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A change in the weather

Nick Robinson | 11:55 UK time, Tuesday, 25 January 2011

One statistic does not a political winter make. Nevertheless, today's news that the economy shrank rather than grew in the last quarter will change the political climate.

Up until now the coalition economic argument has gone largely unchallenged. Not any more. Today's stat, yesterday's warning by the outgoing CBI director general Sir Richard Lambert that the government lacked a vision for growth and the arrival of Ed Balls as shadow chancellor will ensure that the debate will now shift from being solely about the deficit and spending cuts to being about growth as well.

George Osborne

 

George Osborne insists that it's wrong to blame the cuts for today's figure (after all, they've scarcely begun); it's wrong to blame the VAT rise (if anything the prospect of a rise should have boosted spending in the last quarter); and the only thing to blame is the weather. He says it would be wrong to change course. His problem is that even without the snow the figure was disappointing at best. The question he'll be asked increasingly from now on is where will the growth come from.

Ed Balls warns that the VAT rise and the speed and scale of the planned cuts will make growth less not more likely. He will publicly echo ministers' private concerns about the the collapse in the construction sector, the risks of a jobless recovery and the fears of a "lost generation". Given all this the question must arise - does he now feel vindicated in his former view that even Alistair Darling's planned spending cuts would have been too far and too fast? Remember that under Labour's pre-election plans cuts deeper than Margaret Thatcher would begin this April and employers' National Insurance contributions would rise. Ed Number Two said only last week that he now accepted that plan.

Balls used, like Gordon Brown, to warn of a double dip. It became fashionable to dismiss that prospect and to say that flat growth was more likely. A double dip is now back on the political agenda again.

Ever since the coalition was created David Cameron and George Osborne have seemed to float above events as Nick Clegg and Vince Cable were battered by chill political winds.

Today marks the day the political weather changes.

PS. Normally we're cautious about reading too much into what is only a first estimate of growth figures. They are due for revision. However, the ONS says today's numbers focus on the output side of the economy (services, construction and manufacturing) and don't include consumer spending, which is the area that would be most affected by the weather. This means that the second estimate, due in a month, could come in even worse.

Comments

Page 1 of 4

  • Comment number 1.

    The tories inherited a situation of growth after the worst global recession since WWII.

    Growth has gone steadily DOWN, 1.2% then 0.8% then 0.7% now no better than 0%

    Meanwhile the rest of the world continues in upturn and those sections of the british economy feeding off other countries growth continue to thrive.

    The tories have trashed domestic demand and domestic economic recovery with their ideologically motivated cuts.

    These have only just started, worse is yet to come.

    Convert growth into decline against a background of global recovery.

    Well done the tories.

  • Comment number 2.

    'Ed Balls warns that the VAT rise and the speed and scale of the planned cuts will make growth less not more likely.'

    So what's his alternative? He and Labour left us with a massive deficit. It needs the equivalent of a 17p rise in basic income tax (from 20p tp 37p) to eliminate it.

    The Tories are solving the problem through 80% spending cuts and 20% tax rises. Not because they want to, but because there is no choice. We would be bankrupt otherwise, and witness Ireland for what this really means.

    So what would Ed do? Carry on spending and drive us into bankruptcy and the IMF/EU bail-out? And so surrender our economy to others. Just see what cuts are then imposed. At least we currently retain the ability to try to manage this mess ourselves.

    Or would Ed increase taxes by the equivalent of 12/13p in the pound on income tax? What would this do for the economy, except create a huge increase in unemployment and misery as people could no longer afford their homes or to spend money.

    Ed Balls and Labour policy is reckless and stupid. Until he/they can present an alternative that actually solves the problem rather than just pretending it's gone away, they deserve and have my utter contempt. They are shameless.

  • Comment number 3.

    Finally, Gideon raises his head above the shield but having just seen the interview with him on BBC it is impossible to have any confidence in him, with his stock, mantra-like answers to each question. All four answers he gave to four different questions were almost word-for-word identical. I know I should not be surprised by this from a politician but this was a very poor performance "worst weather for 100 years", "will not be blown off course by the weather". Oh dear, oh dear, oh dear ...

