Britain is out of recession. It’s official. The UK Treasury today confirmed what the Government had both predicted and hoped for, that the deepest recession since the 1930s is over. Well, it is over, but only just. While the City of London had forecast a 0.4% expansion that would bring to an end six consecutive months of contraction, the real figure is 0.1%. Britain is the last major Western economy to emerge from what has been a pretty desperate period. The economy has shrunk by between 6% to 10% from what it would have been without the slump. In the meantime, the Chinese economy powers ahead on 9% annual growth.
In truth the UK economy has only returned to growth because of very low interest rates – Britons in jobs with variable mortgages have never had it so good, but also because Gordon Brown’s Labour Government poured £200 billion of taxpayers’ money into shoring up the busted banks. This exercise in selfless generosity is described as “quantitative easing”, something no doubt that bank customers with overdrafts may soon be demanding from their bank managers.
That said, the Conservative Party led by David Cameron virtually alone amongst centre Right European political parties opposed the bank bail outs at the time, putting their emphasis on ballooning public debt as a reason not to back the British stimulus package. If truth be known, had Brown and his Chancellor, Alistair Darling not intervened as quickly as they did, high street cash dispensers or ATMs were within hours of drying up.
But with a General Election due in May, both major political parties have their eyes on the short term needs of floating voters, as opposed to the long term needs of British manufacturing and services. And both are promising cuts in public spending as a way of cutting the deficit.
As far as most voters are concerned, if they have been persuaded by the political and media consensus that cutting is the medicine that is needed, they are more likely to support the party traditionally associated with making them – the Conservatives. So Gordon Brown and the Labour Party have moved dangerously close to the terrain the Conservatives want to fight on.
Few in Britain – save the perennially ignored and patronised Trades Union Congress – are arguing against this strategy. The TUC say that cutting public expenditure now will nip demand in the ankle and choke off the unsteady recovery – and they are probably right.
Would that it could be a dose of much needed democracy to blow Britain’s recovery off course, but that sadly is the way it is beginning to look.
I suspect that Britain is now on the edge of a “double dip” recession, with continuing and rising unemployment, and possibly a long period of deflation. In which case the incoming new Government after the May General Election could soon become the most unpopular on record and in record time.