Tag Archives: George Osborne

UK ECONOMY IN STAGNATION – British Chamber of Commerce predicts 0.3% growth

Recession what Recession? The private sector will pick up the slack and the Conservative Party has all the answers in these “difficult times.”

As the proof of the pudding is being tasted around the country it looks less and less like we managed to avoid a slump and more like we could be heading for a decade of stagnation.

Today we have the British Chambers of Commerce predicting that the UK economy only grew by 0.3% from March until June.  Others are predicting we shrank by 0.2% (citigroup) in the same period.  A third of finance directors believe we are heading for a double dip recession according to Deloitte.

Economic figures other than the overall rate of unemployment have been dire over the past 9 months.  If the expected low or nonexistent growth in the UK economy comes to pass it will mean that the UK economy has not grown for 9 months.

In terms of the deficit this is a disaster, as without growth the deficit will remain or, as is the case at the moment, increase.

This news is being kept off the front pages at the moment due to the News International Scandal and Cameron’s difficulties, but nothing will hide the mess of Osborne’s economic policy as the summer continues with consumers becoming shrinking violets.

Whether we go into a double dip recession is irrelevant, as whatever the technicalities of the economic figures show, the UK economy is stagnating. However, IF we go into a technical double dip it will be a massive psychological blow to the government and confidence will be further reduced as a result and of course Ed Balls will be able to go further onto the attack.

How long will we accept that it is all Labour’s fault??


RECESSION WHAT RECESSION – Is the Private sector really going to take up the slack?

David Cameron’s and George Osborne’s  mantra, of the private sector taking up the “slack” of the shrinking public sector, is beginning to look like wishful thinking rather than economic reality. Anyone with a sense of reality, can see that there is absolutely no evidence of this.

The one statistic that is trotted out to convince us that this is the case is the amount of private sector jobs created as compared to public sector jobs lost. At the last count over 500,000 jobs in the past 3 years.

However both the jobs created statistics and the unemployment figures are puzzling. The public sector appear to be losing more jobs than forecast but there are more jobs being created.  Yet the output figures seen here, show that productivity is not matching the growth in jobs.

Many of the jobs created in the private sector are “flexible” job creation – either part time or less secure and lower waged. As households move from full time work to part time work this puts a strain on the high street as consumer spending decreases. This movement from quality full time jobs to “flexible” and part time work is a familiar story in the UK.  We saw this in the 1980’s.  While we have a warning this week of a “repossession Tsunami” if interest rates rise, this is boxing in the options for the chancellor and Bank of England.

Economic data over the last 6 months have been catastrophic.  The UK economy has not grown at all; inflation is high while wages are rising at less than half the inflation rate; and standards of living are decreasing at rate not seen since 1977. Over the past few days the reality of an economic policy of austerity and rhetoric of doom and gloom is creating the decimation of the high street.

Purely in economic terms this is fairly disastrous.  In many towns and cities, as in Dunstable, a third of commercial units lie empty without any economic activity. Again this is a familiar story that we saw in the 1980’s.  I remember doing a survey of industrial estates in the West Midlands in the mid 1980’s where anything up to 50% of the units would be empty at any one time.

This is just the economic perspective, the cultural perspective is perhaps worse as high streets decline and then the local community declines in tandem causing deprivation and a feeling of hopelessness. There are few on either side of the political divide who would have forecast that we would see the likes of Mothercare, Habitat, Thorntons, Odd Bins, Jane Norman, HMV, and T.J.Hughes either go into administration or massively cut back on jobs and retail presence, while today Lloyds Bank have announced a new round of “efficiency savings” aka 15,000 job losses.

As austerity bites and standards of living decrease, the British public are starting to only spend what they really need to and are ruthlessly looking for bargains switching to the internet for their shopping habits. Yet the deflationary public sector cuts and job losses have barely begun. While this sucks money out of the economy, out sourced inflation continues to rise.

