The Government was proclaiming recently that the economy was ‘healing’ given the recent improvement in unemployment figures and the fall in the number of JSA claimants.
David Cameron said ‘the good news would keep coming’ only to be swiftly poleaxed by Vince Cable who warned, “There is a real worry about [the possibility of a lost decade], a real risk of that.”
The recent indicators show Britain maybe heading for a Japanese style ‘lost decade,’ which was plagued by sluggish economic growth. Latest Office of Budget Responsibility (OBR) forecasts have downgraded the UK’s economy. For 2013 the economy will grow by only 1.2% – down from the previous projection of 2%. The forecast for 2014 puts the UK’s growth at 2% from the previous projection of 2.7%
Even the unemployment figures are contradictory. The latest labour market statistics show the UK unemployment rate went down by 0.1 per cent from September to November compared to the previous three months. The data also shows unemployment falling by 37,000 for the same period and the number of people claiming Jobseeker’s Allowance (JSA) dropping by 12,100. However, in areas of need and high deprivation such as Brent, the opposite is happening. From September to November there were 30,000 people out of work in the borough, which is an increase of 1% compared to the three months from June to August.
I recently hosted a discussion with Rachel Reeves and local businesses in Brent about how Britain can avoid its own ‘lost decade.’
A One-Nation Labour economy would include a plan for jobs and growth including a temporary VAT cut, a national insurance holiday for small firms taking on extra workers and investment in infrastructure and affordable housing. It will also showcase the long-term reforms needed to make the economy stronger, such as proper reforms to our banks to boost lending to small and medium sized businesses.
In Brent we are introducing a range of innovative initiatives to help the local economy such as the award winning Supply Chain Project, which matches construction and employment opportunities with local businesses and residents.
The Chancellor and his rather quiet Lib Dem sidekick Danny Alexander seem to be wedded to their ‘Plan A’ course of action despite the lack of growth and economic progress. GDP figures for the last quarter showed the economy dipped by 0.3%. Even some of the chancellor’s previous backers have urged him to change course. Jim O’Neill, chairman of Goldman Sachs Asset Management, said, “The policy has been on the wrong path.”
The Government’s rapid pace of spending cuts is choking off any chances of an economic recovery. The drastic austerity measures have produced a flatlining economy that is on the verge of a triple-dip recession and is infested with higher borrowing and public debt.
Labour’s challenge will be to continue to keep employment as a priority. It will also need to stimulate the economy through increasing demand and getting households to spend again, but this time without the performance-enhancing drug of credit finance.