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Politics no image

Published on July 29th, 2012 | by Kirsty McKellar
Image © [caption id="attachment_10792" align="alignnone" width="566"] While parliament is in recess, we are sinking deeper into recession. © Mukumbura[/caption]   This week, official figures have shown that the UK economy shrank by 0.7% between April and June. This was a much bigger fall than the expected 0.2%. Labour are saying that these statistics prove that the governments harsh austerity measures have failed, leading to calls for a plan B. This economic crisis is now officially a ‘double-dip recession’, and has sparked a debate over whether austerity measures are choking economic recovery. The economy has now contracted for three quarters in a row, making it the longest double-dip recession since quarterly records began in 1955. So is Ed Miliband right in stating that this ‘marks the death knell of their economic policy’? George Osborne appears to be blaming almost everyone but himself for the disappointing figures. Conservatives have pointed out a slump in the construction industry as this sector showed the largest decline in Gross Domestic Product (GDP) since the height of the recession three years ago. Osborne also blamed an extra day’s Bank Holiday for the Queen’s Diamond Jubilee and an extremely wet April-June, which may have affected high street sales. According to Chris Williamson, an economist at financial information services firm Markitt, as much as 0.5% of the decline can be attributed to the Queen’s Jubilee Holiday. However surely these set holidays would have been included in the 0.2% prediction? Miliband stated that Osborne should ‘stop blaming everyone else and start blaming himself’. Both David Cameron and George Osborne have been all too quick to blame the crisis on the Eurozone and have stressed that ‘our neighbours are also really struggling’. However even within the UK there are those who don’t seem to be feeling the heat quite as much such as the rich, big businesses, bankers and their bonuses. A week before these figures were announced, the International Monetary Fund warned that ‘the planned pace of structural fiscal tightening will need to slow if the recovery fails to take off’, meaning a change of tack from the government. Many people believe that these GDP figures show that austerity measures need to be rethought sooner rather than later. David Cameron has promised to ‘finish the job’ showing that the government, or rather the Conservatives, are sticking to their austerity regime. Advocates of tough austerity measures argue that it takes time to recover from these deep-rooted economic problems, and Osborne insists that we are on the right economic path. The General Secretary for the Organisation for Economic Cooperation and Development (OECD) has also urged Osborne to ‘stay the course’ with the austerity programme. On the other hand, the UK economy is now 0.3% smaller than it was when the coalition came to power in the second quarter of 2010; therefore maybe it is time for a plan B. A glimmer of hope in the wreckage is that the Office for National Statistics stated that employment is growing ‘modestly’ with 181,000 jobs created in the past three months. And although it is no real excuse, we are clearly not the only economy suffering. David Cameron has reiterated that 800,000 jobs have been created, but it is important to remember that these are private sector jobs. For full economic recovery we need to see this reflected in the private sector as well. It is also true that the Olympics may bring a well-needed boost to the economy, alongside the Chancellor and Bank governor’s emergency support measures, but the fact remains that the crisis is deepening in the Eurozone and our government is issuing tough spending cuts and tax reforms. Ed Miliband is urging the government to borrow more money, however they have already borrowed much more than planned. On the other hand, if this would have a positive effect it could be argued that it is worth it. Obviously solving the country’s economic problems was never going to be a quick and easy process, and these new figures reflect this. In 2010 the government set out a five-year austerity programme which Osborne has already been forced to extend to 2017. Speaking at the opening of the Global Investment Conference in London, David Cameron hinted that these measures may continue into the next decade, and with all his excuses he gave off a sense of complacency. What is clear is that a confidence boost is needed to encourage spending and investment, and it could be that a less rapid recovery programme would significantly aid this. This government has undertaken a string of U-turns since coming into power, and now many people are calling for the most important U-turn of all. Personally, I can see both sides of the austerity argument, but surely the aim is to do what works; evidently this is not working.

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Is the government’s austerity programme stifling any chance of recovery?

