Good morning.
If the past 12 years have achieved anything, it’s the end of “boom and bust” economics. Now the UK has the reassuring stability of a constant bust. The country is hurtling into its second recession in two years, much of the public sector seems to be voting for strike action and poverty is on the rise. A day does not seem to go by without another headline outlining just how much more expensive it is to live than it was yesterday. The chancellor, Jeremy Hunt, has warned that there is a tough road ahead, stating that everyone will be paying more tax after the autumn budget and public services will face even more cuts, including the NHS, even though Hunt himself has admitted that the health service is on the brink of collapse.
There are many global factors that affected this economic downturn, from the pandemic hangover to Europe’s energy crisis, but the UK’s chaotic approach to post-Brexit government and a decade of austerity has meant that the country is struggling more than others. But what does that mean for those of us living through further economic decline?
I spoke to Guardian special correspondent Heather Stewart about what the next recession might look like. That’s right after the headlines.
Five big stories
US politics | The Democrats will retain control of the Senate after a crucial victory in Nevada. The loss is a significant blow to the Republicans who were banking on a red wave from the midterm elections.
Turkey | 22 people have been detained in Turkey after six people were killed and a further 81 were left injured when an explosion went off in central Istanbul.
Remembrance Day | King Charles led the Remembrance Sunday ceremony for the first time as monarch. The King laid a wreath at the Cenotaph as thousands of veterans watched on.
Immigration | Figures from the Refugee Council have found that more than 40,000 asylum seekers have waited between one to three years for a decision on their claims.
NHS | Up to one in three hospital beds are occupied by people who are well enough to be discharged but are not able to leave because of an acute lack of social care leaving them with nowhere to go.
In depth: ‘I can’t remember a situation like this in my lifetime’
The economy shrank by 0.2% between July and September, and forecasts show that it will probably continue to contract in the last few months of the year. While a recession has been expected, the reality is looking even more concerning than anticipated. Today’s newsletter breaks down how long this turmoil could last, the government’s response and what the next year could bring.
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The long recession
Even though it does not feel like it, we are not technically in a recession yet. “We won’t formally know that we are in a recession until we get the growth figures for the last quarter of this year, which will be sometime in early 2023. But the very strong expectation is that it’s the start of a recession,” Heather explains.
This one will likely be different to the recession during the pandemic, which was “quite short and sharpish,” says Heather – a reaction to the unexpected nature of a global health crisis that brought the economy to a halt. Conversely, this recession could be a long slog, partly because the Bank of England is likely to keep interest rates high to tackle inflation. “They could of course change their minds about cutting rates in the coming months,” says Heather. “But as we stand at the moment it looks like we’re going to have quite a long period where the size of the economy is declining.”
What this tends to mean in real terms is rising unemployment, stagnating wages and businesses struggling to keep their doors open. The Bank of England has said it expects the coming recession in the UK to be the longest since records began in the 1920s, bracing for a two-year recession that could lead to unemployment doubling. It should be noted that this is likely a worst case scenario.
“The latest forecast suggests that if the Bank of England raises interest rates as high as financial markets are expecting it to, you could end up with a sort of two-year recession. But they probably wouldn’t do that because if it starts to look like a two-year recession they’ll stay their hand and be a bit less aggressive,” Heather says.
There are also a number of external factors that could effect the length of the downturn: for instance if the war in Ukraine ends or the fighting significantly slows down, and oil prices decline, the picture could change significantly. “This is a period of very high uncertainty but certainly the expectation is that 2023 is not a vintage year for the economy,” Heather concludes.
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The government’s response
Jeremy Hunt will announce his autumn budget later this week, and with talk of a “fiscal blackhole”, the expectation is that the chancellor will usher in an era of “austerity 2.0”. The government’s mission is fairly simple: cut public spending and raise taxes – a partial revamp of 2010’s Osbornomics. There is a chance that Hunt has decided that the political cost of taking a sledgehammer to public services is too high, “some of the reports that are floating about suggest that some of the pain from the budget will be deferred,” Heather says. “A lot of them could be through so-called stealth taxes, so things like freezing tax thresholds. It’s not as upfront as saying ‘I’m just going to hike up tax rates by one percentage point’ or whatever, but it is still a tax rise.”
Another tactic Hunt will probably deploy is delaying spending on projects – he has already confirmed that the government will delay implementation of a social care cap for at least two more years. While it may help soften the government’s image, for many people who rely on these services, the delay will have the same impact as a blunt cut. Active cuts to public services will reportedly come after the next election if the Conservatives win, with a real term three-year freeze on day to day spending.
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One million more in poverty
The United Nations poverty envoy told Rishi Sunak that this is the worst moment for austerity. That is because in the UK more than one in five people are living in relative poverty, according to the Joseph Rowntree Foundation. An extra million people will probably be pushed into poverty this winter, moving deprivation levels in the UK to their highest in two decades. Last week the Guardian reported that children are showing up to school with mouldy bread, empty wraps and dry cereal for lunch. One headteacher said that the situation is the worst that she has ever seen – pandemic included.