Greece yesterday ensured that their economy would remain stagnant without growth for a decade and garner the ego of the IMF by voting through the austerity bill delaying the inevitable default and restructuring of the Euro as they wait for the next Euro Domino to fall.

Further shocks to our economy are inevitable with the prospect of inflation caused by external forces and commodity speculation; the decimation of the Euro as we know it; rising interest rates and the continued erosion of democracy as unelected bodies like the European commission, IMF, World Bank and the Banking Sector have a disproportionate amount of power.

Other symptoms of the mess we are in is the latest public sector strikes.  The government rhetoric from both sides of the coalition are attacking the democratic legitimacy of the Unions, while playing the lowest common denominator card.

As with the accusations of “envy” politics of the 1970’s when people were being taxed so much to make them as poor as everyone else, so the right are now playing the same cards.  They continually talk about the poor conditions of the “average” member of the private sector, as if those working in the public sector should have their conditions reduced to that level.  This is pure envy.  Rather than thinking of ways of improving the standards of living of the private sector and securing a better future for all, we are in the blame game and keen to reduce standards of living to a lower acceptable base. While MP’s conveniently have amazing benefits and pensions.

In the article Are we heading for a “Great Recession” , it was discussed how the talk of avoiding a slump is misplaced.  Our stagnation as an economy and society is set to continue.  There is no prospect of significant growth in our economy for possibly years to come while standards of living continue to erode.

We have taken our eye off the ball, as we follow the ideological path of the IMF, with its concentration of Chicago School economists.  If we do not spark growth in the economies of the west we are going to have a bigger deficit (Truth about the UK deficit) in 3 years time than we have today.  Growth is the name of the game and we need to find a way of increasing growth in our economy, or we need to fess up to the inherent contradictions in the capitalist economic model and search for an improvement or a different economic model all together.

Should we consider a “Steady State Economy” and abandon the race for growth?  This could enable stability and a coherent environmental policy, while concentrating on quality rather than quantity and having a debate on what really is “efficient” in either the economy or society.

With every month that goes by, it seems that the lessons of the financial crisis are not being learnt and we dig a bigger hole to put our heads into the sand.  If it were left to the controlling forces of ideology in our society we would race back to the laissez Faire economics of more than 150 years ago, which took a hundred years to evolve into a more civil society.

I for one could not tolerate this, and I am dismayed by the lack of vision by our so called elite as they erode democracy throughout the world.

We need a new vision, a new way forward, and to throw off the shackles of the past.  With the current crop of leaders within the UK and the world I don’t see any evidence that this will happen.




Are we heading for a “GREAT RECESSION”, akin to the great depressions of our past?

Each day that passes, the narrative of politics and economics never ceases to become more interesting.  And so these interesting times continue with yet more bad news for our economy.

I remember some time ago, soon after the crisis of Autumn 2008, having a conversation with a friend who stated quite confidently that the only companies going to the wall were badly run businesses.  How house prices (one of his main concerns) would recover and there was plenty of money in our economy.

The conversation followed the belief that this would be a short blip on the economic landscape, and times would return to normal fairly quickly.  Indeed, within a few months the same person, along with various media publications were stating that the banking crisis was either “over”, or nearly “over”.

Several years down the line – 3 1/2 years since the queues outside of Northern Rock – if we look back we can see a timeline which is significantly longer than we were led to believe.

Today, no one knows how long the banking crisis will last, or indeed where it will lead next.

It seems like every week new news is broadcast casting doubt on any economic recovery with commentators always pointing to the fact that “technically” we are no longer in recession.  This however denies the seriousness with which the world economy is stumbling from one economic shock to another affecting the standards of living of billions of people.

We Avoided Going From A Recession To A Slump 

As we know, Gordon Brown “saved the world”, from the worst effects of the banking crisis, and we are constantly reminded how this action prevented a recession from turning into a slump or depression. (Please note the hint of sarcasm before people start giving me abuse!)

