Britain has sunk back into recession, its first double-dip downturn since the 1970s.GDP unexpectedly shrank by 0.2% between January and March, following a 0.3% contraction in the fourth quarter of last year, according to the Office for National Statistics. A technical recession is defined as two or more consecutive quarters of economic decline. The figures wrongfooted City economists, who had expected a return to growth of 0.1%.
Double-dip recession a terrible blow for George Osborne
“UK government stands accused of over-cooking austerity and killing off tentative recovery that was under way two years ago.” Larry Elliott
Richard Murphy of Tax Research blog writes today:
Osborne offered us his vision two year ago. It was of “expansionary fiscal contraction”.
His argument was that the more he cut government spending the more people would spend, liberated by knowing that if he succeeded in his aim of balancing the budget tax cuts would follow, letting them repay debt they’d take on now to spend. It hasn’t happened. People who face the prospect of unemployment, increased cost for things that were previously provided by the state, lower pensions, higher cost of childcare and the uncertainty of recession have simply stop spending…..
There is only one way to restore that balance in our economy and that is for the government to spend now on the creation of new infrastructure projects, new green energy projects, on the backlog of repairs that need to be undertaken in our public sector properties, in providing services that people need, and in investing with business in our future in sectors such as non-carbon energy.
This spending will, of course, require additional funding, but there is over £2 trillion invested in pensions at present in this country with more than £900 million (or thereabouts) in the larger pension funds. In that case money seeking a proactive home on which a positive return can be paid does exist. In addition, business itself has £750 billion of cash on its balance sheets right now, none of which is being spent. It is this combined cash that has to be brought into use in our economy if we are to get out of recession and nothing George Osborne is doing will achieve that goal.
We don’t, as a result, need corporation tax cuts for big business right now: we need them to pay more tax now so that investment can take place to fund demand for their products. That gets the business cycle going again. (1)
All of this was totally predictable following George Osborne’s Comprehensive Spending Review in October 2010… as the economists reported below said at the time (3). Currently, only 88% of the cuts detailed in the CSR have been implemented, and George Osborne has suggested an additional 10 Billion may be withdrawn from Welfare.
It should be remembered that the implicit consequences of the Coalition government’s stated policies of cuts would result in less spending on public services in the UK than that of the US by 2014/15. (2)
The UK needs more than a plan B. It needs a new government committed to public investment in reducing energy needs and increasing energy production from renewables. It needs a government committed to taking back the NHS and creating living wages and living support for the disabled and long-term sick. Above all, the UK needs to tackle unemployment, particularly amongst the young.
Reblogged this on Representing the Mambo and commented:
I think the really depressing thing about all of this is that it was so predictable. A child could have seen that the government’s economic philoosophy would not reduce the deficit and kickstart growth. There isn’t even a rational capitalist argument for what the government is doing, let alone a moral one.
Is George a complete plonker? Well, yes, but apart from that, is he a complete plonker in the economic sense? Consider the effects on the population at large of austerity as opposed to prosperity. In the former, one’s attention is largely if not wholly taken up with one’s immediate survival. In the latter, one may be more contemplative, reflective, thoughtful even. It might occur to many to wonder, given how the recent travails with the banking system have bought the subject of bankers and banking to the attention of many, just what this all-important stuff we call money actually is and where it actually comes from. Now, from the POV of the bankers, this would be a Very Bad Thing, don’t you agree? (Any who don’t agree should perhaps visit http://www.positivemoney.org.uk/ or http://www.economania.co.uk for the skinny – banks don’t actually make any loans, they just create money from thin air when they pretend to lend it; this is what banks actually do in this society, big secret, they create and control the money supply, shhhhh don’t tell!). If people were lollygagging around with time on their hands then given banks are in the public eye right now they might do a little research on the web and find out secrets about banking that have been hidden from public view for centuries, and the banks absolutely Don’t Want That! This is the information age and as such it represents a very great threat to the banksters. Exposure of their wholly unfair advantage over the rest of us looms as never before. What better to keep us occupied, then, than an unending dose of austerity, served up and enforced by a chancellor so muddled, so dimwitted, so damaged, he imagines the ideas he’s given by his backers are his own? Money or the lack of it is the weapon the banksters use against us, as they would being the controllers of the money supply, and enforced unrelenting austerity is it’s latest and most potent manifestation. So then, George himself is a plonker of the first order, but one would be wrong to think that austerity itself is pointless or without merit. If you’re a banker on the run, it’s your last-ditch weapon.
Great post by Paul Mason http://www.bbc.co.uk/news/business-17842001
Michael Meacher spells it out:
Pingback: Cut out Cuts – Leave the Eton Mess Behind | Think Left
Pingback: Why do the Lib Dems stay in the coalition? | Think Left
Reblogged this on Britain Isn't Eating.
Firstly, it beggars belief that Osbourne and his advisers could be so very incompetent regarding the recent budget.
Firstly, a bit off topic, but need to bail out the people not the banks and corporations. Give everyone a one off payment – not a ridiculous amount that could trigger too higher inflation – but enough to clear a considerable amount of debt; the banks get their money, the people are relieved of high debt repayments, and so they can start spending again; a ‘win-win’ move.
Just carrying on austerity with more of the same has proved without doubt that growth nose-dives. It’s hardly high end economic theory. Gids is reducing welfare by £49 billion over 5 years, and those amounts are spent directly in the local economies. I was called a ‘left wing tosspot bitch’ for pointing out this, claiming that if people spent their former income on Amazon – as it’s a company that don’t pay tax – it’s not going to help our economy. Well fair do’s, but since Amazon has become a selling sector similar to ebay, the small businesses on there, who do pay tax, will obviously benefit. If I spend my money in Tesco, the person being employed there (not workfare) is employed because there is a financial justification for employing them, and then they spend their wages just like anyone else!
In any case, poorer people don’t spend their money in companies like Boots; they’ll got to markets as well as local independent traders for all kinds of services. For example, I pay for various goods and services (main retailers if there are offers on there): the local butcher; Co-op; markets (occasionally as too ill to cope with the journey); taxis; window cleaner; Londis (they have some great bargains in there for basics like washing powder/loo roll/wash up liquids; local post office for cards/firelighters/other goods; a gardener/cleaner/private care that isn’t funded by the LA; local independent hardware store that sells everything from mugs to compost etc etc.
When my LA cut the transport allowance for disabled people – though tax people used to moan about the disabled getting this covered – they stopped moaning when they experienced what happened when that allowance was removed. It was worth £120 every 4 weeks, so you can imagine how small firms were affected.
Giving corporations a tax break won’t help growth: people need money to spend in the first place if we are to have any growth.
These examples prove that local spending by those considered poor makes a real difference to local economies. Goodness knows how they will be affected when the massive tax credits are implemented. It could push the UK over the edge, let alone what families with children will suffer.
I agree but of course ‘austerity’ is not a plan to restore the economy. Austerity is the chosen mechanism of wealth redistribution upward and offshore.