IMF Economic Outlook

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on the International Monetary Fund world economic outlook.

This Government have three economic priorities; our plan for this year is to halve inflation, grow the economy and get debt falling. It is a plan that will alleviate the pressure on businesses and families today, and equip us to become one of the most prosperous countries in Europe. As the International Monetary Fund said in its press conference today, it thinks that the UK is “on the right track'”. It also said that the UK had done well in the last year, with growth revised upwards to 4.1%, which is one of the highest growth rates in Europe for 2022. Since 2010, the UK has grown faster than France, Japan and Italy. Since the European Union referendum, we have grown at about the same rate as Germany. Our cumulative growth over the 2022 to 2024 period is predicted to be higher than that of Germany and Japan, and at a similar rate to that of the United States of America. The Governor of the Bank of England has said that any UK recession this year is likely to be shallower than previously predicted.

The actions we are taking, from unleashing innovation across artificial intelligence, financial services and a host of other sectors, to improving technical education and protecting infrastructure investment, will spur and fuel economic growth in the years to come, benefiting industry and communities alike. However, the figures from the IMF confirm that we are not immune to the pressures hitting nearly all advanced economies. We agree with the IMF’s focus on the high level of inflation in our country, which is why this is our first priority. Inflation is the most insidious tax rise there is, and so the best tax cut now is reducing inflation. That will help families across the country with the cost of living. As the Chancellor has said, short-term challenges, especially ones we are focused on tackling, should not obscure our long-term forecasts. If we stick to our plan to halve inflation, the UK is still predicted to grow faster than Germany and Japan over the coming years. That will help us deliver a stronger economy, one that is growing faster and where everywhere across our country people have opportunities for better-paying, good jobs. That is what the people in this country expect and what we are working tirelessly to deliver.

Britain has huge potential, but 13 years of Tory failure has been a drag anchor on our prosperity. Today’s IMF assessment holds a mirror up to the wasted opportunities, and it is not a pretty sight: the UK is the only major economy forecast to shrink this year, with weaker growth compared with our competitors for both of the next two years. The world upgraded, but Britain downgraded, with growth even worse than sanctions-hit Russia. The IMF chief economist singles out higher mortgage rates as a reason for Britain’s poor performance. The Tory mortgage penalty is devastating family finances and holding back our economy. British businesses are paying the price for the gaping holes in the Tories’ Brexit deal. It will fall to Labour to clean up this mess.

If the Chancellor had ideas, answers or courage, he would be here today, but he is not. The question the people of our country are now asking is: are me and my family better off after 13 years of Conservative government? The answer is no and, as the IMF showed today, it does not have to be this way. I am sure the Minister will clutch at straws and say that everything is fine or that the IMF forecasts are just wrong, but can he explain why the UK is still the only G7 economy that is smaller now than it was before the pandemic? Why is the UK the only G7 economy with its growth forecast downgraded this year? Why are we at the bottom of the league table both this year and next year? Can the Minister answer this: why should anyone trust the Conservatives with the economy ever again?

The right hon. Lady talks about 13 years of failure. Let me just repeat the facts of the matter. Since 2010, the UK has grown faster than France, Japan and Italy. She talks about the next two years. As I have said, the forecast from the IMF says:

“Cumulative growth over the 2022-24 period is predicted to be higher—

in the UK—

“than in Germany and Japan, and at a similar rate to the US.”

I am grateful to the shadow Chancellor for quoting the IMF, because I, too, wish to quote the IMF. Let us go to the IMF press conference at about 3am this morning, which, Mr Speaker, I am sure you were eagerly watching, and quote the economic counsellor Pierre-Olivier Gourinchas who said:

“Let’s start with the good news: the UK economy has actually done relatively well in the last year. We’ve revised”—

growth—

“upwards to 4.1%...that’s one of the highest growth rates in Europe, in that region, for that year”—

2022.

The shadow Chancellor did make a passing reference to the pandemic, but it is usually Labour’s habit to airbrush out of history completely the fact that we as a Government have overseen two of the greatest challenges in the country’s history: a pandemic followed by the invasion of Ukraine. [Interruption.] I know why the shadow Chancellor does not want to talk about the pandemic. Back in December 2021, when the Labour Welsh Administration wanted to lock down in the face of omicron, we took the brave decision as a Government not to lock down in England. Let us remember what the shadow Health and Social Care Secretary said at the time. He said that plan B was “insufficient” and that there were additional measures that were “necessary”. Labour would have kept us locked down for longer. We took the decision to keep our country open. We did so because of the vaccine that we brought forward, which is something that Labour would not have done.

I call the Chair of the Treasury Committee.

Will the Minister take this opportunity to reflect on last year when, despite the headwinds of the coronavirus, the invasion of Ukraine, huge hikes in energy costs, rising interest rates and high inflation in this country, UK businesses managed to generate more than 4.1% of economic growth—twice that of the United States, 25% higher than China, and higher than the eurozone?

