large at present. There is a range of plausible paths for the economy, which have CPI inflation and medium-term activity significantly higher or lower than in the baseline projections in the August Monetary Policy Report. As a result, in coming to its assessment of the outlook and its implications for monetary policy, the Committee is currently putting less weight on the implications of any single set of conditioning assumptions and projections.

    The August Report contains several projections for GDP, unemployment and inflation: a baseline conditioned on the MPC’s current convention for wholesale energy prices to remain constant beyond the six-month point; an alternative projection in which energy prices follow their downward-sloping futures curves throughout the forecast period; and a scenario which explores the implications of greater persistence in domestic price setting than in the baseline. These are all conditioned on announced Government fiscal policies, including the Cost of Living Support package announced in May. There are significant differences between these projections in the latter half of the forecast period. However, all show very high near-term inflation, a fall in GDP over the next year and a marked decline in inflation thereafter.

    The MPC’s remit is clear that the inflation target applies at all times, reflecting the primacy of price stability in the UK monetary policy framework. The framework recognises that there will be occasions when inflation will depart from the target as a result of shocks and disturbances. The economy has continued to be subject to a succession of very large shocks, which will inevitably lead to volatility in output. Monetary policy will ensure that, as the adjustment to these shocks occurs, CPI inflation will return to the 2% target sustainably in the medium term.

    The labour market remains tight, and domestic cost and price pressures are elevated. There is a risk that a longer period of externally generated price inflation will lead to more enduring domestic price and wage pressures. In view of these considerations, the Committee voted to increase Bank Rate by 0.5 percentage points, to 1.75%, at this meeting.

    The MPC will take the actions necessary to return inflation to the 2% target sustainably in the medium term, in line with its remit. Policy is not on a pre-set path. The Committee will, as always, consider and decide the appropriate level of Bank Rate at each meeting. The scale, pace and timing of any further changes in Bank Rate will reflect the Committee’s assessment of the economic outlook and inflationary pressures. The Committee will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response.

    In the minutes of its May 2022 meeting, the Committee asked Bank staff to work on a strategy for selling UK government bonds (gilts) held in the Asset Purchase Facility and committed to providing an update at its August meeting. Based on this analysis, the Committee is provisionally minded to commence gilt sales shortly after its September meeting, subject to economic and market conditions being judged appropriate and to a confirmatory vote at that meeting.

  • Rachel Reeves – 2022 Speech at The Economy 2030 Inquiry Conference

    Rachel Reeves – 2022 Speech at The Economy 2030 Inquiry Conference

    The speech made by Rachel Reeves, the Shadow Chancellor of the Exchequer, on 13 July 2022.

    Thank you.

    I want to pay tribute to the work of the Economy 2030 Inquiry.

    Today’s report strikes not just at the truth that our economic problems are deep-rooted but that they are far more than an abstract question of lines on a chart.

    That it is questions of growth, productivity and inequality which underlie the sense that Britain isn’t working for far too many people.

    As many of you will know, I’m an economist by trade, spending the best part of a decade at the Bank of England.

    But I’m also a politician, so let me spend a few moments on the political situation we find ourselves in.

    Because the tables have turned.

    On the day the Prime Minister finally announced his intention to stand down, I was in Leeds, meeting business leaders.

    What I heard from them was what I have heard repeatedly over recent weeks:

    That political instability at the top is a major drag on market confidence – and the last week has shown us something else about this government.

    Because any lingering sense that the Conservatives are the party of economic responsibility has been shredded to pieces over the past few days.

    Instead of setting out serious plans to help people with the cost of living crisis, just as we hear terrifying estimates of how much energy bills will go up again in October, we are presented with the extraordinary spectacle of a Tory tombola of tax cuts – with no explanation of what public services will be cut, or how else they’d be paid for.

    Honesty and integrity matter in politics, not just when it comes to parties and rule breaking but also when it comes to economic policymaking.

    The level of unfunded tax cuts being bandied about this week would blow a massive hole in the public finances.

    Every single Conservative leadership candidate supported the government’s fiscal rules when they were passed into law in January, but now they are prepared to take a flamethrower to them.

    I’ve set out the fiscal rules which will bind the next Labour government.

    Rules which I will stick to with iron clad discipline.

    Because responsible management of our public finances is the only route to providing the strong foundations we need to reboot our economy, revitalise our public services and re-energise our communities.

    They will be paired with an absolute commitment to ending the shocking levels of waste and fraud we’ve seen under this government strengthened by the creation of a new Office of Value for Money, .to make sure every pound of taxpayers’ money is treated with the respect it deserves.

    Back in September I said that I am more than happy to take on the Tories when it comes to economic competence because I know we can win. If didn’t know then that they wouldn’t even bother putting up a fight.

    It is important that we put this moment in wider context.

    Because we face a succession of long-term economic challenges – low growth, flatlining productivity, stagnant wages, and now soaring inflation.

    Under the last Labour government, the UK economy grew at an average of 2.1 percent a year, allowing us to deliver the biggest boost to investment in public services in our lifetimes.

    But since then, growth has averaged just 1.5 percent a year.

    We shouldn’t kid ourselves that this is solely a product of global trends.

