George Osborne has already undermined the economic recovery – my column in Tribune

The shocking allegations of illegality and corruption at the News of the World and in their dealings with the police have appalled the public. At the time of writing, there remain serious unanswered questions not just for senior figures at News International, but for David Cameron and the Metropolitan Police too.

While the hacking scandal has understandably been the focus of attention over recent weeks, grave concerns about the state of the UK economy and the deepening crisis in the Eurozone have not got the consideration they deserve.

In Britain, it is clear that last year’s economic recovery has been undermined by George Osborne. Our economy has not grown at all in the six months since the Chancellor’s spending review. Confidence has slumped, recent survey data and forecasts have been disappointing and on Tuesday figures for the second quarter of this year will show whether or not this period of slow growth is continuing.

It now seems impossible that we will see economic growth of 2.6% in 2011 – the figure forecast just a year ago before George Osborne’s first Budget. But simply to get back on track to the Office for Budget Responsibility’s three times downgraded forecast of 1.7% growth this year we will need to see growth of 0.8% next week. Anything less than that would put the government’s economic forecasts for this year at serious risk.

Whatever happens in the coming months in America and the Eurozone – the ‘global headwinds’ which George Osborne is trying to blame for blowing him off course – the government cannot hide from the fact our economic recovery stalled before Christmas while other major economies grew faster.

The reasons why Britain has fared worse are clear. Even though economic recovery was still fragile in Britain and around the world, a year ago David Cameron and George Osborne threw caution to the wind and made a political choice to cut further and faster than any other major economy.

And the result? The anticipation of spending cuts and tax rises which go too far and too fast has seen consumers and businesses rein in their spending and investment plans. January’s VAT rise has added to the squeeze on families and pensioners. And consumer confidence has taken a huge knock since last spring when the Conservatives invented the deceit that, like Greece, Britain was somehow “on the brink of bankruptcy”. These are the reasons why our recovery has stalled in recent months.

But while it is George Osborne’s gamble that has undermined our recovery, the crisis in the Eurozone is adding to the UK’s problems – threatening exports to our main market and undermining confidence in UK banks that have big Euro exposures.

Yes, the present crisis underlines that it was right for Britain to stay out of the euro. And Eurozone countries must take the primary responsibility for sorting out the current situation.

But British jobs and investments are also at risk – which is why it is so baffling to me that our government is sitting on its hands and not engaging with this Eurozone debate.

The Euro area is facing a deepening solvency and confidence crisis which cannot be solved by liquidity support alone. Europe needs a new and forward-looking approach: a Eurozone-wide fiscal plan to ensure debts are sustainable, prevent contagion and regain market confidence, alongside immediate and co-ordinated action to restore jobs and growth which is the only sustainable way to get deficits down.

When Britain could be showing leadership – acting as an honest broker in negotiations and proposing a solution for the Euro area – our Chancellor is absent. For him the present crisis seems little more than an excuse to invent more false comparisons between Britain and countries like Greece and Portugal – or to try and blame the current Eurozone crisis for the difficulties Britain has been facing since the autumn.

Simply muddling through won’t work. It’s time our Chancellor stepped up to the plate.

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Posted July 22nd, 2011 by Ed

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