Rishi Sunak cautions against new cutbacks, funds tax breaks instead.

February 15, 2024
1 min read

The UK economy is in a recession, and Chancellor Rishi Sunak has been warned against implementing austerity measures to finance tax cuts. Official figures confirm that the economy contracted by 0.3% in the three months to December, following a 0.1% drop in the previous quarter. This marks the technical definition of a recession. Furthermore, national income per head fell or remained stagnant for seven consecutive quarters, the worst run since records began in 1955. Treasury sources have suggested that Sunak is considering a fresh round of public spending cuts to fund tax cuts ahead of the upcoming national election. However, trade unions have condemned this suggestion, claiming that public services are already suffering and cannot withstand further austerity measures.

Labor MP Rachel Reeves accused Sunak of worsening the economy and stated that the government’s economic plan is failing. The news of the recession comes as a blow to the government, which is already facing criticism for its failure to meet its key priorities. The Chancellor’s allies have suggested that he will introduce tax cuts in the upcoming budget to boost the Conservative Party’s standing in the polls. However, the weaker-than-expected growth performance may limit the scope for substantial tax reductions. Hunt is thought to have approximately £13 billion of headroom in the budget, £8 billion less than initially estimated.

The UK’s recession has prompted economists and political commentators to consider the economic policies of the main parties in the run-up to the general election. The Labour Party has watered down its plans to invest £28 billion annually in green initiatives but maintains that it has a serious plan to rebuild the economy. However, the party has not committed to supporting any potential tax cuts proposed by Hunt. Economists had anticipated a shallow recession at the end of 2023 due to rising costs and strikes across the economy. The overall consensus is that the recession news will have a negative impact on the Conservative Party’s economic message.

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