Rachel Reeves is stamping on growth by killing confidence

OPINION

The sense of decline that has gripped Britain is clear to see when there is relief the economy grew by 0.3% in the first three months of the year instead of a mere 0.1%. Confidence is an economy’s rocket fuel – and Chancellor Rachel Reeves has drained the tank.

There are worrying signs the Government has not learned the lessons of its first 12 months and is once again killing the confidence required for investors to put money into projects and for families to spend cash.

When Ms Reeves arrived in the Treasury she put the country on a crisis footing, talking about a £22billion black hole in the nation’s finances. She then unleashed the National Insurance hike on employers – a move any fair-minded person would believe had been ruled out in the Labour manifesto.

This tax raid on the enterprises which drive forward growth has made it more expensive to take on staff and unemployment has hit a four-year high. The scrapping of pensioners’ universal entitlement to winter fuel payments and the inheritance tax changes which have dismayed farmers demonstrated the ruthlessness at the heart of the Treasury.

If Ms Reeves did this in her first year – what will she do in the coming months? Such uncertainty is poison for confidence.

The warnings from the National Institute of Economic and Social Research that she could face a black hole of more than £50billion have heightened both the expectation of tax rises and the sense that the country is in deep trouble.

There is scepticism in Whitehall about claims of wealth creators fleeing the country. But on both the Left and the Right there is worry we are becoming a prosperity-free zone where living standards crumble, where punishingly high energy costs drive away international investment, where our public services are unsustainable and where major infrastructure projects become fiascos.

Peter Matejic of the Joseph Rowntree Foundation looked beyond the “somewhat disappointing GDP numbers”, saying “the more serious story for families across the country is one of declining living standards”.

He warned that “rising prices, stagnant earnings and unemployment are beginning to scar people’s lives once again”.

This is what happens when meaningful growth vanishes from an economy.

There are fears the UK faces a high inflation, low-growth future, with trade expert Shanker Singham warning we are “recklessly close to stagflation territory”.

Meanwhile, the Conservatives have seized on a message they believe will cut through to voters: “Rachel Reeves is taxing your future to fund her failure.”

A true economic shock such a new war or a pandemic would plunge Britain into a new depth of crisis. The Chancellor has a responsibility to ensure the nation’s finances have a protective buffer in place.

But Britain will be in the danger zone until true growth returns. For that to happen, Ms Reeves must stop frightening families and investors; she must show the Government will not repeat the errors of the recent past.