“The problem is that family budgets were already incredibly squeezed, especially in low income households, people were already really struggling,” Heather says. The combination of a decade of declining wages, a welfare state that has been gutted and rocketing inflation has put the country in a uniquely dire situation. “I can’t remember a situation like this in my lifetime,” she says, “but we seem to be in a place where people are literally in absolute poverty, they’re struggling to feed their kids and I can’t remember that being as widespread as it seems to be at any other time.”
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What happens now?
With predictions that life will only get more difficult in the coming year, many workers, particularly public sector workers, have decided that they have had enough. Heather spoke to the major unions and found that around 1.7 million people are either already taking industrial action or balloting for it. This has been a radicalising moment for many who have seen their real wages fall over the last decade, and then plummet further as inflation topped 10%.
In the short term, housing, particularly for private renters, will get more expensive, but there is a chance that a housing downturn next year will lead to property prices decreasing which eventually could lead to rent also decreasing. In the meantime tenants will feel the bite of astronomically high rent as inflation continues to rise.
“The wider politics of this is that it seems to me to be extremely unlikely at this point that we get another Conservative government,” Heather says. “The question then is to what extent do a Labour government feel obliged to play to the tune that Jeremy Hunt will set out this week.”
What else we’ve been reading
If you are have finished binging The Crown but are still craving royal drama, then look no further. Peter Bradshaw ranked his favourite depictions of Princess Diana over the years. Nimo
Matthew Modine has been enjoying a career renaissance thanks to Netflix smash Stranger Things, so it’s perhaps surprising to see him admit his reluctance to take on the part in Sarah Crompton’s interview. Toby Moses, head of newsletters
Tim Adams’s interview with national treasure and baking aficionado, Nadiya Hussain, was so wonderful. Sitting in a big lively Turkish restaurant, Hussain talks about her family, her love of food and how her life has changed over the years. Nimo
With Jeremy Hunt comparing himself rather strangely to “Scrooge who’s going to do things that make sure Christmas is never cancelled” perhaps the Chancellor could do with reading this piece on the continued relevance of Dickens’ A Christmas Carol. Toby
Snihurivka is a small town that has recently been retaken by the Ukrainian army. Isobel Koshiw spoke to the residents who, for almost a year, were isolated and suffering. “I can’t stop smiling,” said one resident, “because it’s been eight months of nothing to smile about”. Nimo
Sport
Cricket | Ben Stokes fired England to World Cup glory as they beat Pakistan by five wickets, to win the T20 World Cup for the second time.
Football | Danny Ings scored twice, securing Aston Villa a 2-1 victory against Brighton. The Premier League’s final game before it breaks for six weeks to accommodate the World Cup in Qatar saw Man Utd beat Fulham 2-1.
F1 | George Russell claimed his first Formula One win at the São Paulo Grand Prix, with his Mercedes teammate and seven-time champion Lewis Hamilton, coming in second.
The front pages
The Guardian reports on “The hospitals where a third of patients can’t go home”, with a lack of social care leaving many without a suitable place to go.
The Mail splashes with “A&E chief: hospitals harm the elderly” while the Mirror looks ahead to the upcoming budget with “Last chance to save our NHS”. The i previews the budget as well, saying: “Tax rises for all and energy help just for poorest”.
The Sun carries a full page picture of Cristiano Ronaldo and the headline “United have betrayed me”. The footballer claims the club is trying to force him out.
The Telegraph looks ahead to the gathering of world leaders in Indonesia, headlining “Russia is a rogue state, Sunak tells G20 leaders”. The Financial Times says “Crypto races to contain FTX fallout as traders pull billions from market”.
Today in Focus
The mystery of Teesside’s dead crabs
When thousands of crabs started washing up on the beaches of Teesside in north-east England, authorities blamed algae in the water. But the fishing crews watching their livelihoods disappear weren’t buying it.
Cartoon of the day | Edith Pritchett
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The Upside
A bit of good news to remind you that the world’s not all bad
The First Hike Project began in 2015 primarily for people with refugee and migrant backgrounds in Australia. The project was set up to help young people connect with their new country by exploring nature, with the hope that they would feel more at home. Social support workers who helped refugees and migrants with their daily lives noted just how much difference the hikes were making for the wellbeing of the participants. Those involved not only found a new hobby, but also support, hope and shared experience. Faeza Karimi, a 21-year-old law student, who was a participant but is now a volunteer for the project, said “By walking in the bush and hearing the different stories of others coming here, I felt I belonged.”
Sign up here for a weekly roundup of The Upside, sent to you every Sunday
Bored at work?
And finally, the Guardian’s crosswords to keep you entertained throughout the day – with plenty more on the Guardian’s Puzzles app for iOS and Android. Until tomorrow.