My reading of the action taken by world leaders at the time, including Gordon Brown, is that their action was decisive and needed to prevent a collapse of the capitalist system as we know it.  I am glad that Gordon Brown was actually in power at the time, the thought of George Osborne et al being in power, staring into the headlights fills me with horror.

However the structural problems have still not been dealt with and the terms behind the bailouts were poorly thought out.  Like the snooker player planning a centenary break, our esteemed leaders were only thinking as far as the next black.

The idea that we prevented a slump in my opinion is looking less and less like fact and more like propagandist rhetoric.

The more economic indicators are released across the world, the more the economic crisis continues, and for some gets worse and not better.

If I were living in Spain today would I be thinking that this is the normal “economic cycle” or recession, or would I be thinking that this was far more serious?

Spain has 22% unemployment and 45% youth unemployment – a country in debt – and had negative economic growth for 6 consecutive quarters and in the last 5 quarters has not grown more than 0.3% in any quarter. The economy is stagnant at best with now the prospect of enormous cuts in public expenditure, sucking enormous amounts of money out of the economy.

If you were living in Spain would this have been a recession or would you see this as a depression?  The prospects for the population over the next decade in terms of standards of living and general employment is bleak at best.

Spain is by no means the most badly effected economy in the world following the financial crisis, yet these figures give pause for thought after the recent elections and demonstrations there.

Spain though is possibly the most pivotal country within the Euro zone, the country that will have the most effect on the outcome of the Euro’s fate.

Whereas bail outs can be discussed and organised for Greece, Ireland, Portugal and maybe even Italy, to talk of bail outs for Spain would be a bridge too far.

The European Union is the largest economy in the world, a homogeneous trading area, overtaking the USA in GDP in the last decade with over 15 trillion dollars and over 20% of the worlds market share.  The US and EU account for over 40% of the GDP of the planet, so despite the rise in the growth of China and India, the old engine rooms of the world economy are still incredibly important.

Although the rise of these developing economies can aid world economic growth, the fact that these countries “make things” and sell them back to markets in the developed world means that if the developed economies are on their knees then the developing world will grow less as well.

In addition to this there is a massive discrepancy with debt and surplus as China saves too much and collects the debt of the largest single country economy in the world, the US.

The World Economy shrank for the first time in post war history by 2.031% in 2009 showing just how bad the economic crisis has been and how the words of Alistair Darling were so prophetic back in 2008, that this is the worst economic crisis in 60 years. 

Neo-Liberal Philososphy

The crisis appears to be worst where the neo-liberal philosophy was strongest and where the financial markets and economies are at their most mature.

Like 1929, the crisis originated in the US, but due to the spreading of the same ideology across the world by the IMF and World Bank and the ever increasing “Globalisation”, it exposed many interwoven economies and affected those in developing countries who are least able to cope with the fall out.

I remember seeing an interesting debate on the current affairs programme “Newsnight”, before the catastrophic events of 2008, when it was argued that the globalisation and capitalist ideology of the past 25 years had reduced world hunger down to approximately 650 million, that is people who actually go hungry everyday.  Within 6 months of that interview, the amount of the people who go hungry in the world increased back up to 950 million or so.  25 years to decrease it by a third and 6 months to push it up 50%, back to the levels it was previously.  An excellent achievement!

The above graph shows the trend of those who are undernourished courtesy of the worldhunger.org website. Indeed this graph shows that the figures often banded about are actually worse than originally thought.  This graph shows that currently around 13.1% of the worlds population go hungry/are undernourished everyday, 1 in 7 people on the planet.

Globalisation has in fact created more vulnerability in the world economy and the well being of people than before.  Where as many countries were cushioned somewhat from economic strife in one area of the world, the interconnectedness now exposes everyone rather than spreading the risk.

Like the Sub-Prime housing market that started this mess, the spreading of risk added to the problems, hiding them in accounts, products and market values that no one could value or  understand.

The scandal that is the IMF, World Bank and WTO

There appears to be irony in every aspect of life these days, as the two institutions that were becoming almost irrelevant to the developing world prior to the credit crisis are now centre stage “saving” the developed economies of the western world.

