Chancellor Jeremy Hunt has been warned that Britain could already be in a technical recession, despite government claims of an economic recovery.
Mr Hunt has insisted that the government’s plan “is working”, as he continues to dangle the prospect of fresh tax cuts at his March Budget.
But leading economists have said fresh analysis of the UK’s poor growth figures suggest the country has hit a major slump.
Martin Beck, chief economic adviser to the EY Item Club forecasters, said there is a “good chance” that Britain’s economy had contracted at the end of 2023 and slipped into a recession.
After the 0.1 per cent slump in July to September, a slump in the final quarter would mean a “technical” recession of two negative quarters in a row, said Mr Beck.
“We know that GDP – gross domestic product – shrunk in the third quarter and looking at the high frequency numbers for Q4, there’s a good chance that it may have shrunk slightly again,” he told BBC Radio 4’s Today programme.
Rishi Sunak and Jeremy Hunt under pressure to boost growth and get on top of inflation, as well as cutting taxes
The EY Item Club expects the economy to pick up somewhat this year, revising its growth estimate grow for 2024 from 0.7 per cent growth to 0.9 per cent.
But the sluggish outlook is not helping Mr Sunak and Mr Hunt make the case that they have got the economy growing again – one of their big five pledges – as the PM tells voters to “stick to the plan”.
The recession warning comes as Mr Sunak dismissed the idea of replacing Mr Hunt – insisting that he will still be chancellor at the general election later this year.
Asked on a visit to Buckinghamshire whether Mr Hunt would remain in his position when the country goes to the polls, Mr Sunak told broadcasters: “Yes.”
The PM added: “We’d like to do more when it is responsible to do so, but as we saw with the latest inflation data, inflation doesn’t fall in a straight line, it isn’t a given, there’s still work to do, and that’s why it’s important we stick to the plan.”
Reports last year suggested Mr Hunt would stay for the autumn statement and the Budget, but that there was a question mark over his longer-term future. Mr Sunak has until January 2025 to hold an election, but has said he is working towards a vote in the second half of 2024.
Mr Hunt has again signalled that he will cut taxes at his 6 March Budget. In an op-ed for the ConservativeHome website, he said the Tory party had a “track record” of cutting taxes – vowing that voters will “see it as we emerge from the turbulence of recent years”.
Mr Hunt has compared himself to tax-cutting former chancellor Nigel Lawson over the weekend as he and the PM dangled the prospect of further giveaways in the fiscal event on 6 March.
In an op-ed for The Mail on Sunday, he insisted the government’s “plan is working” and likened his record to that of the late party grandee, who slashed personal taxation while serving in the Margaret Thatcher government.
Meanwhile, Mr Sunak and Mr Hunt are under pressure from Tory MPs to boost the funding settlement for on-the-brink councils.
More than 40 Conservative MPs have signed a letter to the PM warning that without emergency cash, many councils will be forced to cut crucial frontline services and hike council tax in an election year.
