The Observer view on the UK economy: don’t despair, signs of growth are emerging
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There are hazards ahead, but Rachel Reeves’s big calls in the budget have left the country better placed than the dominant narrative suggests.
A downside of living in a country with an extraordinarily one-sided media is that it becomes ever harder not to be affected by the dissing-the-Labour-government-at-every-turn lens through which it sees the world. So it is with the economy. The story that an over-empowered chancellor has made a series of mistakes, so risking near certain economic stagflation, is told with relentless enthusiasm.
The statistical revision before Christmas that showed there was no economic growth between July and September is allegedly proof of an economic stasis Rachel Reeves has engendered, while private sector wage inflation suddenly accelerating to 5.4% is obviously a harbinger of inflation to come. The Bank of England has paused further interest rate reductions despite the decline in business and consumer confidence. Investment remains stubbornly low. The Labour government is plainly the only cause of this worrying turn of events, according to the consensus narrative. The chancellor, exaggerating the balefulness of the Tory economic legacy, has talked down the economy. In addition, Labour has released the demon of public sector pay with generous settlements to doctors, nurses and railway workers, and heaped costs on business through its thoughtless £25bn hike in national insurance contributions and unnecessarily empowered workers with its proposed agenda for work. Typical Labour.
