After two years of flirting with recession, the British economy has finally achieved rapid growth. Yesterday, the Office for National Statistics confirmed that the UK contracted by 0.3% in the final three months of 2023, after also falling in the third quarter.
Some may argue that this was just a “technical” recession and that the decline was “shallow”. It is clearly good news that the UK has avoided a deeper recession than previously expected, and some are predicting some growth pick-up going forward. However, the overall picture appears to be stagnant. The UK desperately needs a credible plan to return to strong growth.
There are several possible reasons for the country’s current economic slump, including rising interest rates. The impasse caused by the planning system and the high energy prices caused in part by the rush to net zero are no doubt partly to blame, but, as the ONS itself has suggested, are perhaps the most damaging. One of the contributing factors is the widespread unemployment plaguing the UK.
Approximately 9.3 million working-age people remain unemployed, a significant increase since the eve of the pandemic. Millions of people still receive inflation-linked benefits as prices rise, even as wages have fallen in real terms.
At the same time, the tax burden on the working population has risen to its highest level since the 1940s, due in part to the rising costs of the welfare state. This is clearly an unsustainable situation. You have to work and pay money in the UK.
This underlines the Chancellor’s insistence that the next Budget introduce major tax cuts, not only to reduce disincentives for people to work, but also to reward entrepreneurship and risk-taking more broadly. It only strengthens it.
This need not put unsustainable pressure on public finances. In fact, the tax cuts may well provide an expansionary boost to the economy and ultimately pay the price. For the UK to emerge from its lethargy, it needs to pull unemployed people back into the labor market and increase investment. Achieving both will be difficult unless taxes are lowered.
Many of the country’s problems could be improved if economic growth were higher. Conservatives have also long known the best way to accomplish that. The state must get out of the way so that individuals and businesses can prosper.
After two years of flirting with recession, the British economy has finally achieved rapid growth. Yesterday, the Office for National Statistics confirmed that the UK contracted by 0.3% in the final three months of 2023, after also falling in the third quarter.
Some may argue that this was just a “technical” recession and that the decline was “shallow”. It is clearly good news that the UK has avoided a deeper recession than previously expected, and some are predicting some growth pick-up going forward. However, the overall picture appears to be stagnant. The UK desperately needs a credible plan to return to strong growth.
There are several possible reasons for the country’s current economic slump, including rising interest rates. The impasse caused by the planning system and the high energy prices caused in part by the rush to net zero are no doubt partly to blame, but, as the ONS itself has suggested, are perhaps the most damaging. One of the contributing factors is the widespread unemployment plaguing the UK.
Approximately 9.3 million working-age people remain unemployed, a significant increase since the eve of the pandemic. Millions of people still receive inflation-linked benefits as prices rise, even as wages have fallen in real terms.
At the same time, the tax burden on the working population has risen to its highest level since the 1940s, due in part to the rising costs of the welfare state. This is clearly an unsustainable situation. You have to work and pay money in the UK.
This underlines the Chancellor’s insistence that the next Budget introduce major tax cuts, not only to reduce disincentives for people to work, but also to reward entrepreneurship and risk-taking more broadly. It only strengthens it.
This need not put unsustainable pressure on public finances. In fact, the tax cuts may well provide an expansionary boost to the economy and ultimately pay the price. For the UK to emerge from its lethargy, it needs to pull unemployed people back into the labor market and increase investment. Achieving both will be difficult unless taxes are lowered.
Many of the country’s problems could be improved if economic growth were higher. Conservatives have also long known the best way to accomplish that. The state must get out of the way so that individuals and businesses can prosper.