    The UK had the second lowest productivity growth in the G7 in the 2010s and, as today’s report shows, the UK’s productivity gap with France and Germany has almost trebled since 2008 – equivalent to an extra £3,700 in lost output per person.

    Stagnation isn’t inevitable.

    Our capacity for innovation, enterprise and old-fashioned hard work remains undiminished.

    Britain has huge opportunities if only we have a government that can bring the country together in a spirit of national purpose.

    But the only alternative to a high-tax, low-growth, high-inflation economy is a serious plan.

    Let me tell you what that involves.

    It means addressing our deep-rooted supply-side problems which have contributed to low growth and stalling productivity and are a major factor in the spiralling inflation rates we’re seeing.

    In America, Treasury Secretary Janet Yellen has called this approach “modern supply side” economics.

    It’s based on the knowledge that government plays a crucial role in bringing about economic growth and tackling the structural challenges that have held us back

    My vision for a modern supply side economics for the UK involves three key things.

    First, we need to make sure people can realise their potential and play an active role in a growing economy.

    For all ministers’ talk of a jobs miracle the reality is we have a hidden worklessness crisis with employment lower than before the pandemic at a time of record vacancies, and a million people missing from the workforce relative to pre-pandemic trends.

    That is why my colleague Jonathan Ashworth this week outlined plans from better links between employment and health services, to flexible working, and reforming how our job centres operate to help people return to work where they can.

    Fundamental to strengthening our supply of labour is supporting parents to work.

    That means urgently addressing the cost and availability of high-quality, affordable and flexible childcare.

    Second, we need to support British businesses to thrive – working in partnership to get the economy growing again and provide the good jobs we need.

    That will rest on a modern industrial strategy on our plan to use all the tools at government’s disposal to buy, make and sell more in Britain, and on our Climate Investment Pledge – which will help create new markets and leverage in private investment, and drive carbon emissions down.

    Today’s Resolution Foundation report argues forcefully – and rightly – that we must play to Britain’s strengths.

    We are the second largest exporter of services in the world and pioneers in creative industries.

    We should be proud of those strengths.

    That is why it is beyond belief that the Tories delivered a Brexit deal that hurts our creative and service industries.

    So we will address these flaws building on the deal, ensuring at a minimum we agree the mutual recognition of professional qualifications and negotiate an EU-wide cultural touring arrangement.

    And third… we need to support great British entrepreneurs.

    Which is why, last month, I announced the launch of a new review, led by a panel including Lord Jim O’Neill to map out how we can build the institutional ecosystem that ensure new and growing businesses have what they need to flourish here in the UK.

    This approach – a new, ‘modern supply side’ economics – comprises an ambitious plan for growth grounded in the realities of the world in the 2020s, not in Tory Party fantasy which would result in higher borrowing, increased mortgage rates, and cuts to our schools, hospitals and police.

    Labour’s alternative is based on partnership between government and business – working for sustainable growth felt in every part of the country with a serious plan and the determination to deliver it, built on the strong foundations provided by our fiscal rules.

    Committed to honesty and integrity, because they are important virtues in public life, and because they are essential to a growing economy with stronger public services and higher living standards for all.

    Thank you.

  • Keir Starmer – 2022 Keynote Speech on the Economy

    Keir Starmer – 2022 Keynote Speech on the Economy

    The speech made by Keir Starmer, the Leader of the Opposition, in Liverpool on 25 July 2022.

    I’d like to start with an observation about recent crises.

    Whether it’s the cost of living or recovering from the pandemic our economy is weaker than our competitors. Less resilient. Brittle. And ultimately, we are all poorer for it.

    This is why I am clear Labour will fight the next election on economic growth.

    That there is no task more central to my ambitions for Britain than making the country and its people better off.

    Tonight, I think you will hear two other candidates for Prime Minister who will also define the choice for their party to be about the economy and growth.

    But what a choice it is.

    In one corner you have Rishi Sunak, the architect of the cost-of-living crisis. In the other, you have Liz Truss, the latest graduate from the school of magic money tree economics.

    Neither of them has the answers to the economic challenges we face – and who can be surprised?

    Under their watch, the average British family is £8,800 poorer than their equivalents in other advanced economies. This isn’t just a failure of policy, it’s also a failure of philosophy. Their leadership contest won’t change that.

    Because both Rishi Sunak and Liz Truss rage against the dying of the Thatcherite light. They don’t understand economic strength in the 21st century needs partnership. They don’t believe you need state and market – business and worker.

    The everyday economy and the technological frontier. All contributing together if you want strong, secure and fair growth.

    I am under no such illusions. Rebooting our economy in this way will be the defining task of my Government.

    It will ask searching questions of my party and our instincts.

    We cannot be like the Tories – clinging to old ideas, trapped in our history.

    To give Britain the fresh start it needs, we need a new approach. The goal is straightforward – to maximise the contribution we all make to national prosperity. Every business, every person, every community.

    It sounds simple. But in reality, we failed to do it for decades.

    The best of British business is the best in the world. But we have geared our whole economy to delivering only for those firms.

    We have been complacent about the number of jobs created which are low paid and insecure.

    When insecurity stops people getting on and too few communities feel the benefit of the wealth we create.