  • Comment number 4.

    Well, Nicholas....

    "George Osborne insists that it's wrong to blame the cuts for today's figure (after all, they've scarcely begun); it's wrong to blame the VAT rise (if anything the prospect of a rise should have boosted spending in the last quarter); and the only thing to blame is the weather. He says it would be wrong to change course. His problem is that even without the snow the figure was disappointing at best. The question he'll be asked increasingly from now on is where will the growth come from."

    Indeed. Salient questions. Not the kind you get from Jon112dk.

    "Ed Balls warns that the VAT rise and the speed and scale of the planned cuts will make growth less not more likely. He will publicly echo ministers' private concerns about the the collapse in the construction sector, the risks of a jobless recovery and the fears of a "lost generation". Given all this the question must arise - does he now feel vindicated in his former view that even Alistair Darling's planned spending cuts would have been too far and too fast? Remember that under Labour's pre-election plans cuts deeper than Margaret Thatcher would begin this April and employers' National Insurance contributions would rise. Ed Number Two said only last week that he now accepted that plan."

    So, Labour at sea again for a change with their blank sheet of paper and Blinky Balls playing Fletcher Christian to Buzz Lightweight's Captain William Bligh. Great. Anyone can oppose for the sake of it, just ask Jon112dk. But to do it with any credibility, particularly if you've nailed your colours so firmly to the Brown Mast for 13 years, is a little bit more tricky, except where the plebs are concerned.

    "Balls used, like Gordon Brown, to warn of a double dip."

    Which, I dare say, deep down he prayed wasnt going to happen on his watch. Which if the tories cuts are going to produce it, Labours sure as hell would, in addition to the sovereign debt crisis and the flight from the bond markets into the bargain.

    'It became fashionable to dismiss that prospect and to say that flat growth was more likely. A double dip is now back on the political agenda again."

    Is it? What, because Blinky says so?

    "Ever since the coalition was created David Cameron and George Osborne have seemed to float above events as Nick Clegg and Vince Cable were battered by chill political winds."

    Thats the price you pay for being the junior partner in a coalition. Poll more votes, be the largest party, you get more say, you get more bouquets and less brickbats. Fairly simple really. They could have said no, they could have walked away, they could have got in bed with Labour instead.

    Well, at least the students and the unions would have been happy. The rest of you - they wouldnt give a tinkers cuss for.

    "Today marks the day the political weather changes."

    Bit melodramatic, isnt it? After all, you did say, one statistic does not a political winter make"? So what is it? A gamechanger or not?

  • Comment number 5.

    "The question he'll be asked increasingly from now on is where will the growth come from"

    He should have been asked it loud and clear from day 1.

    "Today marks the day the political weather changes."

    Some people in Oldham may disagree.

  • Comment number 6.

    You raise some interesting points there Nick, whilst I don't agree with any of the current Governments plans (I'm biased) I do think the time has come for DC and GO to call all the tory ministers in for a chat.

    Either they fully support the Government (in both private and public) or they ship out now, any sign of wavering at a later date should be dealt with not only by the offending minister losing his/her ministerial position but also the whip and they be cast out into the wilderness.

    DC and GO have nailed their colours to the mast, any dithering will cause the 'markets' and commentators to slaughter them and bring the whole thing crashing down.

    It is 'implement the policies as they stand or die trying' time, similar to the Thatchers 'Not for Turning' moment.

    So DC and GO, ready the cattle prods and tazers and call in the ministers.

  • Comment number 7.

    In order to understand our current predicament we need a reasoned analysis of the Brown economic legacy, then we can discuss Osborne's plans in a reasonable context.

    Basic economics:

    The role of government & BoE in the economy is to:

    1. Take the heat out of inflationary periods by taxing more, running a surplus and raising interest rates.

    2. Take the sting out of a recession by borrowing and spending more and BoE cuts interest rates.

    This combination of fiscal and monetary policies is described as COUNTER-CYCLICAL action - it irons out the effects of booms and busts, which makes UK PLC more efficient because it prevents the worst excesses at either end of the cycle - Brown's gold rule was that the surpluses and deficits should balance each other out over the cycle - "prudence" in his own words - but IMHO he didn't change this rule - the whole rulebook of the global economic game were changed overnight and he was powerless to do anything about it.