The Chair of the Select Committee is spot on. Instead of talking down our economy, she makes the key point that, despite all those challenges, we had strong growth last year because of British enterprise. That is why, on Friday, the Chancellor, himself a former entrepreneur—there are not many of those on the Opposition Benches—said that we will back advanced manufacturing in the high-growth sectors to ensure that we continue to live with that level of growth in the future.

I call the SNP spokesperson.

I suppose that it is apposite that there is an urgent question on a potential recession on the third anniversary of Brexit.

The IMF has said that the economy of the UK—the only G7 country facing recession—would face a downgrade reflecting, it says, tighter fiscal and monetary policies and the still high energy retail prices weighing on household budgets. There is no getting away from it: with even sanctioned Russia forecast to grow, that is a gloomy prognosis. Given that the Government expect to meet their own new fiscal rule on public sector net debt by a paltry £9 billion in 2027-28, according to the Office for Budget Responsibility, the Government’s own strictures mean that there is no fiscal headroom to provide more support. Is this not the time, therefore, to reduce the energy companies’ investment allowance, which allows them to reduce the tax that they pay by 91p in the pound, to start to generate a meaningful windfall tax that is required to further support households and small and medium-sized enterprises—two of the main drivers of the IMF forecast for the economy—which will otherwise see their energy costs rocket this year?

The right hon. Gentleman talks about tight fiscal monetary policy. We are faced with inflation; it is higher in the UK than in 14 countries in the EU. Inflation is a global challenge, so he is right: we do need to have that stance. Obviously, we want to get inflation down. The cost of energy bills is precisely why, this winter, a typical household in the United Kingdom will have received £1,300 of support, £1,400 in cost of living payments, and the energy price guarantee, estimated by the OBR to be worth £900 for the typical household. That support is provided to every single part of the United Kingdom.

The right hon. Gentleman’s specific suggestion—to be fair, he is making a specific fiscal proposal in relation to the allowance—will hurt one particular sector: the North sea and investment in UK energy. Does he know what the long-term answer to this is? It is not supporting families—we are doing that very generously at the moment—but energy security, investing in nuclear and in the North sea as part of our transition to net zero.

If the Minister is not able to share with the House the advice he has received from the Opposition on how they will reduce public spending and taxation if they ever form a Government, will he at least accept my advice that the message from successful enterprise economies is that we must have a credible plan to reduce corporation tax and regulation on business?

With great respect to my right hon. Friend, who is very consistent on such points, I am bound to point out that, even with the forecast increases, corporation tax will still be the lowest in the G7 headline rates, and, of course, roughly 70% of businesses do not pay that higher rate because of the small business rate that pertains. I have not received any representations from the Opposition, other than a pledge for sound money from a party, which, since promising to put away the great big Government cheque book, has announced almost £50 billion of unfunded spending commitments.

Despite the Minister’s bluster, the Government Benches are empty. Conservative Members have not come to the Chamber in large numbers to defend the Government’s economic results, because the IMF forecast is devastating, as it lays bare the economic incompetence of this Government. Sanctioned Russia is still doing better than we are. This Government are unfit to run the economy, as unfit as those on the Treasury Bench are to be in the Treasury.

I am pleased to say that there is very colourful support on our Back Benches today. I am sure that there will further pertinent and brilliant questions to come. The hon. Lady quotes the IMF, but I simply reiterate what its economic counsellor said this morning about the UK. He said:

“Let’s start with the good news: the UK economy has actually done relatively well in the last year. We’ve revised”—

growth—

“upwards to 4.1%...that’s one of the highest growth rates in Europe”.

That is exactly what the IMF said.

What should the IMF make of our burgeoning £65 billion trade surplus in financial services?

The IMF always stresses the importance of sustainable growth. It is sustainable growth that matters, and, of course, my right hon. Friend is absolutely right: exports are crucial to that. The City and financial services are a massive UK success story. We want to build on that, which is why we have announced the Edinburgh reforms and further measures to strengthen UK financial services. We are quite clear that the future for this country is optimistic and we will get there by backing brilliant British business.

The Minister talks about covid as if we were the only country to experience the pandemic. He talks about the Ukraine crisis as if the fuel costs are affecting only this country, but he fails to mention that the former Prime Minister and her Chancellor crashed the economy, and that that came on top of the uncertainties of the previous years, including the failure to get a decent deal after Brexit, which led to a 4% hit on UK output. That is £55 billion of fiscal consolidation because of the failure of his Government. When will he admit to that and face up to reality instead of misleading the British people?

On the contrary, the whole point of why we mention the pandemic is not to say that we are the only country affected, but to explain the global headwinds that we face as a country. The hon. Lady talks about energy costs, but the Office for Budget Responsibility’s forecast is that the energy price guarantee will reduce the peak of inflation in this country by 2.5%. Inflation is an issue and it is global, but we are taking strong measures to ensure we deliver the Prime Minister’s target of halving it.