    Which makes people feel hard work is not rewarded.

    In a nutshell: we draw our economic strength from too few places.

    And like a skyscraper built without foundations, that ultimately leaves us weak.

    If you want evidence of this, look no further than the cost-of-living crisis.

    Everywhere I go, I hear the same stories. People scared about the future.

    Worried that when winter comes, they will face horrible choices about what to spend their money on.

    Pensioners who can’t afford to turn on the heating.

    Families cutting back on what they buy their children.

    But there’s one thing I hear time and time again that worries me more than anything else.

    That is: working people telling me hard work doesn’t pay.

    That they’re working harder and harder just to stand still.

    That alarms me for two reasons.

    First, because I’ve been lucky enough to take a journey in my life.

    From a working-class family to head of the Crown Prosecution Service.

    And my fear is an economy so wracked by low growth and insecurity means people from my background can’t get on.

    Second, because honestly: what does it say about the state of Britain when working people feel that hard work doesn’t pay?

    What does it say about the health of our country?

    The health, even, of our democracy?

    It says an unwritten contract is broken.

    A contract that says in return for hard work you get a fair reward.

    That you don’t have to feel insecure about your prospects.

    That your contribution is respected.

    It’s a two-way thing.

    A strong national economy needs everyone making the best contribution they can.

    Whatever their circumstances, wherever they live.

    But in exchange, we must make sure the contribution working people make to that national effort is fairly rewarded.

    That hard work does pay.

    That their effort is respected.

    That they enjoy the security they need to get on.

    To do all that we need three things:

    Growth. Growth. And growth.

    That’s why I have told the Shadow Cabinet that every policy they bring forward will be judged by the contribution it makes to growth and productivity.

    Because everything I want for Britain comes back to this central mission.

    Without growth we won’t get a high wage economy.

    Without growth we can’t revitalise public services.

    Without growth we can’t repair that broken contract, re-energise communities or unite the country.

    Low growth countries are weaker at standing up for the national interest.

    Low growth economies can’t support people from my background to get on.

    Low growth economies can’t rise to meet the challenges of the future.

    Challenges like climate change.

    I want to be very clear on this point.

    We will not be distracted by the siren calls – from the right or the left – that say economic growth and net-zero do not go together.

    That these two objectives are somehow in tension.

    Or even that we should actively pursue a policy of no growth.

    I reject that completely. It is totally the wrong way round.

    A plan for net-zero needs growth.

    A plan for growth needs net-zero.

    This is about the future of course.

    Fail to tackle climate change and you can forget about growth -there is no bigger business risk.

    Look at how our infrastructure has struggled in the last few weeks.

    But tackling climate change is also a clear opportunity to create wealth in the here and now.

    That is why Labour is committed to a Climate Investment Pledge worth £28bn a year until 2030.

    And we see that pledge as a down-payment that will unlock the private investment which delivers the next generation of jobs.

    Because – the way I see it – some nation is going to lead the world in electric vehicles, in floating off-shore wind, in new hydrogen and nuclear technologies. Why not Britain?

    But to maximise our collective contribution, we must be clear about the kind of growth we need.

    The growth I want for Britain is strong, secure and fair.

    Strong, because it will build a foundation where every business and every person plays a role.

    Secure, because it will produce good jobs that don’t leave people feeling insecure.

    Fair, because it will unlock the potential of every place – every community, every town and every city.

    This last point is so important and strikes at the structural weakness of our economy.

    It’s not an issue of city versus town.

    The productivity gap between our cities and their equivalents in Europe is too big.

    And too many of our towns don’t have a fair chance to contribute in an economy still dominated by London and the South East.

    This is the hurdle we must clear.

    We need growth that is strong, secure and fair to re-establish the contract between people and prosperity.

    The distinction I would make is this:

    An economy can grow and leave some of its people behind.

    But a nation based on contribution cannot grow in that way.

    But of course all promises need a plan.

    Boosterism and fantasy economics are not the same as ambition.

    So today I want to share with you some of the plans Labour has to reboot growth and set out five principles that will guide my government in growing our economic contribution.

    These are:

    1. We will be financially responsible.

    2. We will be distinctively British.

    3. We will work in partnership with business.

    4. We will re-energise communities and spread economic power.

    5. We will refocus our investment on boosting productivity.

    Let me take each of these in turn, starting with the most direct – financial responsibility.

    The risk of rising inflation could not be clearer.

    So we will not announce a single penny of day-to-day spending without saying how we would pay for it.

    We will only borrow to invest to meet the challenges of the future – that’s what our Climate Investment Pledge is all about.

    And we will set a target to reduce debt as an overall share of our economy.

    That’s the responsible thing to do.

    And the contrast with the Conservative competition to waste more of your money could not be starker.

    With me and with Rachel Reeves you will always get:

    Sound finances; careful spending; strong, secure and fair growth.

    There will be no magic money tree economics with us.

    My second principle is that we must grow our contribution in a distinctively British way.

    This means two things.

    First, that we need resilient supply chains in sectors which are vital for British security and growth.

    That’s why we have a strategy to buy, make and sell more in Britain; why £3bn of our Climate Investment Pledge will help forge a new future for our steel industry.