    What happened to cause this - and was Brown to blame for it?

    Firstly, the economy was going into a mild recession - then the world's banking system self-destructed overnight and there was a huge risk of the commercial banking sector disappearing. This was caused by a number of factors virtually exclusively from the USA - sub-prime mortgages and worthless paper dressed up as "special financial vehicles" - i.e. a massive con trick - suddenly Leaman Bros et al were caught out and had to realise these huge loses and went bust.

    What should the UK government do?

    Firstly UK PLC invested vast sums in buying equity in the banks to recapitalise them - the alternative? No banks, deposits disappear, unforseen collapses in companies suddenly without credit or access to their money - back to bartering until a new state bank could be established - the choice to prop the commercial ubanks p was the least worst option - and we can sell UK PLC's stockholding in the banks at a later date - currently showing a healthy profit.

    The paralysis of the banks resulted in the credit squeeze - no money to lend, so no money to borrow. The effect of the credit tap being turned off was a sharp fall in demand - and a recession heading for a global slump.

    What should government do now?

    Counter-cyclical doctrine and the experience of the Great Depression of the 1930s tells us that governments need to inject demand into the gloal and domestic economy to stop it going off a cliff - this means borrowing and spending.

    The difference in this case was the scale of the borrowing - add in the bank recapitalisation and the stimulus package and critics are right in saying it's a record.

    Where they are wrong is that you cannot view the bank recapitalisation as the same thing as running a "normal" deficit - for start there is an ASSET there which can be sold - bank shares - and unlike hiring a council worker or commissioning a new road, the bank holdings can be unravelled and the borrowing repaid without recourse to tax rises of spending cuts.

    If you blame Brown for all this you are simply shooting the messenger - he had nothing to do with the credit crisis and if he hadn't recapitalised the banks, then god help us.

    These figures mark the end of the benefit of the stimulus package Alistair Darling put in place - but we are about to feel thev full force of the "negative stimulus" of the spending cuts which are yet to bite - and as Stephanie Flanders points out, the rest of the world economy is squeezing us harder than George Osborne.

    What would a sensible, pragmatic economist do as Chancellor now?

    Firstly in assessing the level of UK PLC debt, he/she'd discount the value of the bank holdings from the total debt because they are a realiseable asset we will eventually cash in and use the money to replay the debt - next he/she'd accept that the credit crisis wasn't "business as usual" it was a very serious crisis unrelated to the normal economic cycle - and one that should not be balanced out over a single cycle - i.e. probably two parliaments or more.

    Should Brown have thrown on the brakes earlier, cutting spending harder, sooner, as the coalition endlessly restates?

    Clearly with the benefit of 20:20 hindsight, we now know that cutting spending would have kept UK PLC in recession with lower GDP, lower incomes and higher unemployment, all of which would probably have produced the same level of deficit anyway due to higher welfare payments and lower tax take.

    The ConDems believe that they can cut the deficit over just this parliament and that there is "no alterntive". They propose to do this by £110 Bn of tax rises and spending cuts. As each £ borrowed and put into the economy circulates and changes hands several times, taking £110 Bn out is magnified - I'd say by a factor of up to ten. We call spending money in UK PLC as "aggregate demand" - and if you take my figure of 10, that equates to a fall of £1Tn.

    In an economy barely keeping its head above recession that looks today that it is in real danger of going into reverse, with our export markets in a similarly fragile state, conventional wisdom says UK PLC will be tipped into a deep recession by the negative demand effect of the cuts.

    However, the Office for Budgetary Responsibility says we're going to get loads more new private sector jobs, billions of investment and our exports will surge - yesterday the CBI called this into serious question.

    This is because of a quasi-religious belief that the public sector "crowds out" the private sector, so hack back public spending and the private sector will expand to fill the gap - the "magic of the market" will ensure that underused resources are snapped up and applied to make money.

