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Latest growth figure fires Exocet through Tory claims of economic competence

a man pushing over the word "crisis"The Tories couldn’t have timed it better for Labour. A week before the election the official quarterly growth figures halved to a miserable 0.3%. If this continues at the same level (and of course it may well sink lower still), it would produce an annual growth rate of just 1.2%, no better than the vilified Eurozone. It completely blows the top off Osborne’s claim to have produced the fastest rate of recovery in the Western world and exposes the emptiness of the constantly parroted “government’s long-term economic plan”.

The Tories have only been able to make two bids for winning the election – the leadership (which Ed Miliband has now neutralised) and the economy, and now this second one too has disintegrated. Why hasn’t Labour gone for the Tories hammer and tongs over this collapse of their central claim? Labour should drop its plans for the last week of the election and concentrate relentlessly day after day on destroying Tory credibility over the economy which they never deserved in the first place.

What Labour should be saying is this. The financial crash of 2008-9 was brought about by the bankers’ recklessness and the international recession, and the Labour government did the right thing, supported by the Tories, in bailing out the banks because there was no alternative to prevent an implosion of the real economy. The two 2009-10 expansionary budgets of the Labour chancellor Alistair Darling did succeed in bringing down the deficit for the peak of £157bn to £118bn by 2011-12, but thereafter Osborne’s continuous austerity ground the economy to a halt in 2012, which forced him artificially to try to kickstart growth again by stimulating the housing market through Help to Buy. But because housing supply nowhere near met demand, this merely produced a housing price bubble which could not be sustained and from mid-2014 has gradually blown itself out. With no other stimulus to the economy in place, the so-called recovery has just petered out.

But it’s not only the growth rate that has deflated, so has every other aspect of the economy. Wages are still 8% below their pre-crash level. Productivity, which determines future living standards, is flat. Private investors are on strike, believing (correctly) that Osborne’s recovery has no legs and is not sustainable. The balance of payments on traded goods has the worst deficit in modern British history – £110bn in this last year. Household debt is at stratospheric levels tipping £2 trillions. And unemployment is still nearly 2 million, under-employment is pervasive, and too many jobs are low-paid, insecure and on zero hours contracts. Is this all part of the government’s long-term economic plan? And to cap it all, after 5 years of crippling austerity, the deficit is stuck at £92bn and set to rise, not fall.

There is a terribly simple statement to be made about big deficits which cries out to be made, but which Labour has not made. You can either reduce them by cutting expenditure – the Osborne route – or by increasing income. Labour has rightly left open this option by declining to cap capital (as opposed to current) expenditure, so that public investment can slowly but steadily expand the economy, increase wages, boost household incomes, and thus raise tax receipts enabling government to pay off the deficit faster. Labour should spend the next 5 days lambasting Tory economic failure and promulgating from the roof tops this alternative economic strategy which Britain desperately now needs.

Image credit: Solving the crisis, pic by www.123rf.com

2 Comments

  1. Barry Ewart says:

    Yes John and to blow a further hole in the Tory Propaganda I read in the financial pages on the weekend that in the first quarter this year growth in the Eurozone was 0.4%, in the US it was 0.2% and in the UK 0.3%!
    By the way – this may be something or nothing- but with the election being so close I wonder if it will get dirty with the Tories using some of the US Republican tactics of negative telephoning – ringing people up (not saying they are Tories) with attack lines trying to put people off from voting Labour . Labour better be on their guard re this and put feelers out to ensure it does’t happen and if it does expose it.
    Yours in solidarity!

  2. J.P. Craig-Weston says:

    The Tories, (were they even that capable,) don’t need to resort to those kinds of tactics; they already have the best electoral asset imaginable in Ed Milliband, “Hey look, so OK yes I’m a multi millionaire property speculator living the life in my £2.6 million North London Mansion, with close and unhealthy personal and family connection to Merchant banking, but that doesn’t automatically make me a Tory?

    Does it?

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