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IMF Economic Outlook
31 January 2023
Lead MP
James Cartlidge
Debate Type
Ministerial Statement
Tags
UkraineEconomyTaxationBrexit
Other Contributors: 31
At a Glance
James Cartlidge raised concerns about imf economic outlook in the House of Commons. A government minister responded. Other MPs also contributed.
How the Debate Unfolded
MPs spoke in turn to share their views and ask questions. Here's what each person said:
Government Statement
The Government has three main economic priorities: halving inflation, growing the economy, and reducing debt. The International Monetary Fund (IMF) predicts UK growth at 4.1% for 2022, one of Europe's highest rates, surpassing France, Japan, Italy, and Germany since 2010. Despite challenges such as the pandemic and Ukraine invasion, fiscal discipline is crucial in tackling inflation to ensure sustainable economic growth. The IMF projects UK cumulative growth over 2022-24 to be higher than Germany and Japan's, with a similar rate to the US.
Rachel Reeves
Lab
Leeds West and Pudsey
Question
The shadow Chancellor criticises the UK's economic performance, highlighting that Britain is forecasted to shrink this year compared to competitors. She points out higher mortgage rates as a reason for poor performance and calls out the negative impact of Brexit on businesses.
Minister reply
The Minister emphasises UK growth since 2010 surpassing France, Japan, Italy, and Germany despite challenges like the pandemic and Ukraine invasion. He cites IMF forecasts predicting stronger cumulative growth over 2022-24 compared to Germany and Japan with similar rates to the US.
Harriett Baldwin
Con
West Worcestershire
Question
Despite headwinds such as the pandemic, Ukraine invasion, energy cost hikes, rising interest rates, and high inflation, UK businesses managed to generate more than 4.1% economic growth last year. This was twice that of the US, 25% higher than China, and higher than the eurozone.
Minister reply
The Minister acknowledges strong UK growth in spite of challenges and emphasises backing advanced manufacturing sectors for continued high-growth levels.
Question
The IMF forecasts a UK recession as the only G7 country facing one, citing tight fiscal and monetary policies due to high energy retail prices. The Government expects to meet their new fiscal rule on public sector net debt by £9 billion in 2027-28. Given this, is it not time for a meaningful windfall tax on energy companies?
Minister reply
The Minister counters that inflation is higher than in 14 EU countries and necessitates tight fiscal monetary policy. He cites support measures including the £1,300 household support package and the energy price guarantee. The suggested reduction in energy company investment allowance would harm UK North Sea energy sectors.
Edward Leigh
Con
Gainsborough
Question
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?
Minister reply
With respect to my right hon. Friend, while acknowledging his consistency on such points, I note that even with forecast increases, UK corporation tax will still be among the lowest in the G7. Over 70% of businesses do not pay the higher rate due to the small business rate. The Opposition has announced almost £50 billion in unfunded spending commitments without a sound money policy.
Angela Eagle
Lab
Wallasey
Question
Despite the Minister’s bluster, the Government Benches are empty. Conservative Members have not come to defend the Government’s economic results, because the IMF forecast is devastating, showing the incompetence of this Government. Russia sanctioned is still doing better than we are; this Government are unfit to run the economy.
Minister reply
There is substantial support on our Back Benches today. The IMF stated that UK growth has been revised upwards to 4.1%, one of the highest rates in Europe, which contradicts the hon. Lady's claims.
Desmond Swayne
Con
New Forest West
Question
What should the IMF make of our burgeoning £65 billion trade surplus in financial services?
Minister reply
The IMF stresses sustainable growth and the importance of exports. The City and UK financial services are a success story, which is why we have announced measures to strengthen this sector further.
Rushanara Ali
Lab
Bethnal Green and Stepney
Question
The Minister talks about covid as if we were the only country affected. He fails to mention that the former Prime Minister's government led to a £55 billion fiscal consolidation due to poor economic management, including Brexit uncertainties.