    And why we have committed to new public procurement rules that will build up Britain’s sovereign capabilities in key industries.

    And let me be clear: it isn’t protectionist to say this.

    Or somehow old fashioned.

    Britain will always be an outward facing, confident, trading nation.

    But all around the world, businesses are looking again at the resilience of their supply chains.

    Reacting to the crises we have faced and will face in the future.

    Countries must do the same.

    Second, a British approach means we cannot transplant the economic model of another country onto ours.

    I met Olaf Scholz, Chancellor of Germany and leader of our sister party, the SPD, the other day.

    He is showing that when levelling-up is based on practical plans, not far-fetched promises, amazing things can happen.

    In eastern Germany right now, some of the poorest parts of the country are leading the continent in the lucrative race to develop batteries that store renewable energy.

    This is what can be done.

    And, as Lisa Nandy has spelt out, just because the Tory commitment to levelling up is dead, doesn’t mean the idea of levelling up is dead – Labour will take it on.

    But to do this in a way that isn’t pure boosterism, we must be honest about British strengths.

    Take manufacturing.

    Britain has an extraordinary genius when it comes to manufacturing.

    We lead the world in pharmaceuticals, bio-science, aerospace…

    The Nissan factory in Sunderland is one of the most productive in Europe;

    And the Covid-19 vaccine developed by AstraZeneca and Oxford University has saved millions of lives around the world.

    When I was at Airbus in Filton, I saw them working with 3D engineering literally shaping components by bringing together particles and matter in a way unimaginable in the factory my dad used to work in.

    We can and should take advantage of these strengths.

    The road to higher growth and productivity runs right through them.

    But we are not Germany.

    The role manufacturing plays in our economy will always be different.

    And we have superpower strengths – in universities, in creative industries, in exporting services – that other countries can’t compete with.

    The challenge in both services and manufacturing is the same.

    The best of British is the best in the world.

    And the way we stay competitive is to get more of it: more innovation, more new technology, more research and development, more unlocking the commercial power of our universities, more specialising in the knowledge-rich industries of the future, and more start-ups.

    Which is why we have asked Lord Jim O’Neil to look at how we can make Britain the best country in the world to start a new business.

    And why we have a plan to Make Brexit Work that doesn’t ignore the strength of our services or our universities.

    But an economy that grows our contribution, must rest on strong foundations.

    Foundations that are there in every community.

    That is why the work Rachel has been doing on the everyday economy is so important.

    Retail, education, health and care – we saw in the pandemic how much of the wealth we create depends on these sectors being strong.

    For too long industrial strategy has simply ignored them.

    And with that, ignored one of Britain’s distinctive challenges on growth.

    Labour’s industrial strategy will contain a plan for the everyday economy.

    And our New Deal for Working People will introduce new employment rights to give greater security for people working in it.

    That brings me to my third principle: partnership.

    For growth that is strong, secure and fair – we must work together.

    We need real partnership between state and market;

    Business and worker;

    The everyday economy and the technological frontier and it is the job of a modern industrial strategy to make sure this partnership grows our collective contribution.

    Not in a nostalgic way where Government directs the activities of businesses.

    Modern industrial strategy isn’t about growing the size of the state – it’s about what the state does.

    How it supports businesses to innovate and grow.

    Brings in the creative brilliance of our universities.

    And applies them to the national missions we must all contribute towards.

    Whether that’s leading the world in artificial intelligence.

    Or applying our genius to the challenge of net-zero.

    Just down the road, at the Materials Innovation Factory, the University of Liverpool and Unilever are partnering to bridge the gap between scientific research and production.

    Developing the new materials we need to tackle climate change or discover life-saving new medicines.

    We need to do so much more of this mission-driven partnership.

    But the Government doesn’t have a plan.

    And we have a massive job on our hands when it comes to private investment.

    For decades we have trailed our competitors.

    In France, businesses invest around 30% more relative to GDP every year.

    If we could just close this gap, we would land a serious blow in our battle against low growth.

    We know it requires public investment – that is why we have our Climate Investment Pledge.

    We know it requires fair taxation – that is why we will scrap business rates and replace them with a system that levels the playing field.

    But we also know it requires stability.

    And that requires institutions that take a serious, patient, long-term view about what needs to be done.

    So today I can announce we will establish an Industrial Strategy Council.

    And we will go further by putting it on a statutory footing.

    It will provide advice that shapes policy in the way the Climate Change Committee does.

    Or the Office for Budget Responsibility.

    A permanent part of the landscape.

    That sets out our strategic national priorities that go beyond the political cycle.

    Brings in the expertise of business, science, and unions

    Holds us to account for our decisions.

    And builds confidence for investors that will boost long-term growth and productivity.

    My fourth and fifth principles are best taken together.

    Because spreading power and raising the productivity of the economy everywhere are fundamental to growing our contribution.

    On spreading power, I have asked Gordon Brown to look at new forms of economic devolution.

    To make sure the decisions about things that drive regional growth:

    Like skills; infrastructure; attracting investment; are all made by people with skin in the game.

    Labour will not attempt to run our levelling-up strategy from the centre.

    Nor will we offer it alongside a divisive argument about north versus south;

    City versus towns.