    So who do you believe? did Brown splurge our money and leave us in so much debt that we need a stiff dose of spending cuts to pay them off?

    Or do you see the current plan as a dangerous gamble based on ideology not economics?

    Luckily we will find out who was right in the next 18 months.

    The coalition claim that the public spending cuts won't have a deflationary impact on th economy and that critics overstate its impact.

    Steph's piece https://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2011/01/the_world_is_squeezing_us_more.html

    is a salutory reminder that the economic backdrop is also an important factor in UK PLC's prospects for growth, jobs and paying off our public AND private debts.

    There is however a precedent for Osborne's plan - a very similar austerity plan was implemented in Eire, which he described as a "shining example" of a successful economy.

    Eire is now on its knees unable to service its debt and unable to stimulate its economy because the spending cuts have so surpressed demand that GDP shrank by 17% last year and house prices fell by 40%.

    The verdict of history will be that Brown was a boringly conventional Chancellor faced with an unprecedented crisis that left him little or no choice.

    Osborne on the other hand is likely to be seen as the man who drove UK PLC over a cliff in the winter of 2011/12. The "world squeeze" means that we pay more for less - Osborne's plan to cut aggregate demand by £1Tn as well flies in the face of both Keynesian and Monetarist economic theory - the risk of drastic deflation is simply too high and cutting public spending this rapidly will cause GDP to fall,which in turn cuts tax revenues and drives up the welfare bill - which will INCREASE public debt, not shrink it.

    Let's spin forward 18-24 months - I predict we will be reaching 5M unemployed and GDP will be shrinking fast. Public borrowing will be rising and inflation caused by the collapsing Pound will be over 10%.

    At this point we will hopefully have learnt our lesson - Hayek's "Road to Serfdom" is the ONLY theortical basis for the coalition's current economic policy - and as there will be millions of people trapped without work living on poverty benefits chasing non-existent jobs at the behest of private sector barons running "workfare" programmes, the poorest in our society will have reached Hayek's destination - they will be serfs, pure and simple.

  • Comment number 8.

    And bit by bit the Torylition needs to defend its own actions rather than try and pile the blame for absolutely everything on Labour. At least George is now trying to share the blame with the snow.

    Time for Cameron to get Clarke in the job with maybe Willets for some extra brain power. A couple of phone calls to Darling and Brown about how to deal with difficult economic conditions wouldn't go amiss.

    Our very shaky economy has suffered from 30 years of no support for manufacturing, no guts on financial regulation and amazing capacity for greed at the very top. Maybe it really is time for Cameron to properly consider a cross party emergency economic approach.

  • Comment number 9.

    The persistently negative attempts by left wing media like the BBC to run down the economy appear to have borne some fruit at last.

    Can we assume that the left will now stop saying the latest growth figures are the result of measures taken by the last Labour government? Have we crossed that Rubicon?

  • Comment number 10.

    In response to Mr Fubar.

    "Thats the price you pay for being the junior partner in a coalition. Poll more votes, be the largest party, you get more say, you get more bouquets and less brickbats. Fairly simple really. They could have said no, they could have walked away, they could have got in bed with Labour instead"

    They could never have gone with Labour as it would have been a Coalition of losers. and you no doubt would have slated them if they refused to join the Tories as being dithering politicians that are protecting their own interests whilst the country goes to ruin.

    Basically the lib dems were screwed either way.

    Cameron and Osbourne have cleverly been able to use Clegg, Alexander and Cable as Cannon fodder for most of the unsavoury announcements and the lib dems have shown little if no backbone. However now we are getting down to brass tacks (economy) and the side shows of tuition fees etc. are put to bed they are going to satrt featuring more and more in the cross hairs of the press.

    I personally don't think Osbourne stands a chance. no idea what he's doing and no experience to back it up.

    What I'm struggling with is that although I disagree with pretty much everything David Cameron stands for I quite like him (I feel very dirty inside). He's a bit like Boris. Nice bloke but wouldn't want him running anything.

  • Comment number 11.