Prior to the crisis, the IMF and World Bank were being side lined in trade agreements and loan agreements as developing countries would no longer accept opening up their markets to foreign companies to asset strip them, or deregulating fledgling financial sectors so that speculators could decimate their economies; or sell off their education and health services to the private sector in return for loans so that private companies could make money out of the poorest people on earth while allowing millions to go without education and health provision.  In short the “penny” had dropped.

The WTO constantly struggle to impose its will on developing countries now as deal after deal is scuppered by those who know the harm they do.

These organisations, dominated by the interests of western economies and especially the US, seek to open up markets for the benefit of developed countries with the spin that they will allow “inward investment” and open up markets for developing countries.

Yet the very same US and European Union constantly employ trade restrictions and in some cases the most restrictive practices in the world to prevent damage to their interests.  The US protects its Agriculture sector, steel industry, car industry and airline industry to just name a few.

Irony again rears its head as the IMF prior to the 2007 beginnings of the financial crisis recommended that all countries should follow the US and UK in their approach to light touch regulation in the financial markets.  Praising the US and UK and endorsing their economic policies.  This incidentally is the same IMF that every world leader mentions when justifying their austerity measures, including our own George Osborne.

The IMF was WRONG in 2007 over light touch regulation and DID NOT SEE the crisis coming.  The IMF was WRONG in the way it spread the ideology of neo-liberalism around the world and the WORLD BANK was WRONG in insisting in the liberation of fledgling markets and the privatisation of health and education institutions in developing countries.

Most of these criticisms are barely within the discourse of economics in the mainstream media or political parties.  Both the Labour Party and Liberal Democrats appear to be wedded to the same discourse.

The Effect of Cutting Public Expenditure

As we all know in the UK, we have a deficit that needs to be reduced.  As discussed here in the Truth About The Uk Deficit, the reason for the deficit is largely due to the reduction in tax take rather than simply “over spending” as the chart below shows:

Although outlays were higher at the time of the crisis than tax take by around 2.7% to 3.1% of GDP depending on how you measure it, this was within tolerance limits.  The reason for the decline in tax take and the ever increasing deficit is due to the lack of credit available in the economy and the realisation that much of the wealth created on Banks accounts were not real.  As credit reduced and money was effectively taken out of the economy the recession ensued and people were able to make less money and thus pay less tax.

If we are to bridge this gap we HAVE TO GROW.  If the economy does not grow the deficit will get bigger no matter how many cuts we inflict on our public expenditure.

Over the next 4 years the European Union is embarking on large cuts to public expenditure.  So to are other countries in the world economy like the US.  This will have the effect of deflating the economies in those countries effected, which in turn effect the countries they trade with as they will be able to buy less products, therefore importing less.

This is not a short term problem.  Japan has had mounting debts now for decades and has stuttering growth.

The current rounds of austerity will be affecting the next 4 years, even though most discussions appear to be focussed on the next 2 years.  Effectively the Euro zone average of anywhere between 1.86% to 2.4% of GDP depending on how you measure it (economic statistics are never straight forward!) as the Full fact shows here.

Note this diagram only projects cuts in the first 2 years and the cuts in the UK will be far more in the 2 years after this.

The US is cutting even quicker and plans to decrease the deficit by $4,000 billion or 2.2% of GDP by 2015.

If the 2 economic areas of the world cut between 2% and 2.5% of GDP how will this affect the economy of the areas affected or the world economy?

Nobody really knows is the true answer, the same as no one really knows what will happen next with the banking crisis.

The UK Position

The UK position is perilous at best.  Over the past two days we have had yet more bad news for George Osborne and his plans for growth and reducing the deficit.

Yesterday it was shown that the deficit is increasing under George Osbornes leadership rather than decreasing, and yet growth is also on the wane. Every month we get a further downgrading of growth expectations, today was the turn of the OECD who have down graded to 1.4% this year.  This is after the UK economy has not grown for 6 months and recent figures showing not only consumer confidence is low but that consumer spending is decreasing and is technically in recession after declining for the second quarter in a row by 0.6% in the last quarter, the lowest since the technical recession in 2009.

