PM warned against cuts as UK falls into recession

Britain enduring longest sustained fall in living standards in 70 years

- Richard Partington, Larry Elliott, Kiran Stacey

Rishi Sunak has been warned against launching a fresh austerity drive after official figures confirmed Britain's economy is in recession and living standards have suffered their longest sustained fall since records began almost 70 years ago.

With the government under pressure over its economic management, Treasury sources said the chancellor, Jeremy Hunt, was considering a fresh squeeze on public spending to finance pre-election tax cuts in next month's budget.

But unions said it was an "outrage" the chancellor was looking to balance the books by forcing more austerity on to services already on their knees - while a leading thinktank described any moves to cut taxes as "ludicrous."

Figures from the Office for National Statistics showed the economy shrank by 0.3% in the three months to December, handing Labour the ammunition to claim Sunak's plans lay "in tatters" after 14 years of the Tories underinvesting in Britain.

The contraction in late 2023 followed a drop of 0.1% in the three months to September, confirming a second consecutive quarter of falling national output - the technical definition of a recession - with the ONS warning the picture would have looked even worse had it not been for a rising population.

Highlighting a deep economic malaise, the figures revealed national income per head had fallen or flatlined for seven consecutive quarters - the worst run since modern records began in 1955.