Minister reply
We acknowledge global headwinds caused by the pandemic and other issues. The energy price guarantee will reduce inflation in this country by 2.5% according to OBR forecasts.
Question
Did the IMF welcome the autumn statement, stating it struck a balance between fiscal responsibility and protecting growth and vulnerable households?
Minister reply
The IMF welcomed the measures set out in the autumn statement, recognising that we need to strike a balance between fiscal discipline and support for families through challenging times.
Emma Hardy
Lab
Kingston upon Hull West and Haltemprice
Question
Today's Government response to IMF forecast has been dismissive. The UK is the only G7 economy smaller now than at the start of the pandemic, and growth has been lower under the Conservatives compared to Labour.
Minister reply
The cumulative growth predicted over 2022-2024 for the UK is higher than in Germany and Japan, similar to the USA.
Question
Does the Government confirm their commitment to build on Prime Minister’s Mais lecture and Chancellor’s speech with a clear industrial strategy so that investors can have clarity?
Minister reply
The Government's approach is focused on supporting high-growth sectors, as evidenced by our strong tech sector which is only third in the world by value.
Sarah Olney
Lib Dem
Richmond Park
Question
UK economy faces a triple whammy: IMF forecast predicting recession, ONS survey showing winter of discontent, and insolvency figures indicating more companies going bust than in 2009. When will Brexit benefits start?
Minister reply
We have the lowest unemployment for nearly five decades due to measures like furlough taken by this Government. We are providing £1,300 support for typical families with energy bills and aim to halve inflation.
Question
The shadow Chancellor mentions our growth rate is lower than Russia's but does not mention that the IMF noted Germany too is dependent on gas. How many times has the IMF revised its forecast over 10 years?
Minister reply
It would be a pleasure to write to my hon. Friend regarding forecast revisions. We are proud of our renewable energy sector and its contribution to economic growth.
Mohammad Yasin
Lab
Bedford
Question
Does the Minister think Tory austerity, Brexit or Truss Budget is responsible for the unique mess our economy is in?
Minister reply
It is not a unique situation; 14 EU countries have higher inflation rates. We are focused on reducing inflation and need Labour to show credible policies.
Question
Getting the economy moving forward will depend on supporting investment in R&D. Will my hon. Friend look at ensuring that R&D continues to be incentivised?
Minister reply
We are committed to spending £20 billion by 2024-25 and competitive regimes of R&D tax credits for private sector engagement, aiming to deliver research into future industries.
Carla Lockhart
DUP
Upper Bann
Question
The forecast is concerning for every corner of the United Kingdom. However, in Northern Ireland, there is an added uncertainty owing to the protocol and the internal barriers to trade that it places within the United Kingdom. Investment to drive growth is now being stalled as we await a new agreement. Do the Government recognise the need to urgently restore the integrity of the UK’s internal market to assist economic growth in Northern Ireland, and does the Minister commit to doing that?
Minister reply
We must deliver growth in every part of the United Kingdom. The hon. Lady knows the work that is happening across Departments on the protocol. We have already mentioned energy support; she knows that there are specific conditions that pertain to the Northern Ireland energy market, but we have still put huge support in place, including the recent £600 payment.
Question
I am pleased the Minister is focusing on the facts rather than the forecasts, which have proven time and again to be incorrect. The fact of the matter is that, according to the IMF, last year we had the highest rate of growth of any nation in the G7, nearly double that of the US and higher than that of the whole eurozone—a pretty good record, would he not agree?
Minister reply
My hon. Friend is an absolute champion. He talks up this country and he is right: the facts back that up and show that we should be optimistic. Of course there are challenges, and we want to get on top of them, which is why we must work hard to support our independent Bank of England in getting inflation down.
Stella Creasy
Lab Co-op
Walthamstow
Question
The Minister seems to be walking away from the question of what role Brexit has played in this economic outlook. I can understand why, since half his own constituents think Brexit was a mistake. The benefits of Brexit seem to be like a toddler’s imaginary friend—Ministers keep talking about them, but only they can see them. Will the Minister set the record straight? Can he explain to the small businesses in our constituencies, which used to be able to export with ease to the European Union, a single market where they now face a better deal than they did before?