The “good” news for the UK economy is that the great “re-balancing” of the economy is happening with the stuttering recovery being led by exports.

Many, including the OECD today are calling for the rising of interest rates steadily to counter inflation.  Inflation is not home grown as the depressed wages show, but rather due to commodity markets and increased costs of raw materials.  However, it is argued that increasing interest rates to a more “realistic” level will strengthen the pound and therefore help counter inflation.

Yet it is the weakness of the pound which is helping our exporters, making them more competitive.  If they lose that competitive advantage will that not damage the fragile recovery?  Is this not the classic sign of what happens when you have an effective devaluation?

Further Shocks Will Knock Us Off Course 

We have many more shocks to the economy over the next few years, and which ever way we look at the economic figures they look bad.

Over the next 4 years both the EU and US will go through massive public expenditure cuts and with it probably massive unemployment to go with it.  This will suck out money from the economy causes more stress for consumers and businesses.  If interest rates increase, this will again add costs to businesses, put pressure on households making it harder to pay mortgages that has been the saving grace for many people over the past few years.

This will increase the value of the pound and probably reduce our exporting capacity further having a negative affect on the economy.

Further shock will come as the debts of Greece are most probably going to have to be “re-structured” and Italy may well be the next domino to fall in the Euro zone”.

Speculators have now gravitated to the commodity markets causing further hardship to the real economy and will add to inflationary pressures, putting more pressures on interest rates.

Food riots due to rising prices are likely yet again, while the natural disasters, sadly effecting many areas of the world (including our own, with crop yields looking to be significantly lower this year due to drought), will cause more hardship.

Then we have the prospect of Peak Oil on the horizon.  This is more worrying as it will affect every part of modern life, and is inescapable. No planning has been put into effect by European and western governments generally, it is a forgotten problem, put on the back burner, always something that politicians can come to later.

So are we heading for a Great Recession? Some commentators have already dubbed it as such, but basically without meaning.  If you were living in Spain, Ireland, Greece, Portugal or Italy I would say they already think so.

Other than the odd anomaly like Germany, who seem to be well placed to profit from an export led recovery, with the help of a deflated Euro caused by the southern European countries in crisis, the recovery will likely be in two spheres. The developing countries growing somewhat while the developed countries stutter and stumble trying to get back to normality.

The neo-liberal model is still with us, it has not been challenged economically or politically and continues to hold sway.  Banking reform, though essential still appears to be on the back burner, while those benefiting from high commodity prices like Australia make hay while the sun shines.

This is NOT about economic cycles in a text book, rather an ideology of madness that has taken over undemocratic institutions like the IMF, WTO, World Bank and the Banking Industry that have a disproportionate amount of power in an increasingly interdependent world.

A crisis of democracy is likely to follow, as seen with the recent protests throughout Europe.  This is just the beginning of austerity Europe, and the chances of a “Great Recession” or a “Slump” seem to be closer every day.

For George Osborne the Economic News gets Worse

So we have austerity Britain, and the narrative is set.  David Cameron and George Osborne insist on the biggest cuts seen since WWII, the deficit must be eliminated within this parliament, and the UK economy will be stagnating for some time.

The Labour Party have contributed to this ridiculous narrative by also stating they would halve the deficit within 4 years and these alone would have been bigger cuts to public services than Mrs Thatcher achieved in the 1980’s.

The phrase, “cutting too far too quickly”, is becoming as sickening as the insistence that every single policy of the government is justified on the basis that we have a deficit.

However, figures out today have both the left and the right rather questioning their own rhetoric.

Over the past few months we have seen the blame for bad news in the economy blamed on the wrong type of snow; the late Easter holiday; too many bank holidays; and even a dry year! Every growth forecast is revised downwards and every time we think the last bail out has been carried out, another one comes onto the horizon.

