RACHEL Reeves has escaped a recession by the skin of her teeth – but this is no day for celebration.
Britain’s economy grew in the last quarter by a paltry 0.1%, preceded by 0.0% in the three months prior.
You might have to squint to see it on a graph, but the titchy increase in GDP means she has technically avoided the dreaded R-word that keeps chancellors awake at night.
Yet the Treasury champagne will remain firmly corked for now, as the stats present the embattled Ms Reeves with immediate problems.
First, these sluggish levels of growth are nowhere near the boom she had both suggested during the election, and banked on to pay for her vast spending plans.
The headroom raised by her controversial tax-hiking Budget has since been wiped out by the eye-watering costs of paying off the country’s debts.
It puts her dangerously close to breaking her “non-negotiable” fiscal rules not to borrow for day-to-day spending.
In the minds of some economists this leaves her facing a politically toxic choice: hike taxes again, or cut departmental budgets.
Ms Reeves has all-but ruled out more tax rises – she is already facing enough fury for the looming National Insurance hike.
And saddling Brits with even higher taxes risks suffocating the little growth we have.
Which all points to deep cuts across Whitehall, something that will go down like a lead balloon with Cabinet colleagues itching to splash the cash, and Labour grassroots who shudder at the thought of Austerity 2.0.
There are obvious savings to be made, namely the UK’s ballooning benefits bill and maddening levels of waste across government.
Second, and perhaps even more worryingly for the Chancellor, GDP per capita has shrank for the last two quarters – i.e the increase in the population means the value of growth felt by each person is diminished.
For a government pledging to increase living standards, this is not a good sign.
Third, the growth recorded in the first quarter of 2024 – when Rishi Sunak was PM – has been revised up to 0.8 per cent.
These are levels Ms Reeves would now kill for, and exposes her to attacks from the Tories who will gleefully brandish claims that her Budget has strangled their growth stone dead.
There are some crumbs of comfort, namely that economic output in December was better than expected, driven by the services and construction sectors.
But Ms Reeves knows she is in a tight spot, and is under pressure to deliver.
She owned the £40billion worth of tax rises at the Budget to “fill a black hole in the public finances”.
Critics blast that this merely perpetuated the high-tax, low-growth doom loop Britain has been cycling for decades.
Labour would point to their sweeping plans for more housing, infrastructure and clean energy as the ticket to kickstart “growth at all costs”.
But voters who feel they were promised sunlit uplands by Labour are rapidly losing patience.
Questions about the Chancellor’s own future abound but seem premature, and she has been given Sir Keir Starmer’s full backing for the next five years.
But she knows she needs to find some growth – and fast.