Minister reply
I am happy to stress, for example, the hugely important Solvency II reforms that we will undertake, which will free up enormous amounts of investment in infrastructure. Of course, infrastructure is crucial to future growth.
Question
Today, the Bloomberg UK scorecard reports that, relative to London, life has got worse in areas that voted to leave the EU. That includes Ynys Môn, where the 2 Sisters factory has announced that it is closing in March, with 730 people losing their jobs—many of them from my Arfon constituency. There is no point in the Minister blustering with excuses about covid and Russia; that company says plainly that Brexit is partly to blame. No more excuses and apologies; what is the Minister going to do about it?
Minister reply
I am sorry to hear that. I do not know the specific circumstances. Obviously, we want to see strong investment and growth in this country, particularly in manufacturing. I can tell the hon. Gentleman that, as he is aware, unemployment is about the lowest it has been for decades in this country—we are very proud of that fact.
Question
Is it not time that the Minister told the truth to my constituents? The truth is that the Government have hollowed out not only our defence capacity but our economy. Will he explain to my constituents why, on the ship of shame that is the Government Benches, where there is no captain, first mate or crew, the captain’s cabin boy has been sent to answer questions on this, the most vital topic at the moment?
Minister reply
The hon. Gentleman mentions defence, but he might want to explain to his constituents why, at the last general election, he backed the right hon. Member for Islington North (Jeremy Corbyn), whose policy would have had us leave NATO and undermine the nuclear deterrent.
Clive Efford
Lab
Eltham
Question
I wonder whether the Minister thinks that the sanctions against Russia are having the desired effect. If he thinks that they are, as I suspect he does, can he explain why the IMF predicts that Russia will fare much better than us?
Minister reply
I am happy, once again, to refer to what the IMF said. At this morning’s press conference, Pierre-Olivier Gourinchas, the IMF’s economic counsellor, confirmed “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”.
Question
The Minister talks about other countries, but the reason why things are so bad in the UK is squarely down to the impact that Brexit is having on the economy—a Brexit that Scotland did not vote for. Can he tell me how piling austerity on top of the austerity that has already taken place over the past decade will help us out of this economic crisis that the Tories have created?
Minister reply
It is astonishing that the hon. Lady would say that all our problems are solely down the Brexit. We have record energy bills. In the last year, as a country, we have had to find an additional £150 billion to fund energy because of the invasion of an independent sovereign country by Russia.
Chi Onwurah
Lab
Newcastle upon Tyne Central
Question
Wages in the north-east are 3% lower than when Labour left office, and households have lost £11,000 in wage growth under the Conservatives. Now, according to the IMF forecast, we will get poorer still, as prices rise and the economy contracts because the Conservatives have crashed it. Did the Minister come into politics to make people poorer? If not, is it not time for a Labour Government to deliver prosperity for the British people?
Minister reply
I am not sure whether the hon. Lady was here for my maiden speech—I entirely recognise that she may not have been—but I said: “I am a one nation Conservative,” because I believe in “not going back to dark and divisive days of high unemployment.” And here we are, with the lowest unemployment in almost 50 years.
Ellie Reeves
Lab
Lewisham West
Question
The IMF chief economist highlighted rising mortgage costs as a central issue facing the UK economy. I have heard from countless constituents who are fearful of losing their homes when their fixed rates come to an end, and others whose dreams of getting on the property ladder have been snatched away. What guarantees can the Minister provide that interest rates will get back to the levels seen before the disastrous mini-Budget?
Minister reply
The hon. Lady is an experienced colleague. She is well aware that we have an independent Bank of England, and interest rates are its responsibility. The crucial thing is that we need to work in partnership with the Bank, and we do that by ensuring that fiscal policy does everything possible to support a stable framework in which inflation falls.
