Vince – this “could yet become the deepest recession on record”

The BBC reports the bleak economic news:

The UK economy unexpectedly contracted by 0.4% between July and September, according to official figures, meaning the country is still in recession. It is the first time UK gross domestic product (GDP) has contracted for six consecutive quarters, since quarterly figures were first recorded in 1955.

Here’s what Lib Dem shadow chancellor Vince Cable had to say:

For all the hopes of a quick recovery, these figures make it clear we are still in the longest and what could yet become the deepest recession on record.

“For all that has been thrown at the economy to try and stimulate a recovery it is clear that massive structural problems remain, particularly in the banking sector.

“This news adds to serious concerns over the realism of Government plans to deal with the burgeoning public debt. It is critical ministers spell out a credible path as to how they will deal with the deficit.

“With the legacy of unemployment likely to remain for years after the end of the recession, we need radical measures to avoid repeating the mistakes of the 1990s which left millions on the scrap heap.”

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  • What this also shows is how much deeper a mess we would now be in had the Tories been in position to start their deficit reduction policy.

    Consumer and business confidence is weak and people are reluctant to spend. The consequences of a previously overheated consumer boom – many consumers are worried about spending power, their jobs and debts.

    Only government led stimulus can keep things moving – but there are painful choices now about how we plan to pay for this. Political uncertainty will overshadow the economy from now until the election.

    The other parties are going to have to be more open and discuss the choices as their silence and petty posturing are becoming part of the confidence problem.

    Vince is yet again spelling out the issues and championing the national interest.

  • Martin Land 23rd Oct '09 - 9:12pm

    I suspect most people will find this rather strange. The ‘normal’ economy seems to be picking up. Most people I speak to feel more upbeat about their personal situation. Ruling out the possibility that Cambridgeshire might be different to the rest of the UK Economy, could it just be that a limited number of sectors are disproportionally dragging the figures down?

  • Tony Greaves 23rd Oct '09 - 10:46pm

    I am increasingly of the view that a major part of the problem is that the bail-out/stimulus money was mostly given to the banks.who have been hoarding it. Just imagine if it had been shared out on a per capita basis to everyone in this country!

    Tony Greaves

  • Interesting point Tony, in the US one of the things the Bush adminstration did was to send everyone a cheque to spend – there is still a risk they save it or reduce their debts but less so if its widely spread.

    The problem with the bank bailout is that unless you borrow from the bank, which actually lots of people don’t want to at the moment, because they are paying back and reducing their debts and are you still have to pay high rates of interest, the money is really just helping bank liquidity and capitalisation not directly stimulating economic activity.

    How about £200 each for Christmas ? – cost £10 billion assuming 50 million adults – might have worked better than the VAT cut.

  • Bill le Breton 24th Oct '09 - 9:31am

    So Vince says:
    “It is critical ministers spell out a credible path as to how they will deal with the deficit.”
    And then
    “With the legacy of unemployment likely to remain for years after the end of the recession, we need radical measures to avoid repeating the mistakes of the 1990s which left millions on the scrap heap.”
    Well, cutting public spending or raising taxes will worsen the problem. You are bonkers Vince. The King is in the all-together, if you are still harping on about the deficit.
    I repeat, debt is not the problem. Borrowing is not the problem. Demand is the problem.
    We should be campaigning now for a National Programme of Reconstruction. There has never been a better time to increase the provision of affordable social housing, increased shared equity initiatives, environmental projects around power and public transport facilities, Wi-Max to give everyone free internet access, and local works projects around bodies like Groundwork.
    Let’s get Britain working, let’s get people involved in the rejuvenation of their neighbourhoods, let’s prepare Britain for the next 30 years.

  • We were de facto all sent a cheque – a VAT cut – it means that for every £100 you spent this year, the govt gave you approx £1.25 in “cashback”. The VAT cut was the easiest way to distribute money as it means that people end up with a bit more in the pocket after they have bought to stuff that they were going to buy.

    Oddly (in my view) the LibDems opposed it, although the IFS argued in its favour.

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