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For a Prime Minster who promised to 'get the economy moving again' today's GDP figures must be deeply worrying. They reveal growth of just 0.2% in the second quarter of 2011.
Today we've heard the additional bank holiday due to the royal wedding, the wedding itself and the warm weather in April all being held up as reasons for this poor performance. Not so long ago, the Chancellor of the Exchequer came to the House of Commons and blamed the winter snow for Britain's shock plunge into negative growth at the end of 2010.
We've had a multitude of excuses from this government but its time they accepted that their decision to increase VAT coupled with cuts that go further and faster than any major economy has resulted in the economy flat lining since the autumn.
Today's results mean that we are now 0.6% behind achieving the latest OBR growth forecast for 2011 and that has already been downgraded three times.
When Labour left office recovery had begun, growth was 1.8% in the second and third quarters of 2010 ahead of the EU average and the USA. Last spring we were turning the corner, but now thanks to the choices the Chancellor made last year, things have taken a turn for the worse.
I've long said that the Tory economic approach is a dangerous experiment with people's jobs and prosperity and the evidence shows the economy has been faltering over the last nine months.
Yet the Chancellor's astonishingly complacent response to today's GDP figures suggests he plans to carry on regardless of the evidence, clutching at excuses and refusing to accept that his plan is not working.
We warned the Chancellor last year that the VAT rise and spending review risked choking off the economic recovery and would deliver the slower growth and higher unemployment that we are now seeing.
It is not too late for the Chancellor. He can change course and consider a 'Plan B'. He should follow Labour's call for a temporary VAT cut to help get our economy moving again. Even the IMF and the Federation of Small Businesses have called for temporary tax cuts if the slow growth persists.
The Chancellor should also repeat last year's bank bonus tax and used the money raised to support the jobs and growth that Britain badly needs. £2billion could be raised from repeating the bank bonus tax which would help create over 100,000 new jobs, pay for the construction of 25,000 new homes and boost the Regional Growth Fund.
It's time for George Osborne to forget the dogma, admit his mistakes and take notice of the warning signs around him. It's time for an alternative that puts jobs and growth first and gets Britain's economic recovery firmly back on track.
Follow Angela Eagle on Twitter: www.twitter.com/angelaeagle
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European support is the support of the noose to the hanged man.
UK inflation is based on imported price increases, why?
Because Labour unleashed 15% GDP to be printed through quantitative easing.
Did it make the UK economy grow? A little, some 1.7% (for a 20% increase in the money supply) but at the cost of devaluing Sterling by 30% to see the inflation we have now.
And the goods that are seeing the biggest price rises? Autonomous items, food, fuel & energy.
Thanks to QE, thanks to Labour devaluing Sterling.
Discretionary spending is suffering as autonomous spending has increased drastically, cutting VAT on them will achieve nothing other than remove much needed tax revenues. Reduce VAT and do what? Increase borrowing?
Utter madness. Any kind of tax cut would have to be financed through reducing government spending further.
And Labour did not cut the VAT on fuel or energy and it is not proposing one now. We need lower consumption taxes like a hole in the head when aggregate demand is down across the board because incomes are being squeezed.
It would make far more sense to cut direct income tax and raise the basic income tax threshold earlier than planned to £10,000 as promised by the coalition. A reduction in NI would also lower employer's costs making investment and employment easier.
And cut government spending to pay for it.
That would do more to shore up domestic budget and stimulate aggregate consumer demand.
Your post is exactly why I am ex-Labour.
As usual, again, I can only emphasise that Spain finds that Winter constraint on their clocks to cause virtually all general workers to be very inefficient and open to hazards in unnecessary darkness - even for Spain alone in the Mediterranean. The NHS Budget is not prepared for onerous conditions in both Winter and Summer for the stress of extremely unusual, early starting times.
I see no reason for lowering VAT. We need a retail shake-out. There are too many shops and consumption has been too high.
I would rather place an emergency recovery tax upon the very wealthy to raise around £5 billion a year for five years. And use the money to create productive jobs.
But there you are in the Labour Party wanting to increase consumption for no good reason other than the Tories are depressing it. You know that increasing consumption will do no long-term good. A temporary reduction in VAT? So after the reduction is over it is back to where we are?
Seems kind of pointless.
I agree with Ms. Eagle’s comment that them Chancellor’s response is “astonishingly complacent”. Sadly, this is a response form a leadership that has no experience of actually running a business and whose members seem to be safely cushioned from the realities of the outside world by position and or privilege.
If the Chancellor really wants to see growth the answer is astonishingly simple; he simply has to create a situation whereby it is easier for people to do business.
There are a myriad of simple actions that could be taken to encourage new business start-ups, to foster growth of small enterprises and to nurture existing businesses. Real and meaningful tax holidays could be introduced for new ventures, the mountains of red tape that throttle business can be cut away, the absurdities of the Brussels directives could be ignored.
To say that it cannot be done is absurd. To say that Brussels would object would be the coward’s way out. If the ministers in this government lack the experience of running anything, they could surely bring in outsiders to tell them what to do. There are still some British entrepreneurs out there, - Mr. Richard Branson would be one of them.
Sincerely, Derek Lantin. http://dereklantin.booksabuzz.com
However, there must be plenty of gifted business people that this government could call on. Management Today, The Guardian and the Telegraph all publish lists of leading British entrepreneurs, - I am sure that this government could find the help that it needs, - if it wants to.
The good thing about facilitating new ventures and sweeping away bureaucracy is that it really does cost nothing. Giving tax holidays to new ventures is not a ‘cost’ but a means of creating a business that was not there before. Sadly, the PR conscious members of this government would probably not feel that such measures are sufficiently exciting, sexy or attention-grabbing to warrant their attention.
Regards, Derek
Why not get your facts straight before you criticise? This is what the ONS said about the current GDP figures:
"There were a number of special events associated with 2011 Q2 including; the additional April bank holiday; the royal wedding and the after effects of the Japanese tsunami."
Perhaps you could remind me of the growth figures Labour policies achieved in the last two years of government. I wouldn't trust any plans from the bunch that gave us deep recession and the accompanying massive annual deficit.
However I do recall Osborne telling us back in May that Royal Wedding was going to be GOOD foe economy and warm April just what we needed after cold Christmas sales period.