Ruth Jones
Lab
Newport West
Question
The news from the IMF this morning is deeply concerning. Small businesses are at the heart of the local economy in my constituency. Why does the Minister think the Federation of Small Businesses is reporting that confidence of small business is at its third lowest level since the federation started tracking it?
Minister reply
The hon. Lady is right to mention small businesses, which make such an important contribution to our economy. My message to small businesses is that we have put in an enormous amount of support to help them with energy costs, including the £18 billion energy bill relief scheme over the past six months.
Claire Hanna
SDLP
Belfast South and Mid Down
Question
The UK’s economic decline, which was started by Brexit but exacerbated by the mini-Budget, is genuinely sad, and it hurts millions of ordinary, blameless people. Will the Minister commit to advocating in Cabinet for a pragmatic EU-UK deal? If not, will he acknowledge that if the protection of the protocol is removed, more and more people in Northern Ireland will ask about leaving Brexit madness?
Minister reply
Of course, the hon. Lady knows about the work happening across Government in respect of the protocol. The UK has grown faster than France, Japan and Italy since 2010, and only three economies have a £1 trillion tech sector: China, the US, and the UK.
Question
There is a popular café on Regency Street that says they are badly understaffed. This seems to chime with findings of UK in a Changing Europe about a shortfall of 300,000 workers due to Brexit and the end of freedom of movement. Will the Government admit that their Brexit has taken the UK economy out of the frying pan and into the fire?
Minister reply
I do not know the specific circumstances of why the café is struggling to recruit; however, I can say in aggregate that we are proud to have almost the lowest unemployment for the best part of 50 years. This presents challenges when we have a tight labour market.
Question
The Minister continues the Tory playbook of excuses—global headwinds, global challenges, other countries having high inflation, Putin’s illegal war and the pandemic—but the reality is that the UK is the only G7 country facing a recession this year. Is that due to Tory incompetence, or is it the Brexit dividend?
Minister reply
I was clear about the challenges this year in respect of inflation, which is why we need fiscal discipline. We have done everything possible to support people in every part of the UK.
Question
What consideration has been given to using the so-called Brexit freedoms? In Wales, that could involve devolving VAT and corporation tax to empower the Welsh Government to boost the economy. If these powers—the so-called Brexit freedoms—are not going to be used, is the Welsh economy not far better off back in the European single market and customs union?
Minister reply
The hon. Gentleman knows there is enormous benefit to Wales from being part of the UK. We are boosting this country through changes to Solvency II regulations that will hopefully see a significant increase in infrastructure investment, which will be of massive benefit to every part of the UK, including Wales.
Question
Often it is the retail and hospitality sectors that are hit hardest during economic slowdowns. What specific support is being considered for such businesses to ensure that redundancies are minimised and jobs are protected?
Minister reply
The hon. Lady makes a very good substantive economic point about discretionary consumption under pressure in pubs and shops when inflationary pressures are higher. We have taken huge steps to support hospitality, extending the 50% reduction in business rates by another year up to 75%, and announcing a six-month extension to the freeze in alcohol duty.
Jim Shannon
DUP
Strangford
Question
Being the only G7 country, according to the forecast, to have an economy set to shrink this year, will the Minister consider increasing spending power in the UK by focusing on help for SMEs and businesses in Northern Ireland that are hit harder by costs associated with the reprehensible Northern Ireland protocol?
Minister reply
The hon. Gentleman is absolutely right to continue to be a stalwart champion of SMEs and small businesses in his constituency and, indeed, in Northern Ireland. We are focused on growth across the UK, underpinned by fiscal stability and falling inflation.
Shadow Comment
Rachel Reeves
Shadow Comment
The shadow Chancellor criticises the Government for their economic performance, noting that Britain is forecasted to shrink this year compared to competitors. The IMF highlights higher mortgage rates as a reason for poor performance and calls out the negative impact of Brexit on businesses. Labour asserts it will clean up the 'wasted opportunities' left by Conservative rule.
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