    To me they’ve always felt like false choices.

    A productive Liverpool is good for Birkenhead.

    A strong Dudley is good for Birmingham

    And each has a shared fate in a wider battle against regional inequality.

    But we must also recognise that every place needs the power to grow its own economy.

    So our reforms will allow devolved and local government to make long-term financial decisions.

    To reap the rewards of investment in their economy.

    That way you make sure every city, every town, every place takes ownership of their contribution.

    That people and businesses with a long-term commitment to their community, work together in partnership.

    It’s what Labour is delivering where we are in power.

    And it’s what Labour will deliver in national government.

    But as well as spreading power, real levelling-up also requires investment.

    And this is where my Labour Party will move on from the old ideas.

    Because the old approach focused on growing the pie in any way possible.

    Then redistributing.

    But this is not strong, secure and fair growth.

    It leaves too many people in insecure jobs where their hard work is not fairly rewarded.

    Too many communities locked out from the benefits of growth.

    And redistribution cannot repair the contract.

    There is no point looking to the right on this.

    The evidence of the past decade shows they will only give us stagnation.

    But what we will do – what winning centre-left parties around the world have done – is to adopt a new approach to investment.

    An approach the US Treasury Secretary Janet Yellen has called Modern Supply Side economics.

    It rests in part on a universal truth about social democracy.

    A strong economy needs strong public services.

    And strong public services need reform and investment.

    But it also depends on something more subtle.

    Because the investments we make now should have a laser-like focus on boosting long-term productivity across the country.

    Not just quick wins in the South East.

    Which means we must learn to focus on the supply side.

    On growing the collective contribution.

    Everywhere.

    You can see this approach in our fully-funded plans for public service reform.

    Whether it is our 8,500 new mental health professionals….

    or our National Excellence Programme for schools that will tackle the educational inequality at the heart of low productivity…

    our policies are not just an investment in the health and wellbeing of our communities.

    They are also an investment in the long-term growth and productivity of the country.

    There is no tension here – just look at how many people at the moment can’t work because of their health.

    A highly skilled and healthy nation.

    And a fast-growing modern economy.

    Depend on each other.

    I never think it’s too hard to identify what people want from politics.

    At the moment, it’s probably easier than usual.

    People want a fresh start for Britain.

    They want the opportunity to get on.

    And above all they want to be free from the insecurity of the cost-of-living crisis.

    The approach to growth I have set out today will challenge my party’s instincts.

    It pushes us to care as much about growth and productivity, as we have done in the past about redistribution and investment.

    Not to hark back to our old ideas in the face of new challenges.

    You will see a clear contrast between my Labour Party and the Thatcherite cosplay on display tonight.

    The difference between a Labour Party ready to take Britain forward.

    And a Tory party that wants to take us back into the past.

    Between Labour growth.

    And Tory stagnation.

    That will be the choice at the next election and we are ready.

    Ready to renew the contract with working people.

    Ready to reboot our economy and end the cost-of living crisis.

    Ready to unlock the contribution of every business, person and community.

    And deliver the strong, secure and fair growth our country needs.

  • Boris Johnson – 2022 Answers at Liaison Committee (Tax Cuts)

    Boris Johnson – 2022 Answers at Liaison Committee (Tax Cuts)

    The answers given by Boris Johnson, the Prime Minister, at the Liaison Committee held in the House of Commons on 6 July 2022.

    Darren Jones: Prime Minister, how is your week going?

    The Prime Minister: Terrific, like many others.

    Q99 Darren Jones: Did Michael Gove come and tell you to resign today?

    The Prime Minister: I think I said earlier that I am here to talk about what the Government is doing. I am not going to give a running commentary on political events.

    Q100 Darren Jones: Okay. Let’s talk about what the Government is doing. You have just said today that the Government is giving the biggest tax cut in a decade, but it is a tax cut to your own tax rise, isn’t it?

    The Prime Minister: No, what it does is it gives 30 million people—by lifting the threshold, it gives them, on average, a tax cut of £330.

    Q101 Darren Jones: Against the tax rise that you previously announced. In fact, freezing tax allowances for average income tax payers means that they are going to pay £46.8 billion more over the next four years. Tax is going up, not down, isn’t it?

    The Prime Minister: It is certainly true that what we have had to do is make sure we deal with the fiscal impacts of covid. The Committee will remember that we had a colossal fall in output. We had the biggest pandemic for 100 years, and we had to look after people and businesses to the tune of £408 billion. That money doesn’t grow on trees. In order to protect our schools and hospitals, we of course have had to—

    Darren Jones: Increase the tax levels.

    The Prime Minister: We have had the health and care levy. What we are doing now is helping people with, on average, a £330 tax cut.

    Q102 Darren Jones: Prime Minister, I asked about the tax cut that was announced today, but I will move on. Let’s look at the economy before the pandemic. You mentioned the pandemic—an event that was very difficult for the Government. Before the pandemic—between 2010, when the Conservative party came into office, and the pandemic—national debt increased by £640 billion. It is now at 100% of national wealth, and you keep announcing tax cuts and spending plans at the same time. Are you just going to keep putting more and more debt on to the nation’s credit card?