    Is Fubar [-] Saunders an actual person, or some sort of computer programme designed to continuously copy extracts of Nick's posts, before then automatically pouring derision on them?

  • Comment number 12.

    Shiver me timbers out come all the socialists with 'I told you, I told you'...

    What did you tell us? To carry on spending and hang the national credit rating and go the way of Greece and Ireland? Double digit long term interest rates would do us a whole heap of good after all. Great strategy...let's triple our interest payments.

    Have you never seen someone get to grips with tackling an enormous debt crisis? It involves cutting spending and making the choices the labour party never had the spine to make or the chance to deliver.

    Which is of course the real problem with the socialists - they are and always have been spineless. Always take the easy way out. Always ask for more.

    Your way ruined us.

    It's grim up north London...

  • Comment number 13.

    1. At 12:18pm on 25 Jan 2011, jon112dk wrote:
    =========================================================================
    As you regurgitated your points I will once again regurgitate my response as you chose last time to attack me on something I did not even say rather than the contra arguments about your statements.

    On your points it should be noted that the growth which you point two was driven by public spending / programmes being brought forward which was supported by the NAO and NOS who both highlighted the abnormal growth in the construction and services industries over that period.

    Secondly the IMF do forecast a growth over the next year but that is split between the developed world and the underdeveloped and or emerging economies. In fact they are saying that the Euro zone is at best going to be flat at 1.5% Please reed the report and not just headlines on the web and in newspapers who pick what they want to publish. In the same report they also say that they are expecting the UK to achieve 2% growth. So by inference if you support the global growth fore casted you then also support the UK's growth of 2% which outstrips our neighbours growth of 1.5%. Or are you one of those who cherry picks the bits that best suit your argument

    Never let facts stand in the way of a good argument.....

  • Comment number 14.

    Paul @ 11

    Be careful Paul, his other trick is withering personal abuse that you won't be able to stop laughing about (no really).

    I see also that we have our first post (9) blaming BBC bias for the downturn - truly fabulous insight.

  • Comment number 15.

    This is a disaster for the Conservative governments strategy. This is the first quarter where there handling of the economy shows through and they have put us back in recession. They were told there policies were a mistake but they were too arrogant to listen. They are not fit to govern and should resign.

    Call an election

  • Comment number 16.

    The problem isn't that public spending is too high, the problem is that the economy collapsed because of the banking crisis.

    So by cutting public spending the government are treating the symtom and not the illness.

  • Comment number 17.

    7. At 12:44pm on 25 Jan 2011, richard bunning:

    Brilliant and simple analysis of the situation Richard. Post of the day for me as I really understood what you were saying. Thanks!

  • Comment number 18.

    A few corrections to comments made here:

    1: The economy was recovering before the election. The deficit had shrunk by £18 billion as a result of Keynsian investment in the economy by Labour (which has now been reversed).

    2: The deficit is large, but as a % of GDP it's smaller than it was for 8 of the 11 years under Thatcher. It wasn't a crisis then, it's not a crisis now. The coalition has an idiological reason for shrinking the state, not an economic reason.

    3: The weather doesn't affect spending as much as the politics. For entirely political reasons (i.e. get it into everybody's mind that the last government was a disaster, so that any action taken by this government can be justifiable) the coalition spent the last 6 months endlessly talking down the econimy and terrifying the electorate. No wonder we all stopped spending money.

    4: Almost nobody reads the figures or looks at the data personally. Most people get their "facts" about the economy second-hand, interpreted via the media. If you read the Telegraph or Express, the country is bankrupt and we need to sack 90% of all civil servants. If you read the Guardian or the Mirror, the economy is doing OK (considering global factors) and the cuts are dangerous and unwarranted. I recommend to everyone that they spend time reading newspapers they wouldn't normally read, just to get a more balanced view.

  • Comment number 19.

    #13. At 1:00pm on 25 Jan 2011, Chris London

    Let's keep it simple for the tories on here....

    The economy of the rest of world was growing: it still is.

    The disunited kingdom economy was growing: now it is not.

  • Comment number 20.

