December 24, 2024 - 8:00am
It wasn’t exactly the Christmas cheer Rachel Reeves had been hoping for.
On Monday, the Office for National Statistics reported that the UK economy failed to grow in the third quarter, a reduction from the original estimate of modest expansion. And with the October figure on GDP growth now coming in at slightly less than zero, the risk of a second quarter without growth — or worse — is rising. In short, far from the renewed economy Reeves promised us all, the UK may be heading into a recession.
In fairness to the Chancellor, her government has four more years in which to deliver, so an early stumble isn’t itself a problem. What’s more, if this lump of coal is on the government, it’s on both Labour and its predecessors, considering that the outgoing Tories left her a dreadful inheritance. Their obsession with tax cuts — which over 14 years led successive chancellors to degrade public services so badly that the economy went backwards — and hastily negotiated Brexit deal with Europe would have hamstrung any government.
However, Reeves made her task even harder by failing to ask for a mandate for the kind of bold reform the economy requires. On the election campaign trail earlier this year, she promised to restart the economy and repair public services while matching fanciful Tory promises not to raise most taxes.
That left her to focus any tax rises on business, in particular the National Insurance contributions which employers must pay for their employees. This added cost of creating jobs has, unsurprisingly, led firms to curtail job-creation, while business investment may also suffer in response. That, at least, is the pre-Christmas message from the Confederation of British Industry, which warns that “businesses continue to cite the impact of measures announced in the Budget — particularly the rise in employer National Insurance contributions — exacerbating an already tepid demand environment”.
Making matters worse, neither Reeves nor Prime Minister Keir Starmer did themselves any favours with their negative messaging in the months leading up to her Budget. The state of the economy and the public finances is undoubtedly bad. However, hammering home that message may have killed any animal spirits they wanted to stir. Investors awaiting a turnaround before investing could now create a self-sustaining doom loop: few jobs are created, demand thus drops, and so new investment is further postponed.
It needn’t be this way, though, because bad news can be delivered with a happy ending. In 1982, during the depths of a recession his government’s policies had helped to worsen, Ronald Reagan delivered his first State of the Union address. In a masterclass of hope-filled oratory, he laid out a vision of how the painful process through which America was passing would ultimately lead to a renewed economy — as it duly did, when in the late summer of 1982 the stock market bottomed and a decades-long bull market began.
That sort of strategic vision has been lacking in the communications of both the Prime Minister and the Chancellor, who sound more like grumpy Calvinists insisting that suffering is good for us. Time may, as Reeves insists, allow her programme to deliver fruit. But if things don’t improve soon, the pressure may rise either for her to abandon her earlier promises on taxes or for the Prime Minister to abandon her.
John Rapley is an author and academic who divides his time between London, Johannesburg and Ottawa. His books include Why Empires Fall: Rome, America and the Future of the West (with Peter Heather, Penguin, 2023) and Twilight of the Money Gods: Economics as a religion (Simon & Schuster, 2017).
jarapley
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SubscribeWhy would a Hispanic voter, who came here legally, think any different about open borders than any other American? Sounds kinda racist to me.
Of course legal immigrants from Latin America don’t look kindly on illegals. Hardly rocket science. Legal immigration is a long, difficult and costly process. No one likes queue cutting.
I’m sure there are similar trends in the UK.
Still, I’m sure political analysts and commentators will keep pretending these groups vote as a single bloc as if all their interests and instincts were the same (just like they don’t in the countries they came from !).
This ongoing assumption that immigrants are always going to be on the side of other immigrants, always for more immigration and OK with illegal immigration needs to be binned forever. Along with thinking that voting behaviour within any given minority is going to be homogenous. Laughable, inaccurate, possibly racist.
I spent the last evening or two immersing myself in online criticism of Obama by black Americans due to his comments last week about black men not getting on board with Harris. The reasons for their discontent with BO/Harris/the Democrats were so diverse as to make trying to lump them together according to race rather misleading, possibly counterproductive.
When the Democrats make the case that America is a “Nation of Immigrants” they are implying a Strawman that Republicans are “Anti-Immigrant.”
No they’re not. As Milton Friedman once said you can have Open Immigration or a Welfare State. You can’t have both. It is statistically impossible to budget for people not yet in the country who may require social services.
Here’s the actual quote for people interested in the truth vs. the complete BS in this article:
“When Mexico sends its people, they’re not sending their best,” Trump said. “They’re not sending you. They’re not sending you. They’re sending people that have lots of problems, and they’re bringing those problems with us. They’re bringing drugs. They’re bringing crime. They’re rapists. And some, I assume, are good people.”
You forgot an important element that Hispanic people are generally more religious and the Democratic Party has turned into the Godless party.