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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8 Comments
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.
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?
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.
I said that ages ago on a forum – I’m sure it’s still around somewhere if you look…I predicted a 5 year recession!
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.
Paul, I agree…we would be in a deeper hole if the Tories were in charge. And, listening to George Osborne this morning, they would still be digging, despite the economic data. According to Osborne, on the Today programme today, It is called having a plan to get the UK out of recession!
Martin, Cambridge could be different – though I think it depends which part of Cambridgeshire you are referring to. The data suggests poor economic performance across the piece – many of those worst affected at the moment are quite well hidden from view. That is part of the UK’s problem – in my view.
Tony, I think there is good reason for suspecting that much of the ‘stimulus’ money has gone into the bank’s vaults AND some has found its way into equity markets. It is important to note that the VAT element was a very small boost to UK domestic demand and delivered at a time when many households were suffering sharp reductions in income and trying to pay down debt. It was chosen by a Chancellor who wanted to avoid upsetting ‘the City’. It reflected a misguided focus on monetary (rather than fiscal) means to address what Richard Koo has labelled a balance sheet-recession.
and Paul again, Unfortunately Obama wasn’t able to do much in the way of a quick ‘shovel ready stimulus’ at the start of the year … so US states, with some of the biggest problems, which should have been doing more to counteract local labour market disasters (I mean human disasters) are facing a fiscal disaster which is going to intensify economic problems across the US.
Oh Get me! – as they say in the US – ‘thank you for your leadership’.
Bill, I think we are in the same place…but I know you are far away.
Tim, There was nothing odd about opposing the VAT reduction. In a deflationary environment intelligent economic policy makers should be looking to get the biggest bang for their bucks and paying careful attention to the marginal propensity to consume. The UK Government is hoping that others will do the heavy lifting while it behaves in a way it hopes will minimise damage to the financial sector and keep ‘the City’ sweet.
There is a chink of light on one front. I understand that Lib Dem Treasury spokesman, Vince Cable, is reported as having said the latest data should be viewed as a “cold dash of realism”. Although the bit about ‘cold dash’ worries me because it suggests that the Party leadership didn’t see it coming. Vince is also reported as having added: “This news adds to serious concerns over the realism of Government plans to deal with the
burgeoning public debt.” Too bloody right! And then the report I’ve read suggests he went even further – I hope it was in an honourable liberal tradition when addressing tough economic times.
VC: “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 scrapheap.” I’d say we have to avoid repeating mistakes that have a much longer history. I really do hope that we – as a Party – can. But it will me rather less ‘me tooism’ on the economic policy front.