Rachel Reeves today insisted she has the ‘right economic plan’ after unemployment saw a surprise fall – but only before the Middle East crisis erupted.
The UK jobless rate dipped to 4.9 per cent in the three months to February – down from 5.2 per cent – and its lowest level since last summer.
However, the ONS said that was largely driven by a rise in numbers classed as inactive and not looking for work.
The more recent signs were also gloomy, with numbers on payrolls down 11,000 in March to 30.3million – 65,000 lower than a year before – while vacancies have dropped to a five-year low.
Pay rises have also been slowing dramatically, although public sector workers have been doing better than the private sector after Labour’s bumper settlements. Most economists had expected the jobless rate to remain unchanged.
Speaking in the House of Commons this afternoon, the Chancellor talked up her stewardship of the economy amid the global energy crisis sparked by the Iran war.
‘This Government has the right economic plan,’ she told MPs. ‘A plan that was right before the conflict in the Middle East started and is now essential to weather the impact of that conflict.
‘A plan that is backed by the IMF. A plan to keep costs down for everyone, and to support those who need it most, and in a world that is more uncertain, a plan to build a Britain that is stronger and more secure.’
Rachel Reeves today insisted she has the ‘right economic plan’ after unemployment saw a surprise fall – but only before the Middle East crisis erupted
The UK jobless rate dipped to 4.9 per cent in the three months to February, its lowest level since last summer
The more recent signs were also gloomy, with numbers on payrolls down 11,000 in March to 30.3million, 65,000 lower than a year before
Vacancies have dropped to a five-year low
Ms Reeves rejected calls for a ‘knee-jerk’ response to the Middle East crisis, as she set out the Government’s plans to ‘weaken the link’ between gas prices and the cost of UK electricity.
‘We are continuing to plan for every eventuality, but we must deal with the economic costs that are already being felt,’ she added.
‘I reject the demands that a knee-jerk response to this crisis, that would put household finances at risk through higher inflation and higher interest rates.
‘Every choice I make will be about keeping costs down for families and businesses.’
Ms Reeves will hike the Government’s windfall tax on low-carbon electricity generators from 45 per cent to 55 per cent to raise Treasury funds that will be used to support consumers and businesses with the rising costs in the short term.
The so-called electricity generator levy was introduced in 2022 to target the excess profits being made by nuclear, biomass and renewable energy projects built before 2017 as electricity prices soared after Russia’s invasion of Ukraine.
The Government is also proposing a voluntary move by these ‘legacy’ clean power generators, which supply around a third of Britain’s power, on to fixed-price contracts to help protect consumers from volatile prices.
It is hoped the contracts will deliver benefits on consumers’ bills over the next 12 months, though officials are not yet able to say what savings could be delivered.
And ministers said they will also increase support available for households on heating oil and liquified petroleum gas to transition to lower-carbon alternatives by increasing the boiler upgrade scheme grants to a total of £9,000.
Other measures to help cut bills include:
- Further details on so-called transitional energy certificates, which will provide industry looking to invest in North Sea drilling with greater clarity over already-explored areas near near existing licensed fields.
- Providing an additional £100 million, on top of the £1.2billion pledged to deliver energy upgrades to 100,000 social homes, to boost the delivery of solar installations.
- Backing efforts to install solar panels on a further 100 schools and colleges this year.
- Driving forward plans to expand renewables across the Public Estate – including using brownfield land, industrial sites and railway sites to host solar panels and wind turbines.
- Streamlining outdated rules to unblock the electricity grid queue and speed up clean power.
- And plans to make EV chargers, solar panels and heat pumps easier to install for renters, flat-dwellers and households without a driveway.
But Tory shadow chancellor Mel Stride said the Government’s plans to address the global energy crisis are ‘too little too late’.
He told MPs that Labour needed to scrap carbon taxes and renewable subsidies ‘which are pushing up bills’, and reverse the decision ‘to rely on imported oil and gas’.
‘The current crisis shows how exposed we are and how damaging the Government’s Net Zero obsession has been to our economy, to households and to businesses,’ Sir Mel said.
‘The Government is right to want to reduce that exposure, but is doing too little too late.
‘We need an urgent change in course, not dither and delay. We need a proper, cheap power plan to get bills back down and we need it now.’
In response, Ms Reeves said the Government was investing in, and is reforming, the energy market ‘so that we can take back control of our energy security’.
She said: ‘The shadow chancellor says that the response to the fossil fuel crisis is to rely more on fossil fuels and to reduce investment in clean, home-grown energy.’
Liberal Democrat deputy leader Daisy Cooper said the Chancellor is ‘fundamentally wrong’ to say that a knee-jerk response to the economic crisis would put households at risk.
She said: ‘The Chancellor should have come here today to explain how she was going to use the £20million extra the Treasury is pulling in every single day through higher VAT, higher energy profits levy and other taxes to tackle the immediate cost of fuel crisis that is facing families and businesses today.
‘I believe that Chancellor is just fundamentally wrong when she says that a knee-jerk response would have put household finances at risk through higher inflation and higher interest rates.’
She argued that using the extra tax revenue to drive down the cost of petrol, train fares, bus fares and home charging electric vehicles would have ‘helped the Chancellor to control inflation and higher interest rates’.
Ms Reeves said: ‘I do find what (Ms Cooper) has just set out as being fundamentally economically illiterate…
‘The truth is, the IMF and every other forecaster is clear that tax revenues are going to be lower, not higher, because of this conflict in the Middle East, and so the money that (Ms Cooper) wants us to spend simply does not exist.’
The ONS said the fall in the unemployment rate was driven by a rise in inactivity, especially among students, which rose 70,000 in the quarter.
It also cautioned the figures should be treated with caution given an overhaul to the way they are collected.
The figures showed average regular wage growth dropped further, to 3.6 per cent in the three months to February, down from 3.8 per cent in the previous three months and remaining at the lowest level since November 2020.
Earnings are still outstripping inflation, rising by 0.4 per cent with the Consumer Prices Index (CPI) taken into account, but this is the lowest real growth for more than two-and-a-half years.
Vacancies also plunged by 29,000 in the three months to 711,000 – now the lowest level since April 2021.
Liz McKeown, ONS director of economic statistics, said: ‘Alongside falling unemployment, the number of people not actively seeking work increased, with data suggesting fewer students seeking work alongside their studies.
‘Regular wage growth has slowed further with growth at its lowest rate in over five years.’
The data comes amid fears of a spike in unemployment as the Iran war takes its toll on the UK economy, with the Item Club forecasting the jobless rate will surge to 5.8 per cent by the middle of 2027, with almost 250,000 more people without a job.
Commenting on the ONS figures, Work and Pensions Secretary Pat McFadden said: ‘These figures show that there was an improvement in the labour market at the beginning of the year with unemployment falling below 5 per cent, and 332,000 more people in work than a year ago.
‘But we cannot escape the effects of the war in the Middle East which are likely to feed through to prices and employment in the coming months.
‘We will do everything we can to support the country through this period, including by slashing energy bills by up to 25 per cent for 10,000 manufacturers.
‘And we’re focusing on future proofing and upskilling our workforce through our £2.5billion investment to get more young people earning and learning alongside personalised support to help sick or disabled people who had previously been written off.’
Shadow work and pensions secretary Helen Whately said: ‘This month’s dip in unemployment is outweighed by the rise in people who are economically inactive, who have left the labour market altogether.’
The senior Tory MP added: ‘Labour’s taxes and red tape have killed opportunity for many thousands of people.’
