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Rachel Reeves was last night accused of ‘going into hiding’ after the economy ground to a halt under the weight of her tax hikes. On another dismal day for Labour, official figures showed output flatlined in July, triggering warnings from business leaders that the Government ‘cannot tax its way to growth’.
The bleak figures were met with a stony silence from the Chancellor, however, though a Treasury spokesman was forced to admit the economy ‘does feel stuck’. Ms Reeves’ failure to address the situation – ahead of what looks set to be a brutal Budget of further tax hikes in November – sparked outrage.
Shadow Chancellor Sir Mel Stride said: ‘It’s no wonder the Chancellor has gone into hiding while the economy crumbles on her watch.’ Until now, Ms Reeves has regularly commented on economic figures, and last month hailed ‘a strong start to the year’ after the Office for National Statistics reported growth of 0.4 per cent in June.
But Treasury sources yesterday said she would not be commenting on the latest figures. The change of tack came amid chaos on Downing Street as the Government reels from the departures of Angela Rayner and Peter Mandelson. There are also suggestions that Sir Keir Starmer has sidelined Ms Reeves with the appointment of his own economic team. Yesterday’s ONS figures showed the economy flatlined in July. Over a three-month period, output crawled 0.2 per cent higher.
Ms Reeves raised taxes by £40 billion in her first Budget in October last year and it is feared she will need to find anywhere between £20 billion and £50billion more this time around. Concerns over the parlous state of the public finances – and inflation at the highest level in the G7 – have sent UK government borrowing costs to 27-year highs on global bond markets in recent weeks.
The boss of Barclays yesterday urged Ms Reeves to cut spending rather than raise taxes to balance the books. ‘We need to curb expenditure at the government level,’ said the bank’s chief executive C.S. Venkatakrishnan.
Ben Jones, lead economist at the CBI business lobby group, said the economy is ‘stuck in the shade’. Anna Leach, chief economist at the Institute of Directors, said: ‘Plans for growth have been hit by sharp rises in employment costs, and fears of yet more tax rises to come to fill the latest black hole in the public finances.’ Sir Mel added: ‘Raising taxes again won’t fix Labour’s economic mismanagement.’
