Our Economy is walking a tightrope


Is today a day of reckoning ?  In the last 7 days we have seen the worst week for the coalition government.  With previously reasonable results of growth and bumping along employment figures,  the coalition has tried to claim credit for this while blaming the previous government for all the ills we face.

However, reality is now beginning to hit the government.  Previous economic figures have been largely due to previous economic policy decisions by the Labour government.  Due to Economic lag, it is only now we are beginning to see the results of decisions made under the coalition and they are not looking pretty.

Even Sir Richard Lambert has now come out criticising the coalition for it’s lacklustre growth strategy.  A damning condemnation of the coalition government’s strategy, and specifically George Osbornes weakness.  A critique expressing concern that decisions made so far have been largely for political reasons and not for the good of the economy.

The strategy of 2 years of extreme pain before growth and maybe a tax cut to win the election.  Cynical to the last. But where will the growth come from?

Apparently, the private sector will magic more jobs than is lost by the public sector. I find this hard to believe based on the figures I have seen.

The knock on effect to the private sector of the public sector fiscal and capital spending reductions has not been fully appreciated.  I predict significant unemployment rises and as a result fiscal problems.  In addition a lack of growth prospects over the coming 18 months.

This morning the growth figures for the final quarter of 2010 were released.  We were expecting slow growth of maybe 0.2 to 0.6%.  But today the figures have shown a CONTRACTION of the economy of 0.5%.

This is devastating news for the economy even taking into account the poor weather.  It shows an underlying weakness in the economy.  The coalition will have to start taking some responsibility for the risk they are taking with the economy for political reasons.

To me it is not a matter of Labour verses the Coalition, but about treading a fine dividing line, walking a tightrope if you will, without the knowledge of exactly where the rope is.

Anyone who says they know through their economic knowledge what will happen to the economy is a liar.  Economics is a social science, with many variables leading to many possible outcomes.  Sadly, we are being led by a government and opposition by ideological sources that defy logic.

We will be lucky to survive the next 2 years without 3.5 million jobless, but that is not the point.  This is a political gamble by the coalition to win an outright majority for the Conservative party and has nothing to do with what’s good for the country.

A bad week for the coalition has just got a lot worse, sadly it is the rest of us that will suffer.  At least we are all in this together.




  1. Day of reckoning? It’s just one quarter of figures. So what if the economy falls 5% this year. We are one of the richest countries in the world. Knock off 5% and we are still one of the richest countries in the world. The real problem is that most people in this country don’t realise how well off they are. They like to complain all the time, but 90% of the world would love to take our place. Anyone who feels hard done by should try moving to Asia or Africa. Then they’d realise what life is really like for most people. People in this country have never had it so easy.

    • “So what if the economy falls 5% this year”

      If the economy falls 5% it means everybody’s standard of living will further reduce, more unemployment, higher amount of poverty etc etc. In a society that has an economic model of growth, a reduction of 5% would be dramatic for a lot of people.

      As to comparing the UK to Asia or Africa I agree, many would rather be in our position but that is a different argument. It’s not about “feeling hard done by” and as for the comment “never had it so easy”, it is quite ridiculous.

      If you would like to argue for a massive re-distribution of income around the world, or a steady state economy, that would be an interesting discussion that I may have sympathy with.

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