    The Prime Minister: Sorry, you were just complaining about taxes going up.

    Darren Jones: I am asking about what you are doing in government, Prime Minister.

    The Prime Minister: You need to get your story straight.

    Darren Jones: My facts are from the Treasury, Prime Minister. Debt is up.

    The Prime Minister: We have to be sensible and we have to be responsible. We are making sure we manage the public finances in a prudent way, and I think that there will be scope for further tax cuts in due time.

    Q103 Darren Jones: Maybe imminently. Prime Minister, can I move on to economic growth? You said yesterday that you welcomed your new Chancellor, Nadhim Zahawi, because he would grow the economy, presumably in a way that Rishi Sunak couldn’t.

    The Prime Minister: I don’t think I said that. Anyway, go on.

    Q104 Darren Jones: We are more likely to end up in a recession this winter, aren’t we?

    The Prime Minister: As I was saying to Stephen, the economy and people are going to be under a lot of pressure, but I think we will get through it.

    Q105 Darren Jones: Do you think there will be a recession in the winter?

    The Prime Minister: I think there will be a lot of pressure caused by the price spike. We are going to do everything we can to shield people and deal with the underlying causes of inflation, whether that is through the energy markets, the labour markets or whatever. There is a lot that we can do, and I think we will emerge stronger on the other side.

    Q106 Darren Jones: You and your supporters have often said that you have got all the big calls right as Prime Minister, but actually on tax, debt, growth and pay, things have been getting worse, not better. I understand that 14 million people voted for you in 2019; you have let them down, haven’t you?

    The Prime Minister: No, I think that what they can see is a Government that gets on relentlessly with a programme of uniting and levelling up. We have the biggest investment in infrastructure for a century—£650 billion going in on all the things that Huw was talking about: roads, rail, transport of all kinds and housing. It is a colossally ambitious programme that we are still doing. At the same time, because, as you put it, Darren, we got the big calls right—

    Darren Jones: I didn’t agree with that, by the way.

    The Prime Minister: Well, I’m going to agree with it even if you don’t. We got the big calls right on covid. We came out of lockdown faster, and we got it right with the vaccine. That has put us in a position to look after people, and that is what we are doing.

    Q107 Darren Jones: Thank you. I’m going to move on to my next question. I would like to read something out to you: “When a regime has been in power too long, when it has fatally exhausted the patience of the people, and when oblivion finally beckons—I am afraid that across the world you can rely on the leaders of that regime to act solely in the interests of self-preservation, and not in the interests of the electorate.” Who authored that quote?

    The Prime Minister: You are trying me. Was it Cicero? Was it Aristotle? Let me think—was it Plato? Was it Montesquieu?

    Q108 Darren Jones: Maybe Nero. Just to break it to you, it was you, Prime Minister. Perhaps it was foresight. I will finish, because I am about to run out of time. I made a joke there, but in all sincerity—I know this must be difficult for you personally—this isn’t funny. This is not a game. People are struggling across the country. It is not brave for you to carry on doing this. I think, in my view, you are hurting the country, Prime Minister. On a very human level, surely you must know that it is in the country’s interests for you to leave now.

    The Prime Minister: I think the country is going through tough times. You are making a point about duty, right? I look at the issues this country faces, I look at the pressures that people are under and the need for Government to focus on their priorities—which is what we are doing—and I look at the biggest war in Europe for 80 years, and I cannot for the life of me see how it is responsible just to walk away from that, as I said earlier on in PMQs, particularly not when you have a mandate of the kind we won two or three years ago.

  • Rishi Sunak – 2022 Letter of Resignation as Chancellor of the Exchequer

    Rishi Sunak – 2022 Letter of Resignation as Chancellor of the Exchequer

    The letter of resignation from Rishi Sunak, the Chancellor of the Exchequer, sent to Boris Johnson, the Prime Minister, on 5 July 2022.

  • Caoimhe Archibald – 2022 Comments on the Cost of Living

    Caoimhe Archibald – 2022 Comments on the Cost of Living

    The comments made by Caoimhe Archibald, Sinn Fein’s Spokesperson on the Economy, on 18 June 2022.

    For months the cost of living has been on a steep upward trajectory, inflation is now predicted to hit 11% over the next couple of months and this is impacting on workers, families and businesses.”Boris Johnson and his government need to listen to workers and act now.

    While the Tory government did announce some measures in recent weeks, further action is urgently needed, particularly in relation to rising petrol and diesel costs.

    Petrol and diesel prices are heading towards £2.00 per litre and many people are calculating the cost of every journey and only making the ones they can’t avoid.

    The British government should act immediately to cut duty on fuel further and also slash VAT on fuel and energy.

    Workers and families are struggling as their pay packets don’t go as far now as they previously would have, and we need to empower workers to uphold their rights to decent pay and conditions.

    We need the DUP to join immediately with other parties to form an Executive so we can tackle the cost of living crisis and get money into the pockets of workers and families.

  • Rachel Reeves – 2022 Speech to the Times CEO Summit

    Rachel Reeves – 2022 Speech to the Times CEO Summit

    The speech made by Rachel Reeves, the Shadow Chancellor of the Exchequer, to the Times CEO Summit in London on 16 June 2022.

