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Put growth and jobs first

Ed Balls lost no time in attacking the government when the latest figures emerged showing a contraction of the economy in the last quarter, urging them to “urgently re-think their reckless plan to cut the deficit too far and too fast and start putting growth and jobs first.” Osborne’s reaction, however, is “we’re not going to be blown off course by the bad weather.” In fact, it’s worse than that: at the very time we might be slipping into a double-dip, the government’s primary focus is likely to be on inflation. The markets are already assuming that there will be a three points rise in interest rates this year in spite of city fears that higher rates too soon “could be GDP suicide“. Higher prices are primarily caused by a weak pound, the government’s foolish decision to raise VAT and the surge in global commodity prices. If this turns out not to be a temporary inflation spike, it is surely right to increase the inflation target rather than prejudice growth and jobs.

Ed Balls statement in full is as follows:

It is clearly a matter of great concern that Britain’s economic recovery has now ground to a halt. As the independent Office of National Statistics has confirmed, even after the effects of December’s bad weather, the UK economy saw no economic growth in the final quarter of 2010.

“With families and businesses already facing both rising unemployment and rising inflation, the fact that the economy is now shrinking means the Conservative-led Government’s claims to have saved the economy and secured the recovery will ring very hollow indeed.

“With consumer confidence low and public spending starting to be cut at the end of last year, it is no surprise that construction and services are the sectors hit hardest in these figures. But they are all the more worrying because they cover the period before the Government’s VAT rise and sharp public spending cuts have even begun.

“It is now becoming even clearer that when David Cameron and George Osborne complacently congratulated themselves in the autumn for securing economic recovery, this was in fact the result of decisions taken by the Labour government to get the economy moving again.

“The Government inherited an economy that was strengthening, with growth of 1.1% in the second quarter – thanks to decisions we took to support jobs and get the economy moving. It also meant last year’s deficit came in £20 billion lower than previously forecast.

“Now we are seeing the first signs of what the Conservative-led government’s decisions are having on the economy. The fact is cuts which go too far and too fast will damage our economy. And shrinking growth and rising unemployment is not only bad news for families but will actually make it more difficult to get the deficit down.

“As the head of the CBI said only yesterday, this Government has no plan for growth and it is taking political decisions regardless of the damage they will cause to job creation and business. Simply slamming on the brakes is not a credible economic policy.

“It is not too late – George Osborne and the Treasury must urgently re-think their reckless plan to cut the deficit too far and too fast and start putting growth and jobs first.”

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