The Bank of England has revised down its already lacklustre growth forecast, slashing expectations for 2025 from 1.5% to a dismal 0.75%. Meanwhile, Rachel Reeves and her economic masterminds are still peddling the fantasy that ‘growth’ can be summoned by policy incantations and the well-worn magic wand of tax hikes and interest rate cuts. The latest economic projections, however, tell a different story—one of stagnation, inflation, and looming job losses.
The government’s economic strategy appears to be built on the belief that if you just make the City bankers comfortable enough—give them the tax policies they like, reassure them that their portfolios will stay plump—then prosperity will trickle down like champagne at an exclusive Mayfair club. But here’s a thought: what if growth isn’t achieved by blindly following the whims of the top 1%? What if, instead, we judged the success of our economy by how the bottom 30% are faring at the checkout, rather than how the ultra-rich are doing on their Bloomberg terminals?
When ‘Growth’ is Just a Headline
Rachel Reeves and Keir Starmer are predictably putting a brave face on the situation, welcoming the Bank’s interest rate cut as if it were a trophy rather than an admission of economic malaise. But lowering interest rates by a meagre 0.25% isn’t some grand solution; it’s a desperate bid to inject momentum into an economy that’s wheezing under the weight of high inflation and dwindling consumer confidence. Meanwhile, the government’s decision to raise the employer’s rate of National Insurance by £24 billion is set to achieve exactly what anyone with a shred of economic literacy could predict—job cuts and wage stagnation for those already struggling to keep their heads above water.
Even the Bank of England, usually measured in its statements, couldn’t dress up the reality: “Business and consumer confidence has declined” since Reeves’s budget in October.
Confidence is key to investment, spending, and, ultimately, economic growth. So, what’s the plan, Rachel? Austerity 2.0? Pretend it’s all fine until the next election? Or simply keep up the facade that the economy is ‘turning a corner’ while millions find it harder to afford the weekly shop?
Stagflation: The Economic Zombie We Should Have Seen Coming
The real horror looming over all of this is stagflation—that delightful cocktail of a combination of high inflation, stagnant economic growth, and high unemployment that governments pretend doesn’t exist until it smacks them in the face. The Bank of England is now warning that inflation will climb to 3.7% by the autumn—nearly double its supposed 2% target. This means prices are still rising, wages are still failing to keep up, and yet economic growth is flatlining. In other words, a repeat of the 1970s, minus the disco and good music.
What’s even more concerning is that two members of the Monetary Policy Committee wanted a sharper interest rate cut of 0.5%, signalling that they see the economic situation as far worse than the government would like to admit. The pound, sensing the incoming storm, promptly dropped against the dollar. Meanwhile, the phrase ‘fiscal hole’ is making an unwelcome return, with economists already predicting that Reeves will have to start slashing public spending come March.
An Economy for the Few, at the Expense of the Many
It’s time we stopped measuring economic success by how well the wealthiest are doing.
The stock market is not a barometer for prosperity. The fact that hedge fund managers can still afford their winter retreats to St. Moritz does not mean the economy is ‘strong.’
Instead, let’s take a look at the grocery aisles, where people are having to make hard choices between heating and eating.
The problem with this government’s approach is that it fundamentally misunderstands what growth actually means. Real economic strength isn’t about whether the FTSE 100 is up or down—it’s about whether ordinary people can afford to live decent lives. If the bottom 30% are struggling, then the economy is not ‘growing’—it’s contracting, in real, human terms.
Rachel Reeves came into office declaring that growth was her ‘number one priority.’ If that’s the case, she might want to start measuring it in ways that actually matter to the vast majority of the population. Otherwise, all this government is doing is playing economic theatre while people continue to suffer. And at some point, the audience is going to get tired of the act.
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