Today figures for government borrowing show that despite the flat lining of the economy; no growth for 6 months; higher taxation; the cutting of funding to countless charities; the reversal of promises on not increasing VAT – not getting rid of EMA, Sure Start or reducing family allowance; that the deficit is INCREASING.

As the diagram below shows, kindly provided by the Spectator, borrowing is increasingly rising.  In short the rhetoric is not matching reality.

Over the past year, each month the government has spent MORE than in the equivalent month under the previous government under Gordon Brown.

The austerity narrative has been written and people are scared about their jobs and their standard of living is constantly reducing, yet the problem that the government has said is their main priority, is not being dealt with.

So far, we are experiencing all the downsides of an austerity Britain, but not any of the upsides – the deficit is still growing.

This is especially hard to take when many are now worse off than they have been in the last 7 years, yet the actual real austerity measures have not even taken effect.

The question has to be asked, when they do finally come through, how bad will it get?  If the economy is already flat lining, will we be plunged back into recession?

Time after time we are told that we avoided a slump.  Yet the evidence may not support this view.  It is 3 1/2 years since the crisis started in the financial sector and there is no end in sight.  There are many more shocks to the world economy still to take effect and we are yet to employ the stringent medicine advocated by the IMF and others to reduce the deficits in the UK and elsewhere.

The Labour party have nothing to offer either.  Their policies are incredibly similar to  the governments, yet you would never believe it with the rhetoric we are offered.  Both parties are so hell bent on providing a rhetoric of difference between them, yet in reality there is little difference.  Just where is the alternative?

In recent weeks David Cameron has started changing the governments tack on this as they are pointing out just how similar the spending cuts would be.  The government has recognised that they have been so successful in their rhetoric and publicity machine that they are taking the flack of austerity that the Labour party should be at least taking in part.

So people are scared and confidence is low; banks are still not reaching their lending targets to small businesses; consumer behaviour has already changed affecting growth – yet the real cuts are yet to bite.

I think the understatement would be “This will be a tough year”.



The current figures so far show a 12% short fall in the lending of the 5 main banks to small and medium sized businesses as based on their commitment in the weak Project Merlin.

No one is really panicking yet as ministers will wait until the end of the year before responding, but the figures are certainly interesting.

First of all, of the main banks it is the almost wholly state owned bank that is making the most commitment to lend, with RBS having a share of 46% as opposed to their market share in this sector of 30%. Perhaps state ownership does have an affect??

On the one hand this shows how RBS have been intervening in this sector, but perhaps highlights that the other Banks, Lloyds, Barclays, Santander and HSBC are frankly not doing enough.

There are two aspects to this tale.  One, that there is plenty of enecdotal evidence to suggest it is harder to obtain credit by companies with healthy order books, especially in the service sector, as there is less or no collateral for the banks to feel happy about lending against.  There is also evidence that Banks are no longer providing the close support networks that successful small and medium sized business had prior to the crisis.

Secondly, the Banks insist, with some evidence, that the demand for the loans is just not there.  Some ministers and the Bank of England are less than sympathetic to this argument.  But this could well be, at least in part true.

All indications with the economic figures over the past 8 months show a poor, stuttering or stagnating economy, with rising costs and a lack of demand with rising taxation affecting the consumer.  The lack of growth could be the reason for the lack of companies even applying for loans.

But then we have to ask, if RBS can do it, quite spectacularly, why cannot the other banks?

We are now 3 1/2 years since this all started and there is absolutely no sign within the UK economy that the problems either in the financial sector or the real economy are any where near over.

In the type of economy we have, we need growth, without it, were doomed to a decade of declining standards of living and an ever increasing deficit.

MARCH FOR THE CUTS: Is this the “Silent Majority”?

Over the last few days there has been a media offensive by the right wing of British Politics, namely the Tax Payers Alliance, UKIP and Rally Against Debt.  UKIP have apparently obtained the right use the term “Tea Party”, if or when it decides to create an American style Tea Party movement against government spending.