    Thank you Dominic, and thanks to the Times for hosting us today.

    Since being appointed Shadow Chancellor I have had the privilege to visit inspiring British businesses.

    From Castleton Mills, once a key part of West Yorkshire’s textiles industry – now reimagined as a creative, collaborative space housing freelancers and start-ups.

    To world-recognised names like Rolls Royce in Derby – leading pioneering research to develop carbon-neutral aviation.

    And Oxford Nanopore, one of our leading technology and life science firms.

    Britain has huge economic strengths. Our leading universities, our language, our geography, our excellence in sectors from financial services to life sciences to cultural industries.

    But questions of wealth creation have become too marginal to our politics.

    After starting my career as an economist at the Bank of England, I spent several years at HBOS in Halifax.

    I know what business can bring. Not just in prosperity and work which pays well – but in pride and identity.

    After a decade in which people have seen their incomes stagnate and their public services cut to the bone, I don’t only see the task of building a more just society as a moral responsibility – though it is that – but also as the route to a dynamic economy with wealth creation at its core.

    Through which opportunity is widely shared, and through which we can break out of our cycle of low growth, low productivity and underinvestment.

    Labour is pro-worker and pro-business in the knowledge that the success of both is crucial to our country’s economic success.

    A new partnership between government and business will be the foundation of everything the next Labour government will hope to achieve.

    This a challenging moment.

    The politics of stagflation and energy security have come to the fore for the first time in half a century.

    But this present crisis is just the latest chapter in a longer economic story. Between 1997 and 2010, the UK economy grew at an average of 2.1 percent a year, but since then, growth has averaged just 1.5 percent a year.

    And now the OECD forecasts that the UK will have zero growth next year – putting us behind every G20 economy bar Russia.

    I don’t accept that economic decline is an inevitability.

    But we do face a succession of challenges if we are to return to strong growth and shared prosperity.

    Our success will rely on the leadership of both government and business.

    I know businesses increasingly recognise their wider role in strengthening our economy and society.

    But there is an onus on government to rethink too.

    It is no longer enough – if it ever was – for government to simply get out of the way.

    In America, the Biden administration is taking a more active role in tackling structural economic weaknesses. US Treasury Secretary Janet Yellen calls this approach ‘modern supply side economics.’

    For the next Labour government, such an approach will mean government applying itself more concertedly to driving up the productive potential of our economy. By boosting labour supply through providing workers with the skills, healthcare, and childcare they need to flourish. By using its power of procurement to support businesses here in Britain. And as a strategic partner of business.

    Let me talk more about that final point – strategic partnership.

    I want to see UK companies thrive, to see great ideas come to fruition and for the UK to be a great place in which to invest.

    But I don’t believe all that happens in a vacuum.

    The state has to be active in fostering the conditions for our country to prosper, whether that is in sponsoring world leading research, getting the regulatory environment right, or in helping bridge the gap between a fantastic concept and the reality of its commercial production.

    The last Labour Government developed an active industrial strategy on these lines – and for all my differences with the the Cameron and May governments, their efforts to continue this work were welcome.

    But now these efforts have been abandoned – and the industrial strategy scrapped.

    And for no clear reason, other than an ideological objection.

    Ideology won’t help great British companies, but good partnership will.

    That’s why Labour will bring local, regional and national leaders together with businesses, workers and universities to support the growth of high-tech, competitive industries of the future. And to map out a better way forward for the high-employment, low-productivity sectors on which we all rely – what I call the everyday economy.

    But an approach to strategic partnership can’t stop there.

    I agree with the director of the CBI, Tony Danker, that what is required to break us out of our cycle of underinvestment and low productivity is ‘catalytic public investment’.

    Labour’s climate investment pledge would provide just that, and crowd in private sector investment – to create new markets and bolster existing ones.

    And a modern supply side approach cannot and must not ignore the task of making Brexit work for British businesses and consumers.

    So we must address the flaws in the Brexit deal hitting our food and drinks manufacturers, creative industries, professional services and more – through repairing and strengthening our supply chains, and building on the UK-EU trade deal to cut red tape for exporters.

    We need to adopt an approach that seeks to solve problems in a practical way for UK companies, and aims to build trust – rather than continually retreating to the issue of Brexit as a domestic political wedge.

    Any competitive market economy must offer opportunities for new, innovative and agile businesses to flourish.

    Innovation is a great British strength. It’s in our DNA.

    We have immense resources in the creativity and drive of our entrepreneurs, and the innovative capacity of our universities.

    Fast-growing firms already contribute £1 trillion to our economy and employ 3.2 million people.

    But something I have heard repeatedly is a real worry about the stubborn obstacles preventing many of them from scaling up, and the small number of start-ups listing in the UK.

    Labour’s mission is to build an institutional ecosystem enabling the market access, finance, and skills that new and growing businesses need.

    So today I am launching a review, led by a panel of entrepreneurs and experts including the economist and former Treasury Minister Lord Jim O’Neill, and tasked with charting a course to ensure Britain is the best place to start and to grow a business.

    The review will be given a remit to ask the difficult questions and present solutions – about the incentives for growing businesses here compared with other countries, about access to capital – especially patient capital, about the skills, structures and incentives presented to our universities to spin out new businesses, and about how we extend opportunities to a more diverse range of entrepreneurs.

