One expert has torn the Chancellor apart with a stark warning (Image: Getty)
A senior Bank of England economist has issued a damning indictment of the state of the economy in a fresh blow to Chancellor Rachel Reeves.
Professor Alan Taylor, a member of the Bank’s monetary policy committee, said: “GDP growth appears to have ground to a halt in the second half of 2024.”
He is one of the nine people, including Bank of England Governor Andrew Bailey, charged with making decisions about , which help to determine the cost of mortgages.
But in one bit of good news for homeowners, he suggested that the threat of an economic slowdown could make the case for interest cuts even stronger, as they tend to help the economy grow – raising the prospect of payments falling for people on variable rate mortgages or those planning to renew a fixed-rate deal in the future.
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Prof Taylor warned that business confidence was low, saying: “With confidence indicators and business expectations veering to the pessimistic, in my view the risks are now more skewed to the downside.”
He said inflation, which fell from 2.6% to 2.5% this month, was on course to reach the Bank’s target of 2% – but said measures introduced by the Chancellor, including increasing National Insurance payments for employers, would cause “bumps in the road” which tend to push inflation up.
And he highlighted the dangers of the National Insurance increase, saying that although the tax is paid directly by businesses and will affect their profit margins, it would also hit the public.
Prof Taylor said: “The full economic response isn’t just about business: even as these margins squeeze business cashflow in real terms, they also spill over into households’ real incomes.”
It comes as Rachel Reeves insisted she would not resign despite a wave of criticism over decisions such as the National Insurance increase, inheritance tax on family farms and means-testing, as well as poor economic growth with the economy growing by just 0.1% in November.
Speaking to the ’s Political Thinking podcast, she said: “I’m here for the long haul.”
Defending tax rises, she said: “If I had made the decision not to address those very real pressures, then this is the consequence: borrowing costs would have gone through the roof.
“Borrowing costs not just for Government but for families and businesses, like it did when Liz Truss was prime minister.”
Elsewhere, Ms Reeves insisted she had not taken criticism of her decisions personally.
She added: “Some people don’t want me to succeed. Some people don’t want this Government to succeed. That’s fair enough. That’s the prerogative, but I’m not going to let them get me down.
“I’m not going to let them stop me from doing what this Government has got a mandate to do, and that is to grow the economy, to make working people better off.”