    One group not suffering is the bankers, their bonuses are going up and up:

    https://uk.finance.yahoo.com/news/Half-bankers-UK-U-S-see-reuters_molt-3012899851.html?x=0

    So what are the politicians doing about this? Nothing. Because the bankers have them all in their pockets.

    It's time for the people of Britain to stand up to the Liblabcon cabal that are destroying our country for the bankers.

  • Comment number 21.

    There are seldom any posts here that are supportive of the government. Seldom any from businessmen. None so far as I can see from "bankers" (and who can blame them).
    My conclusion is that all of the above are too busy working hard to help the country afford all of the public spending.
    All we 'hear' is how badly people are going to be affected by "the cuts".
    Can I just 'say' that we in the private sector have suffered more than a decade of ever increasing public sector spending, mainly to the benefit of the staff working in those "services". Indeed, thousands of people in the public sector (including hundreds in the BBC) are paid more than the Prime Minister. All this and a secure job that has a prescribed "delivery" without the real constraint of finding and earning the money to pay for the service.
    It is time that the state was rolled back, to encourage more people to be subjected to the market, and what people are prepared to pay for.
    One poster suggests that the current plans will lead to poverty and unemployment..... well where have the 5 million current benefit claimants come from? How are we going to persuade them to take jobs? 270,000 children in households where no-one has ever worked! If this is where public spending gets us, lets chop it back as quickly as possible.

  • Comment number 22.

    we need dear Margaret Back, like our one other great leader whom held the soil of this country inviolate new what to do. It took 18 years after 79 to get the uk BACK ON TRACK , it will take at least that long but we have the problems of china and India to cope with.

    get all the layabout of the dole and apple pickering thats where it will start

  • Comment number 23.

    rockRobin7 @ 12
    'fraid I've not followed this blog for a while, but when / why did it stop being a great time to be a tory?

  • Comment number 24.

    Damn. Shame Labour didn't win the election, we would definitely have been in growth right now... or fake growth at least, paid for by 'fiscal stimulus' as we have been for the majority of 2010 anyway. Seriously, did people not expect this? WE WERE NEVER OUT OF RECESSION.

  • Comment number 25.

    It is exactly as I and Gordon warned - the Tories are going to trash our economy. In brighter news that means I will be back in power earlier than expected, in the head honcho role no less, once I've shot the sitting duck that is Milliband.

    SmilingEdBalls

  • Comment number 26.

    Coalition clearly as clueless as we feared. But of course no-one actually voted for this...
    Blaming the weather and singing 'Carry on Regardless' hardly seems to be an appropriate response. The Tory message, such as it is, continues to dim and if they keep this up then no-one will bother listening to them at all.
    Let's hope their easy ride is passing and the media and opposition will get tore in about them.
    I suspect that they've lost Coulson at the worst possible time - Nick, have you had the call yet?

  • Comment number 27.

    18

    You're the man, Russell!

    17

    As we say in Devon, cheers 'm dears!

    20

    As I see it, only Labour is capable of squeezing the libertarian ideology out of one of the major UK political parties and IMHO Ed Miliband and Ed Balls COULD deliver this if they felt it offered an alternative to "socialism for bankers" and austerity for everyone else.

    The Tories are the Banker's Party in all but name and Clegg is a libertarian through and through. Come on the Greens? Hopefully, in the long run, but not a serious option right now.

    If the whole practical basis for the cuts is called into question by the economy going into recession, at what point will the centre-left LibDems rebel and pull the coalition down - and if Labour gets back in, will it just be Blair/Brown Mk II, or will Labour REALLY change?

    Now's the time to press Miliband & Balls hard...

  • Comment number 28.

    Like Giselle, I understood Richard Bunnings comment and was persuaded by it (except that I can't really believe in 5 million unemployed - perhaps I'm just too optimistic). I didn't understand the comment by Rockrobin7 and others similar to it. It doesn't seem to be the case that the actual level of our national debt is high. So the problem is that it is increasing at a rate that spooks the markets. If this is so the cost of doing so is great relative to our rate of growth. In February an article in the enconomist dealt with this and concluded that "the relatively subdued level of American and British bond yields does indicate that the two countries face a far smaller threat of IMMINENT fiscal crisis than the nations at the top of the table."

