The government’s failing plan is doing long-term damage – my Tribune column

“The good news will keep coming”. That is what David Cameron boasted about the economy in the House of Commons just a few months ago. At the time it looked deeply out of touch with people’s experience, but after last month’s news that our economy is shrinking again it smacks of staggering complacency.

It’s not just one set of bad figures that shows how comprehensively this government’s plan has failed. Our economy has now stagnated for two and a half years under this government and borrowing is rising as a result as the costs of economic failure mount. This is now the slowest recovery for 100 years, according to the experts at the National Institute for Economic and Social Research.

The human price of this economic failure is clear to see. Millions of people on low and middle incomes continue to have their incomes squeezed as prices rising faster than wages combine with real terms cuts to working tax credits and child benefit. While overall unemployment is falling, the number of people on the dole for over a year is at its highest level since October 1997. Youth unemployment is rising again with nearly one million young people out of work.

Since George Osborne’s spending review Britain’s economy has grown by just 0.4 per cent – a rate 13 times slower than the 5.2 per cent his plan forecast. And despite all the problems in the euro area, that’s slower than Germany, France, America, Australia and Canada. Only two other countries in the G20 have performed worse.

Why have we done so badly compared to everyone else? Of course there had to be difficult decisions on spending and tax. But just as the eurozone crisis was deepening and the US economy slowing, the government decided to raise taxes and cut spending further and faster here in Britain. This crushed confidence and choked off our recovery, as even Nick Clegg is now beginning to admit. But rather than recognising they’ve got it wrong on the economy, Ministers have spent the last six months obsessing about a referendum in five years time.

This isn’t good enough. There is now a growing chorus of voices calling for a change of course and action to kick-start the economy. Business leaders are increasingly concerned and urging the government to act. The chief economist of the IMF says there should be a rethink in the Budget. Even Boris Johnson is demanding more infrastructure investment and house-building, even though he has failed to deliver it in London.

Labour is clear what a plan B now should include. Our five point plan for jobs and growth is needed now more than ever. This is exactly the right time to make the long-term investments we need to make our economy stronger for the future and get construction workers back to work, so let’s bring forward long-term infrastructure investment and build thousands more affordable homes which we desperately need.

We need a tax on bank bonuses to fund a job for every young person out of work for a year or more. A temporary VAT cut would put money back into people’s pockets, boost confidence and help our struggling high streets.

And to help small businesses who are the lifeblood of our economy we need a British Investment Bank to boost lending, a cut in VAT on home repairs and maintenance and a national insurance tax break for small businesses taking on extra workers.

It is grossly irresponsible and out of touch of George Osborne to continue shrugging off the advice now coming to him from right, left and centre. The Chancellor should listen and act now to give direct help to struggling families and businesses. But the only people he and David Cameron are helping are millionaires who will get a tax cut in April, on the same day that millions of working families have their tax credits cut. This kind of Tory trickle-down economics is just not going to work.

The longer David Cameron and George Osborne cling on to their failing plan the more long-term damage will be done, the longer families will see their living standards squeezed and the further behind other countries we will fall. Britain cannot afford another two and a half years of this. They must finally put the national interest before their political pride, admit it’s not working and act to kick-start this flatlining economy.

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Posted February 8th, 2013 by Ed