Labour was last night accused of wrecking UK growth as businesses gave the thumbs-down to Rachel Reeves‘ Budget.
The first economic figures published since the Chancellor’s damaging tax raid on employers showed that the private sector is shrinking and even raised recession fears.
Richard Fuller, shadow Chief Secretary to the Treasury, told the Mail: ‘Labour’s Budget of broken promises has caused significant damage to our economy and working people.’
It comes after Ms Reeves hiked the rate of employer National Insurance contributions to 15 per cent and reduced the threshold for paying the tax from £9,100 to £5,000 – despite an election pledge not to increase National Insurance ‘for working people’.
More than 80 retail bosses this week wrote to the Chancellor to warn that the move will cost jobs and lower wages.
And a new poll illustrated voters’ deepening disillusionment with the Government, putting the Conservatives three points ahead in voting intention – with the Tories on 28 per cent, and Labour on 25 per cent.
The research by More in Common was also critical of Sir Keir Starmer‘s promise of ‘change’, with two thirds of voters saying the new Government ‘feels like more of the same’.
In the first half of this year, the UK enjoyed the strongest growth in the G7 group of advanced economies. But after Labour took office – and began laying on the doom and gloom about the state of the economy – growth shrank to just 0.1 per cent in the third quarter, the joint second-worst in the group.
The private sector is sinking, the first figures since the Chancellor Rachel Reeves’s (pictured) Budget have shown
Shadow Chief Secretary to the Treasury Richard Fuller said that Ms Reeves’ Budget had hit working families and caused ‘significant damage’ to the economy
Another grim economic update this week showed that government borrowing had surged to a higher-than-expected £17.4 billion thanks to Labour’s Budget. Pictured: Sir Keir Starmer
The UK’s stalling economic performance is a major setback to Labour’s ambition to achieve the fastest growth in the G7.
Separate figures from the ONS showed retail sales slumping last month – blamed on consumer jitters ahead of the Budget on October 30.
And the pound sank below $1.25 versus the US dollar, its lowest level in six months.
Ms Reeves’ £25 billion NI raid has already come under heavy fire, with even the Bank of England governor warning it could have major impact on jobs.
Mr Fuller said: ‘It is no wonder so many businesses are already sounding the alarm of the damage her National Insurance jobs tax will do to this country.
‘At the end of the day, it will be hardworking families that will be forced to pick up the tab for Labour’s economic illiteracy.’
Former Tory chancellor Jeremy Hunt said: ‘A rather ham-fisted start has destroyed the healthily growing economy they inherited.’
Yesterday’s purchasing managers’ index (PMI) survey showed the Budget has already made things worse, crushing business confidence.
Former Chancellor Jeremy Hunt said Labour had destroyed the ‘healthily growing economy they inherited’ with a ‘ham-fisted’ approach
The figures gave a much weaker than expected reading of 49.9 – where the 50 mark separates growth from contraction.
Chris Williamson, of S&P Global Market Intelligence, which compiled the survey, said: ‘Business optimism has slumped sharply since the general election, dropping further in November to hit the lowest since late 2022.
‘Companies are giving a clear ‘thumbs-down’ to the policies announced in the Budget.’
Some firms pointed to ‘subdued business confidence’ in the wake of the Budget and many reported that they were implementing hiring freezes.
Mr Williamson said: ‘The first survey on the health of the economy after the Budget makes for gloomy reading. Businesses have reported falling output for the first time in just over a year while employment has now been cut for two consecutive months.’
The survey – conducted between November 12 and 20 – pointed to the economy shrinking at a quarterly pace of 0.1 per cent.
‘But the loss of confidence hints at worse to come – including further job losses – unless sentiment revives,’ Mr Williamson added.
Paul Dales, chief UK economist at consultancy Capital Economics, said: ‘I am now more worried that economic growth will be weaker than our forecasts. And at this stage, it would no longer be a surprise if the economy contracted in Q4.’
Another grim economic update this week showed that government borrowing had surged to a higher-than-expected £17.4 billion in October thanks to Labour’s inflation-busting pay deals for public sector workers, including nurses and teachers.
The More in Common poll asked voters about the UK today, with 70 per cent saying things are ‘getting worse’, and only 8 per cent saying they are ‘getting better’.