The UK economy is “headed for the worst of all worlds” as businesses expect activity to fall at the start of next year, according to the Confederation of British Industry (CBI).
The industry group’s growth indicator survey found that private sector firms expect to cut down on hiring, reduce output and for prices to rise in the first three months of 2025.
One of the main reasons given by businesses for the poor outlook was Chancellor Rachel Reeves‘ decision to raise employers’ national insurance contributions (NIC) – which is expected to raise around £25bn a year.
While the chancellor accepted the budget decision will not be “easy” for businesses, she said earlier this month the government “made a commitment during the general election… that we wouldn’t increase taxes on working people”.
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UK economy declined in October
Alpesh Paleja, the CBI’s interim deputy chief economist, said: “There is little festive cheer in our latest surveys, which suggest that the economy is headed for the worst of all worlds – firms expect to reduce both output and hiring, and price growth expectations are getting firmer.
“Businesses continue to cite the impact of measures announced in the budget – particularly the rise in employer NICs – exacerbating an already tepid demand environment.”
He added that firms are looking for Labour “to boost confidence and to give them a reason to invest” in 2025, “whether that’s long overdue moves to reform the apprenticeship levy, supporting the health of the workforce through increased occupational health incentives or a reform of business rates”.
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The CBI’s poll, based on responses of 899 companies between 25 November and 12 December, also found expectations for economic growth were at their weakest since November 2022, in the aftermath of Liz Truss’s resignation as prime minister.
Lucy Powell, leader of the House of Commons, told Sky News’ Sunday Morning with Trevor Phillips the ONS figures were “disappointing” and said that “of course we want to see these things (economic growth) happening faster”.
The Labour MP for Manchester Central said, however: “This is a bit like turning round some huge oil tanker…
“We take a fundamental view here about fixing the foundations, which is about trying to bring some economic stability, which means making sure that the budget adds up, which is something that we didn’t inherit.
“We inherited this big black hole in the public finances which we had to put right.”
Ms Powell then defended raising employers’ NICs, acknowledging while “it was a difficult decision,” it was made “to get money into the front line” of the NHS and other services.
Responding to the CBI’s survey, shadow business secretary Andrew Griffith said: “Since taking office, the chancellor has made this country a hostile climate for aspiration, for investment and for growth.”
The Conservative MP added: “Rachel Reeves’s tax-raising spree and trash-talking her economic inheritance are literally killing businesses and jobs.
“If there is a recession – and based on these CBI expectations that seems increasingly likely – it will be one made in Downing Street. Labour needs to urgently change course before the damage they are doing becomes even greater.”
For centuries an odd tradition lay dormant in our democracy.
A number of nobleman have had the chance to sit in parliament, simply by birthright – 92 seats in the House of Lords are eligible to male heirs in specific families and 88 men have taken these seats and currently sit in the second chamber to vote on legislation.
It is not known exactly when this quirk in our parliamentary system started but Sir Keir Starmer‘s government is trying to end it.
The prime minister has said that the right to sit in the second chamber bestowed at birth is an “indefensible” principle and his government have started the process to end hereditary peers for good.
It will mean that those with hereditary peerages will have to be part of the process that gets them voted out of a job they had previously been entitled to for the rest of their life.
The last of the hereditaries
We meet the Earl of Devon who has one of the oldest hereditary peerages.
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He can trace his family title back to the Saxons, but the right to sit in the House of Lords came much later – he says granted in 1142 for supporting the first female sovereign, Empress Matilda.
He is the 38th Earl of Devon since then and the last to sit in the Lords as a hereditary.
His castle in Devon places him in touch with the community he represents – it is one of the main reasons he feels strongly that he adds value to parliament.
He argues he and his peers bring a certain life experience with them that the political appointees do not.
He says there is a greater regional representation within the UK and he has a deeper understanding of the historical constitutional workings of parliament that comes from passing knowledge from generation to generation.
“I certainly feel that the role that the hereditary peers play in the House of Lords is exemplary,” he says.
He greatly defends the idea of service that he and his peers strive for but he also says there is a social purpose and social value to the hereditary principle as the monarch is the epitome of it.
“I don’t think that Keir Starmer is a republican but it does beg the question of once the hereditaries go is the king next,” he says.
By contrast, Lord Strathclyde has one of the newest hereditary peerages.
He has not only participated fully as a member of the Lords but also served in previous Conservative governments in senior roles.
He believes this latest intervention by the government is a purely political move.
“I think the real reason why the government wants to get rid of them is because most of them are not members of the Labour Party,” he says.
“So it’s a smash and grab raid on the constitution. Get rid of your opponents and allow the prime minister to control who entered the House of Lords.
“I can guarantee you that once this bill is through and becomes law, there will be no further reform of the House of Lords no matter what ministers say.”
It is true that over half of hereditary peers are Conservatives and astonishingly few are Labour – there are only four.
But removing the hereditaries doesn’t change the composition of the Lords all that much.
The Lords is 70% men, which would only drop 3% once these peers are removed, and the percentage of Conservative peers overall in the house only drops by 2% if all the hereditaries leave overnight.
Broader Reform
Reform has been talked about since the 1700s when there was an attempt to cap the size of the swollen chamber now at more than 800 members.
But despite successive governments promising reform, the House has only got larger.
Hereditary peers have long maintained that once the government passes this first stage of reform they will be less motivated by other opportunities to modernise the second chamber.
In 1999, Blair culled the amount of hereditary peerages (having previously promised to get rid of them all).
While 650 departed, a deal was struck for 92 to remain with replacements when these peers died or retired and filled by a bizarre system of byelections, where the only eligible candidates were hereditary peers.
The current leader of the Lords, Baroness Smith, says the elections are a bizarre, almost shameful part of our democracy and compares them to the Dunny-on-the-Wold in Blackadder where there is only one eligible voter in the entire constituency.
While the government’s aim to abolish these peerages has finally stepped up a gear, it is also true that Labour has watered down promises on broader reform in the Lords.
Pre-election, it had floated the idea of abolishing the second chamber altogether.
In the manifesto the party modified that to instead reducing the scale of the Lords through a retirement age, but that was not in the King’s speech and no timeline for those objectives has been given by the government.
Baroness Smith insists these are still commitments and the government is currently looking at how to implement them, though it does seem to be moving at a much slower pace than this first stage of removing the hereditary peers who, it seems, will hang up their ancient robes for good at the end of this parliamentary session.