The Tax Payers Alliance explained on various media outlets how they represented the “Silent Majority” in the UK and need to show their voice is heard in the debate.

So the question surely is – Are they the SILENT MAJORITY. It is a phrase easily used quite often when people are losing either the argument or the possibility of political power.

Recently we have heard the likes of Polly Toynbee talking up the existence of a progressive alliance, the idea that actually most people in the UK are progressives in their political thinking and that they represent the majority.  Yet the facts do not back this up.  Over the past 30 years we have had right wing governments, pretty much exclusively, with a quasi Tory party existing within the Labour Party power structure.  This does not show a “silent majority”.

In March this year we had a “March For An Alternative” – that attracted over Half a million men, women and children who marched through the capital against the cuts.

Yesterday we had 350 people with banners stating they quite like them.  Does this show a “silent majority”?  I think not.

The tax payers Alliance has been arguing that we should be performing MORE CUTS and not less, and not ring fencing vital services.

There is also a European dimension to this with both UKIP and the Tax Payers Alliance largely anti Europe.

What this shows is not that there is a silent majority for the cuts, but that the fringe right wing pressure groups have something in common with those in power.  They are influencing policy at the heart of government and stand along side mainstream politicians on a platform to reduce public spending on an ideological basis.

I neither think this is a “majority”, or that there is an appetite for a “Tea party” movement in the UK.  The fringes of the right claim they are note being heard, when in reality they have a few of their fingers on the levers of power.



George Osborne talks a good talk, much like a good second hand car salesman, but can he walk the walk?  It is easy to see his schooling along side David Cameron, but like Flashman Dave, reality seems always a little different to the rhetoric.

Today the figures were released for the growth of the economy in the first three months of this year by the National Office of Statistics.  In the first 3 months of 2011 the economy grew by 0.5%.  George Osborne is claiming this as a vindication of his policies.  However, on closer inspection it can be seen that the economy has not grown at all now for 6 months.

Even taking into account the bad weather in the latter part of last year this is a miserable result.  GDP may well be a poor indicator of quality of life and of society in general, but it is a good indication of exactly where the economy is in respect of a recovery in a growth economy environment.

For the economy to only flatline for 6 months after the deepest recession in our post war history, it is remarkable that this can be classed as a vindication of economic policy.  Normally, history shows that after a deep recession we would have an initial period of steep growth in a V shape recovery.

This shows we have flatlined at best.  We have missed a double dip recession by a bee’s whisker.  The good news for the chancellor is that these figures include the impact of the VAT rise, yet the cuts have not started hitting people’s pockets. Only after April will we see how this shock to the economy will affect growth.

Meanwhile, others in the financial markets and in the Monetary Policy Committee, are indicating they are not expecting interest rates to rise until the Autumn, putting back the expected rise by nearly 6 months.  Growth prospects for 2011 are bleak and the cuts are yet to bite, although peoples expectations have no doubt been affecting consumer confidence and spending.

There are only crumbs of comfort for any impartial observer, with manufacturing due to the weak pound doing well.  Pretty much everything else is going Pete Tong!

However, it is hard to come to any other conclusion than these are devestatingly bad growth figures for the government and George Osborne in particular.  With the biggest austerity program in our history just coming into being, the economy could not only flatline but revert back to negative growth.

The sad situation for ordinary people, is that the obsession with the deficit has clouded the judgement of not only the UK government, but the IMF and general political and economic discourse.

The Truth about the deficit as discussed here is that unless the economy grows the deficit will never be dealt with and we will inevitably get poorer and the deficit get worse over time.  Cuts cannot deal with a collapse in tax take which is the primary reason for our deficit problems.

George Osborne’s course is set, and he is not for turning, but it may cost the rest of us dearly in the long run.

Bank of England keeps rates at 0.5% 
George Osborne: Putting the fuel back into the British Economy? 
George Osborne’s Budget: Another damp squib