Britain is paying the price in lost jobs and lost growth – my Tribune column

Only George Osborne and David Cameron could describe last week’s economic growth figures as good news. They showed that our economy has flatlined over the last six months – the 0.5 per cent growth in the first quarter of this year, which the government trumpeted, simply made up for the 0.5 per cent contraction we saw at the end of last year due to the severe snow.

The Chancellor, who refused to repeat the Office for National Statistics’ description of the economy as being flat, seems to be in denial about the impact his decision to cut too deep and too fast is making. In the previous six months, under the influence of our plans to get the deficit down in a steadier way and put jobs and growth first, our economy grew by 1.8 per cent. But since George Osborne’s spending review, since the Tory VAT rise, but before the bulk of the cuts started to kick in last month, the economy has not grown at all.

In contrast, over the same period, the US economy grew by 1.2 per cent – even though both sides of the Altantic have been through a big global recession and had to face rising world oil prices and severe winter weather. As the respected Financial Times commentator Martin Wolf noted last week, the UK economy is 4 per cent below the level it was at before the global financial crisis, while GDP in the US has now surpassed its pre-crisis peak.

While last year’s cuts and the VAT rise have had an impact on our economy, the promise of big cuts and tax rises to come has also hit consumer and business confidence hard. Consumer confidence has hit a nearly 20 year low. And only this week we saw that manufacturing – which has recently been boosted by a weak pound that makes our exports cheaper abroad – is also facing a slowdown with new orders at their lowest level for eight months.

The warnings we and the Liberal Democrats made in the general election twelve months ago that putting up VAT and cutting spending on jobs programmes and school buildings in the last year would put the recovery at risk have now come true – although the Lib Dems have helped make those fears a reality. It’s no wonder that on the doorstep in recent months pretty much every person I’ve met who voted for Nick Clegg feels betrayed. This coalition has no mandate for its reckless economic policy, just as it has no mandate for its NHS reorganisation or the trebling of tuition fees.

Of course, after the biggest global financial crisis since the 1930s, every major country faces tough decisions to get their deficits down. But cutting further and faster than any other major economy was – as even Nick Clegg recently recognised – a political choice by this Conservative-led government.

The economy should be growing strongly this year. But inflation and unemployment are both set to be higher – and growth significantly slower – than the independent Office for Budget Responsibility forecast would happen under Labour’s plan. And what is the result? George Osborne is now set to borrow £46 billion more than he was expecting to just a few months ago. That’s because fewer people in work paying taxes and the economy growing more slowly creates a vicious circle.

There is an alternative, as Labour has been setting out. We should be putting jobs and growth first and reducing the deficit in a steadier way. This approach was working a year ago when the economy was starting to grow strongly, unemployment was falling and borrowing came in £21 billion lower than planned. The government should also be repeating last year’s £3.5 billion bank bonus tax to build thousands of new homes, create over 100,000 jobs and support small businesses.

By refusing to even consider an alternative, George Osborne is putting politics above economics. He is taking a reckless gamble and Britain is already paying a price in lost jobs and lost growth.

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Posted May 6th, 2011 by Ed

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