While parliament is in recess, we are sinking deeper into recession. © Mukumbura

 

This week, official figures have shown that the UK economy shrank by 0.7% between April and June. This was a much bigger fall than the expected 0.2%. Labour are saying that these statistics prove that the governments harsh austerity measures have failed, leading to calls for a plan B. This economic crisis is now officially a ‘double-dip recession’, and has sparked a debate over whether austerity measures are choking economic recovery. The economy has now contracted for three quarters in a row, making it the longest double-dip recession since quarterly records began in 1955. So is Ed Miliband right in stating that this ‘marks the death knell of their economic policy’?

George Osborne appears to be blaming almost everyone but himself for the disappointing figures. Conservatives have pointed out a slump in the construction industry as this sector showed the largest decline in Gross Domestic Product (GDP) since the height of the recession three years ago. Osborne also blamed an extra day’s Bank Holiday for the Queen’s Diamond Jubilee and an extremely wet April-June, which may have affected high street sales. According to Chris Williamson, an economist at financial information services firm Markitt, as much as 0.5% of the decline can be attributed to the Queen’s Jubilee Holiday. However surely these set holidays would have been included in the 0.2% prediction? Miliband stated that Osborne should ‘stop blaming everyone else and start blaming himself’. Both David Cameron and George Osborne have been all too quick to blame the crisis on the Eurozone and have stressed that ‘our neighbours are also really struggling’. However even within the UK there are those who don’t seem to be feeling the heat quite as much such as the rich, big businesses, bankers and their bonuses.

A week before these figures were announced, the International Monetary Fund warned that ‘the planned pace of structural fiscal tightening will need to slow if the recovery fails to take off’, meaning a change of tack from the government. Many people believe that these GDP figures show that austerity measures need to be rethought sooner rather than later. David Cameron has promised to ‘finish the job’ showing that the government, or rather the Conservatives, are sticking to their austerity regime. Advocates of tough austerity measures argue that it takes time to recover from these deep-rooted economic problems, and Osborne insists that we are on the right economic path. The General Secretary for the Organisation for Economic Cooperation and Development (OECD) has also urged Osborne to ‘stay the course’ with the austerity programme. On the other hand, the UK economy is now 0.3% smaller than it was when the coalition came to power in the second quarter of 2010; therefore maybe it is time for a plan B.

A glimmer of hope in the wreckage is that the Office for National Statistics stated that employment is growing ‘modestly’ with 181,000 jobs created in the past three months. And although it is no real excuse, we are clearly not the only economy suffering. David Cameron has reiterated that 800,000 jobs have been created, but it is important to remember that these are private sector jobs. For full economic recovery we need to see this reflected in the private sector as well. It is also true that the Olympics may bring a well-needed boost to the economy, alongside the Chancellor and Bank governor’s emergency support measures, but the fact remains that the crisis is deepening in the Eurozone and our government is issuing tough spending cuts and tax reforms. Ed Miliband is urging the government to borrow more money, however they have already borrowed much more than planned. On the other hand, if this would have a positive effect it could be argued that it is worth it.

Obviously solving the country’s economic problems was never going to be a quick and easy process, and these new figures reflect this. In 2010 the government set out a five-year austerity programme which Osborne has already been forced to extend to 2017. Speaking at the opening of the Global Investment Conference in London, David Cameron hinted that these measures may continue into the next decade, and with all his excuses he gave off a sense of complacency. What is clear is that a confidence boost is needed to encourage spending and investment, and it could be that a less rapid recovery programme would significantly aid this. This government has undertaken a string of U-turns since coming into power, and now many people are calling for the most important U-turn of all. Personally, I can see both sides of the austerity argument, but surely the aim is to do what works; evidently this is not working.

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About the Author

Kirsty McKellar

Kirsty has recently graduated from the University of Liverpool, obtaining a degree in Politics and Criminology (BA Hons). She is mostly interested in British politics, particularly the policies of the current coalition government. After completing her dissertation on the reasons for youth voter apathy with a First classification, she has developed a keen interest in young people’s relationship with and participation in politics. Kirsty has also undertaken some valuable work experience with her local MP, Esther McVey. She enjoyed the experience of working in local politics with Members of Parliament and Wirral Borough Council, helping to organise a charity event for the Big Lottery Fund. Kirsty intends to move to London this year to pursue a career in politics and social research, as it is something that she has always been passionate about.



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