Putting the UK economy into reverse

By Chris Williamson MP

The Office of National Statistics revelation that the UK economy saw no economic growth in the final quarter of 2010 is extremely worrying. Worse still, the GDP figures published today by the ONS show that construction output actually fell by 3.3% in the final quarter of 2010, the largest fall since the height of the recession in early 2009.

But rather like latter-day equivalents to Emperor Nero, George Osborne and Nick Clegg refuse to accept that they’ve got it wrong blaming the cold weather instead. George Osborne says: “There is no question of changing a fiscal plan that has established international credibility on the back of one very cold month,” (sic). He claims that to change course would “…plunge Britain into a financial crisis.” (sic)

Meanwhile the response to the ONS figures from the Tories’ ‘lackey in chief’ Nick Clegg, suggests that he’s emigrated to Planet Cameron. He is still referring an “economic recovery” which, according to the view from Planet Cameron, is still in its “early days”. According to Nick Clegg these depressing economic indicators have apparently been caused by:

“The government…doing the difficult work of putting the building blocks [to economic recovery] in place.”

Most experts and people at the sharp end would beg to differ. For example, the Construction Products Association CEO, Michael Ankers, says:

“After two quarters of relatively strong growth in the middle of 2010, these latest figures show that the economic recovery has stalled even before the full impact of the public sector spending cuts is felt.”

He dismisses the Osborne’s argument that it’s all down to the weather. He says:

“Although the poor weather in the last few weeks of the year undoubtedly had an impact on the construction industry, as it did in 2009, it is clear that the recovery in the construction industry has already petered out and that private sector growth is not coming through strongly enough.”

Of course the “strong growth in the middle of 2010” to which Michael Ankers refers was only brought about because of the measures introduced by the previous Labour government. Labour’s new shadow chancellor, Ed Balls, says it’s a matter of great concern that Britain’s economic recovery has now ground to a halt. His anxiety is shared by economists who are worried because the GDP figures for the last quarter are much worse than expected. Some believe it could mean that Britain may now suffer a double-dip recession after all; something Ed Balls expressed concerns about last summer. Furthermore, with inflation hitting 3.7% last month, there are also growing fears that the UK is heading for a double whammy caused by “stagflation”.

This Tory-led government is becoming increasingly isolated and very few people now support its economic prospectus. Even the outgoing CBI chief, Sir Richard Lambert, has criticised the government’s inadequate growth strategy and is falling in line with Labour’s calls for measures to increase demand. In his last major speech as head of the CBI he said:

“The sooner we can get output back up to the levels that were expected before the recession, the quicker government revenues will rise to narrow the fiscal gap. It’s not enough just to slam on the spending brakes. Measures that cut spending but killed demand would actually make matters worse.”

So what’s happened to the brave new world envisaged by Messrs Cameron, Clegg and Osborne who told us there would be a private sector led recovery. They claimed their drastic cuts to public spending wouldn’t affect demand and that the jobs they were axing would be absorbed by a dynamic, pristine, thrusting private sector. The reality is rather different with growth shrinking and construction output, one of the key economic drivers, set to fall by a further 2% in 2011.

What this Tory-led government refuses to accept is that there is a strong interrelationship between the public and private sectors. Both need each other and taking an axe to one causes catastrophic blood loss in the other.

These are worrying times with George Osborne’s ideologically driven approach to the economy proving to be both inept and dangerous. The spectre of 1930s Britain looms ever larger.