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Labour has come into power and the economy is shrinking.
It is not the news the chancellor was expecting, and it underscores the challenges she faces in delivering the government’s promise to turbo-charge growth.
The economy contracted by 0.1% in September and eked out growth of just 0.1% in the first three months of the new Labour government.
There is an alternative version of this. A new government has come into power with a big growth agenda. That should have generated optimism among businesses and consumers.
August’s interest rate cut should have delivered another boost. Instead, confidence appears to be slumping.
Business groups say that uncertainty about tax rises may have “played a part” in the damp performance.
The chancellor says she is “not satisfied” by the latest results but is, once again, asking us to be patient with her. Hers is a long-term plan to fix the economy.
She is trying to heal chronic problems through reform and investment that might take time to pay dividends.
Today, she was trying to move the conversation away from tax hikes to reform and investment. In recent days, we’ve heard about big reforms to the pensions industry, and we are expecting more on planning.
Yesterday, in her Mansion House speech, the chancellor also hinted that she was eying up a closer relationship with Europe, saying that Brexit had thrown up “structural challenges”.
This feels like a moment, not only because of Reeves’ remarks but also because of an intervention from Andrew Bailey.
Officials have repeatedly shied away from talking about Brexit even though economists have repeatedly warned that the decision is weighing on the country’s growth potential, with the OBR forecasting a 4% hit over the next 15 years.
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Yesterday, however, the governor of the Bank of England ventured into the debate, saying he wanted…
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