    I consider it a key task for the next Labour government – a central part of a modern supply side approach – to provide answers to those questions, and to unleash the next generation of innovators and wealth creators.

    The method I have outlined today is a modern supply-side approach, with government as a provider economic security, enabler of a highly-skilled workforce, and a strategic partner to business.

    The object is a stronger society – underpinned by a thriving market economy in which opportunity is shared widely.

    But to realise this, we need a different kind of leadership. Upholding strong institutions, practising transparent decision-making, and showing respect for business.

    Keir Starmer’s Labour Party – proudly pro-worker and proudly pro-business – will offer that leadership.

    Thank you.

  • Rachel Reeves – 2022 Comments on the Economy

    Rachel Reeves – 2022 Comments on the Economy

    The comments made by Rachel Reeves, the Shadow Chancellor of the Exchequer, on 12 June 2022.

    People are scared about the future and lack the confidence to spend.

    While the Chancellor’s cost of living package and u-turn on the windfall tax are welcome, we need more than just sticking plasters. People want more than just sticking plasters. They want to know that the government has got control of the economy and a grip of this crisis.

    Over the past 12 years the Conservatives have demolished the foundations of our economy.

    With me as Chancellor, Labour will build a stronger, more secure economy. We will get the cost of living crisis under control and make Britain more resilient, laying the foundations we need for a thriving, dynamic economy.

  • Pat McFadden – 2022 Speech on UK’s GDP Figures

    Pat McFadden – 2022 Speech on UK’s GDP Figures

    The speech made by Pat McFadden, the Labour MP for Wolverhampton South East, in the House of Commons on 13 June 2022.

    I am grateful to the Minister for his response. GDP down 0.3% in April. A fall of 0.1% in March. Services down 0.3%. Production down 0.6%. Construction down 0.4%. Inflation at 9%. Tax promises broken. The trade deficit at £24 billion. The pound falling against the dollar. The director general of the CBI saying business leaders are “in despair”. The OECD forecasting that, next year, the UK will have the lowest growth of any G20 economy, with the sole exception of—Russia.

    That is what the Government are presiding over. Britain is going backwards under the Conservatives. Our businesses, universities and people are all great, but they do not have the partner they need in this Government. The chaos is affecting more and more areas of life: passports, driving licences, GP appointments, A&E waiting times, airports and delays in court trials. Time after time what we used to take for granted is now another feature of Boris Johnson’s backlog Britain.

    Those on the Government Benches had a chance to change direction last week. They had a chance to install new leadership that might have given us some hope of a greater sense of grip on all this. But what did they do? They decided that the best person to turn the economy round, to sort out the chaos and the backlogs, and to bring the qualities of focus, attention to detail and sustained delivery to these matters was the current Prime Minister. That was the judgment they made.

    The question for the Minister today is simple: after making that judgment—I do not know what he did, but that was the collective judgment—and choosing to continue with the leadership that brought us here, what will the Government do now to turn matters around, and why on earth should anyone believe that the result will be different from what went before?

  • John Glen – 2022 Statement on UK’s GDP Figures

    John Glen – 2022 Statement on UK’s GDP Figures

    The statement made by John Glen, the Economic Secretary to the Treasury, in the House of Commons on 13 June 2022.

    Like other advanced economies, the UK is affected by global economic challenges, including the unprovoked Russian invasion of Ukraine. As the Chancellor said a few weeks ago,

    “A perfect storm of global supply shocks is rolling through our economy simultaneously.”

    At the same time, the impact from the wind-down of the national covid testing scheme is dragging on UK GDP data. Overall, the figures for April, published by the Office for National Statistics this morning, show that output fell by 0.3% on the month, with the services sector falling by 0.2%, and production and construction declining by 0.6% and 0.4% respectively. As the ONS notes, the fall in GDP on the month is driven by the impact of the wind-down of the NHS covid testing programme. Testing volumes fell by 70% from March to April, which, alongside the impact from vaccines, detracted 0.5 percentage points from GDP growth in April. Looking through the impact of falling tests, we see that the rest of the economy actually grew by 0.1%. Importantly, GDP is still 0.9% above pre-pandemic levels, and support provided over the past two years has put the UK economy in a good position to deal with any economic headwinds, with record numbers of employees on payrolls and a strong economic recovery from the pandemic.

    As the Chancellor has also said:

    “The next few months will be tough. But where we can act, we will.”

    The Government are taking significant action to support households this year, having announced an additional £15 billion of further support for households just over a fortnight ago, on top of the £22 billion announced at the spring statement. In the longer term, the Chancellor has set out his vision for a lower tax, higher growth, higher productivity economy based on the three pillars of capital, people and ideas. The plan for growth and the tax plan represent an ambitious strategy for boosting growth and productivity in the years ahead. The Government’s priority going forward is to put those into effect, including through significant investment in infrastructure, skills and innovation.

    We will of course keep the data under close review, and that includes monitoring the economic impact of Russia’s illegal invasion of Ukraine, but our focus will continue to be on the best solution for all: a growing economy that supports high-wage, high-skilled jobs.