Wednesday, 25 April 2012

Recession, totems, and polls - the Tory dilemma

As far as I can see about the only bright spot in today's news Britain has entered a double-dip recession is that the figures might be wrong.
It's true recently the Bank of England's and Office for Budget Responsibility's forecasters have been woefully over-optimistic; so there's a good chance the Office for National Statistics number-crunchers have been too pessimistic about construction output in their calculation of first quarter GDP.
But even if the figures are revised upwards later, the economy will still be no better than bumping along the bottom.
George Osborne launched his austerity programme in the expectation that significant growth would kick in somewhere along the line. That's not likely before the next General Election in 2015 for a variety of reasons - not least the erosion of our European export markets.
But the Chancellor apart from tinkering at the edges is sticking with plan A. Unhappily, while continuing to shrink the public sector, the jobs aren't being created in private industry to take up the slack.
The only weapon in the armoury is quantitative easing but the Bank's Monetary Policy Committee will get increasingly twitchy about printing billions of more pounds if the rise in inflation doesn't begin to flag as predicted.
Osborne needs to introduce a fiscal stimulus package to kick-start growth.
But he won't. Britain would lose its AAA credit rating, a blow to reducing the deficit, and equally important it would mean abandoning a Tory totem. Voters would see policy as "all pain and no gain" letting in Labour in a replay of the current French political scene.

3 comments:

  1. The govenment has to follow the [real] money. Windfall taxes and raised [not lowered] corporation taxes on blue chip and other large companies; proper annual mansion taxes on the wealthy: severe taxes on personal bonuses; large needed infrastructure products funded again by the corporations, under instruction and mandated by the government, with a mandated ceiling on profits made; forced transparency for offshore tax havens and the forced collection of taxes avioded and evaded and therefore consequently held in those havens. With no new wealth being created through growth the government is under obligation to finance any stimulation by taking the funds held in abundance by the very wealthy.

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  2. The earlier contributor to this blog, GC, talks a lot of good sense.

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  3. Hmm. Let's see how President Hollande fares if he really intends to hit the French rich, who are already threatening to leave the country. GC

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What do you think? GC