2 June 2023
State of the economy

Parliament has been in recess this week, coinciding with school half-term. I have been looking at the economic outlook as there have been a number of statistics published and plans announced in recent days to give us some indication of what progress is being made.

Last month several of the government's commitments to improve the standard of living for those on low incomes began to come through with record uplifts in the National Living Wage, the 10% increase in state pension and many benefits. In addition the first of three direct payments to 8 million low income households were made, which will total £900 this year per eligible household.

We also saw the first signs of energy bills starting to come down from July. The energy price cap on energy suppliers has been reduced by over £400 by Ofgem, which should reduce gas and electricity bills for those on a standard tariff for the next quarter.

The positive impact on the economy has started to be recognised by external observers. The International Monetary Fund (IMF) recently reassessed its view of the UK's economy. The decisive and responsible steps taken by the UK under the PM and Chancellor have led to the IMF upgrading its forecasts for GDP growth by 0.7% for 2023, surpassing even the Bank of England's projection. The IMF attributes their more positive outlook to improved confidence, government actions, and growth-enhancing measures outlined in the Spring Budget.

Although high inflation remains a challenge, the figures for April showed the first significant reduction in the headline rate to 8.7%, the first time it has been below double digits for 7 months. The British Retail Consortium food inflation indicators saw a decline in May, suggesting food inflation may have peaked.

Looking ahead, the IMF recommends evidence-based reforms to enhance business investment and productivity growth. A key area for this investment I expect will be in decarbonising our energy generation.

One of the largest renewable energy providers, SSE, announced plans last week to invest up to £40 billion in low-carbon infrastructure in the UK over the next decade. Last month at the G7 meetings in Japan, the Prime Minister announced £18 billion of investment by Japanese companies and investors in the UK, much the largest part into our energy sector.

While some may regard me as overly optimistic; I reject the narrative suggesting Britain is in decline. We are an innovative nation with a global outlook and world-class talent. 

But I completely accept there is still much to be done to get our economy back on track to exceed pre-pandemic levels and spread prosperity across Shropshire.

The government's three economic priorities of halving inflation, fostering economic growth, and reducing debt remain unchanged and critical to deliver.