This morning I joined the Guardian’s panel of Martin Kettle, Len McCluskey and Matthew Oakley to give our verdict on today’s GDP numbers:
“The Chancellor must eat humble pie”
The statisticians, clutching at straws, blamed the victims – the British people – for the measly 0.2% growth in GDP. It turns out we are too fond of holidaying (the royal wedding effect) and basking in “warm weather”.
But this cannot explain the fall in manufacturing by 0.3% and the 3.2% fall in electricity, gas and water supply. Nor does it explain the rise by 0.7% in “business services and finance”. The fact is the economy remains unbalanced, and the coalition government is doing very little to restore some balance, and with it the potential for recovery.
And without economic recovery, there can be little hope for the public finances. The fact is, the chancellor cannot cut the deficit if the economy does not recover. Today’s numbers offer little succour. GDP is still lower than it was in 2006 – four years after the crisis “debtonated” in August 2007.
The chancellor’s budgetary outcome depends on the plans of the entire economic system and its reactions to the Treasury’s policies. Right now the British economy is responding to the government’s determination not to provide a stimulus to the very weak private sector – by faltering.
The argument is that Britain “cannot afford” a fiscal stimulus. That we “cannot afford” to boost the private and public sectors, create jobs, generate income and restore hope to 2.5 million unemployed people.
But we could, apparently, afford to bail out the banking system.
The coalition government’s determination not to stimulate the creation of employment, and with it the income that will generate recovery – will be viewed negatively not just by the powerful rating agencies, but by the British people too.
The fact is that just as work makes things affordable for individuals, so employment makes recovery affordable for the economy as a whole. And until the chancellor eats humble pie, and absorbs this economic lesson, neither the economy, nor the public finances will recover.
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