Michael Simmons

The bogey is off. In recent years Britain’s economy has experienced an annoying trend: growth in the first half of the year which completely died off in the second. Not so this year. Figures just released by the Office for National Statistics (ONS) show GDP expanded by 0.7 per cent between July and September. Over the last year it means the economy is 1.9 per cent larger. The growth in the last quarter was made up of a 0.9 per cent expansion in services and 0.1 per cent in production. The construction sector, however, shrank by 0.7 per cent. Nevertheless, even on the important per head measure, the economy has grown by 0.7 per cent in the quarter and by 1.7 per cent compared with the same period last year, despite rising energy costs and assorted global troubles.

Fears of resurgent inflation have finally caught up with the rate-setters of the Bank of England’s Monetary Policy Committee (MPC). The Bank has voted by eight to one to raise interest rates to 4 per cent. It’s the first rate hike in more than three years, ending a cutting and hold cycle that started in 2024. So far, the MPC had resisted raising rates because the majority of the committee was not convinced that inflation was baked in or leading to so-called ‘second-order effects’, where retailers raise prices in anticipation of more inflation and employees make precautionary pay rise demands.

The Bank of England’s former chief economist Andy Haldane has accused the Bank of being too slow to tackle the latest wave of inflation and warned that five years of missed targets ‘does beg the question in the markets’ mind: are they serious?’ ‘More than five years of misses, does beg the question in the markets’ mind: are they serious?’ On this week’s episode of Reality Check (which you can watch below), Haldane tells me the Bank ‘hasn’t learned its lesson’ from the inflation shock of 2021 and thinks that it ‘should have gone a bit sooner’ in raising interest rates. ‘The truth is, it’s a very self-serving comment,’ he said. ‘I left the Bank of England’s Monetary Policy Committee in June 2021. Inflation was bang on 2 per cent.

The run of good economic news has come to an end. A double whammy of releases from the Office for National Statistics (ONS) make clear the problems John Healey will have to overcome at his first Budget next week.  Inflation sped up to 3.5 per cent in September which while expected by economists was higher than they’d predicted. The previous figure was 3.1 per cent and the increase was driven by motor fuels as diesel hit its highest price in four years. Worryingly, core inflation – which strips out volatile food and energy costs – also rose from 2.6 per cent to 2.8 per cent. Services inflation was up too, hitting 3.7 per cent.

Has the jobs market bottomed out? Figures just released by the Office for National Statistics (ONS) show that, unexpectedly, the unemployment rate fell to 4.7 per cent, with the employment rate ticking up too. That said, more accurate HMRC estimates for payrolled employees fell by 111,000 in the year to August. But there were signs that this jobs collapse is finally starting to slow, with a previous 26,000 fall between July and August revised to an increase of 1,000. A ‘flash’ estimate for September also saw an increase of 13,000 from the month before. Forecasts had expected jobs to keep falling. There was no good news to be found in the vacancy figures, though, which show a fall in advertised jobs of 21,000 in the last three months.

Britain’s economy has surprised again. GDP grew 0.1 per cent in August, according to the Office for National Statistics (ONS). That’s obviously not much – but after 0.4 per cent growth in both June and July, pretty much every forecaster had expected a contraction. All of August’s growth came from production, which was up 0.8 per cent, while services were flat and construction continued its slump. Growth in AI, the ONS said, was driving things along with the legal and advertising sectors. Taken together, the surprisingly resilient growth figures – by the stagnant standards we’ve grown used to – we’ve had means that so far, at least, we are the fastest-growing economy in the G7.

There was a palpable frustration from the Prime Minister in his Labour conference speech this week. ‘I would love to go quicker’, Andy Burnham told delegates, explaining he was constrained by the reality of our public finances. But his frustration isn’t just about not being able to splash the cash within the fiscal rules. He feels he needs a fresh mandate before making the more radical changes he’s keen to make. In some ways we should be thankful; despite the clearly impressive oratory and the totally sound decision to break the ratchet effect of the triple lock, it was a speech with some quite radical socialist principles at its core. Principles that have Britain’s financial ruin at their end. That’s for the election though.

The first half of John Healey’s first Labour conference speech as Chancellor reminded me of old men in a bowls club reminiscing about the Korean war. For more than 15 minutes Healey set out his credentials as a Labour veteran. He’d gone from his constituency Labour party to the trade union movement and then to No. 11 (note, no mention of private business experience). He’s been around the block so long that Labour is ‘literally’ his family, he said, paying tribute to his wife. Once the thanks to the Mrs were out of the way, things moved to his true love: Gordon Brown. It felt, at times, like the Liverpool Convention Centre had been given over for a Brown memorial rather than the governing party’s conference.

Behind the scenes of The Spectator’s wealth tax debate this month there were lots of nervous whispers. ‘Wealthy people we work with are absolutely terrified about an exit tax,’ one Westminster figure remarked. The economist Arthur Laffer, one of the debate’s speakers, couldn’t believe a wealth tax was even being considered. Britain is already near the top of his famous curve – the point beyond which taxation reduces the Treasury’s take – and seems determined to push things to destruction. The latest fiscal rumour – that we might seize millions on a wealthy migrant’s departure – is a dangerous one. According to reports, it’s also the reason Chris Rokos, the third-highest taxpayer on the Sunday Times tax list, has decided to leave for Greece.

The Bank of England has just voted six-three to hold interest rates at 3.75 per cent, a decision that makes Britain’s central bank an outlier following rate hikes from both the European Central Bank and America’s Federal Reserve. It’s the sixth time in a row the Bank has voted to hold rates. The decision also comes in spite of yesterday’s news that inflation climbed further away from the Bank’s 2 per cent target, hitting 3.1 per cent in August, and the Monetary Policy Committee’s own forecast that rising energy prices will drive inflation above 4 per cent in the first few months of next year. In a letter to the chancellor, Andrew Bailey, the Bank’s governor, also warned energy bills are likely to rise 24 per cent in the winter.

Britain is heading head first towards another cost of living crisis. Figures released by the Office for National Statistics (ONS) show inflation rose to 3.1 per cent last year – up from 2.9 per cent the month before. ‘Sharp’ rises in petrol and diesel costs were the main driver, the ONS said, with air fares making a considerable contribution too. The Chancellor, John Healey, put the blame on global events, saying: ‘The war in the Middle East is impacting on inflation worldwide, not just here at home. In our bills, our weekly shop and at the petrol pumps.

Britain is in a wage spiral – though not a traditional one. Instead, job and wage growth is surging in the public sector while the private sector struggles. Unions put pressure on the government because of the cost of living, Labour grants pay rises, the cycle continues and a dwindling private sector picks up the bill. Figures just released by the Office for National Statistics (ONS) show that while private sector wage growth in the three months to July was flat at 2.9 per cent, it grew to 6.3 per cent in the public sector. Statisticians continue to insist that this is partly a ‘base effect’ whereby the timing of public sector pay rises occurred earlier than normal, but this explanation has been used for so long it is no longer credible.