“The final quarter of 2011 and the first quarter of 2012, the second successive quarter of contraction. Over the past year the economy has therefore not grown at all, and total output is now 0.2 per cent lower than it was six quarters ago, in the third quarter of 2010.” – OBR
The reality is that the numbers on growth have fluctuated around zero since the Osbourne spending review: it is the long term lack of growth in the economy is the problem and the underlying reason for the squeeze on living standards and lack of jobs – even in Reading youth unemployment has more than doubled.
Events happen. But the government response has to be robust. I am sure (mostly) that the economy will find growth again at some point, but the question is will the government act to make the situation better by investing and building confidence or will it continue to stand by? Yesterday at the event with Ed Miliband small businesses in Reading complained about the lack of bank financing, builders raised the worry that their state of their business meant they couldn’t take on apprentices and young people asked where the opportunities were for them.
The government could and should make a difference to all of these things.
American Nobel Prize winner Paul Krugman says:
“The defense I hear from Cameron apologists is that the austerity mostly hasn’t even hit yet. But that’s really not much of a defense. Remember, the austerity was supposed to work by inspiring confidence; where’s the confidence? Basically, the expansionary aspect should already have kicked in; it’s all contraction from here.”
I suspect I will get at least one comment from a reader that blames Labour for everything. If that’s what you really believe that’s fine. I disagree. The key question is what to do now, and I think it’s fair to say that 18 months is long enough to treat the UK economy as an experiment in expansionary austerity. Now it’s time to change course and return to reform of financial services, investing in infrastructure and giving our young people (and others including older workers) the skills they need in today’s and tomorrow’s economy.