    So basically we need to make sure that we keep our growing at a reasonable rate and cut at rate that is compatible with this. What's hard to understand about that?

  • Comment number 29.

    "This combination of fiscal and monetary policies is described as COUNTER-CYCLICAL action - it irons out the effects of booms and busts, which makes UK PLC more efficient because it prevents the worst excesses at either end of the cycle - Brown's gold rule was that the surpluses and deficits should balance each other out over the cycle - "prudence" in his own words - but IMHO he didn't change this rule - the whole rulebook of the global economic game were changed overnight and he was powerless to do anything about it."

    Notwithstanding that he kept on moving the goalposts to suit himself - if it doesnt balance out over the cycle - then move the definition of the cycle! Powerless to do anything about it? Er, not quite so sure about that. There was quite a lot he could have done about it.

    "What happened to cause this - and was Brown to blame for it?"

    He must take his fair share of blame not only for creating the conditions to allow it, but also for lying about it afterwards.

    "Firstly, the economy was going into a mild recession - then the world's banking system self-destructed overnight and there was a huge risk of the commercial banking sector disappearing. This was caused by a number of factors virtually exclusively from the USA - sub-prime mortgages and worthless paper dressed up as "special financial vehicles" - i.e. a massive con trick - suddenly Leaman Bros et al were caught out and had to realise these huge loses and went bust."

    Ah, the "it all started in America" argument. You think sub-prime and exotics were exclusive to the US? And that it all happened to Lehmans "suddenly"? Yeah, right....

    "What should the UK government do?"

    What ever it is coming, I get the feeling it has a red tinge to it...

    "Firstly UK PLC invested vast sums in buying equity in the banks to recapitalise them - the alternative? No banks, deposits disappear, unforseen collapses in companies suddenly without credit or access to their money - back to bartering until a new state bank could be established - the choice to prop the commercial ubanks p was the least worst option - and we can sell UK PLC's stockholding in the banks at a later date - currently showing a healthy profit."

    Prevention in my humble opinion, would have been better than cure, but hey, that wasnae Gordons fault was it? After all, he didnt replace a 300 year old functioning, recognised regulatory system with a jobs for the boys Heath-Robinson contraption that wasnt fit for purpose and took four years to get up and running, did he? It was well known that RBS, HBOS and Northern Rock were in trouble, at least a year before they nearly pancaked. Anyone working in the square mile could have told you that.
    Once you've let it get to this state though, you've got two alternatives. Let them collapse and risk the whole lot going down or bale 'em out. Whether it was the least worst option or not is too early to tell. Certainly trying to reinflate the bubble is abjectly pointless.

    "The paralysis of the banks resulted in the credit squeeze - no money to lend, so no money to borrow. The effect of the credit tap being turned off was a sharp fall in demand - and a recession heading for a global slump."

    I think you'll find you've slightly over-simplified that. There was quite
    a bit more to it.

    "Counter-cyclical doctrine and the experience of the Great Depression of the 1930s tells us that governments need to inject demand into the gloal and domestic economy to stop it going off a cliff - this means borrowing and spending."

    But, that was the 1930's. Things are different. Globalisation has put a very different complexion on things. It is not that simple any more just to revert to Keynesian type.

    "Where they are wrong is that you cannot view the bank recapitalisation as the same thing as running a "normal" deficit - for start there is an ASSET there which can be sold - bank shares - and unlike hiring a council worker or commissioning a new road, the bank holdings can be unravelled and the borrowing repaid without recourse to tax rises of spending cuts."

    And in the meantime, theres the interest to be paid on what you borrow, whilst you're waiting for the bank stocks to mature like a fine cheddar. And, if it costs you more to borrow to make up for whats missing in tax revenue, etc, the more you have to pay out to the bondholders, the less you have to spend on other things, unless you borrow more, pay more interest... etc etc. You're oversimplifying things.

    "If you blame Brown for all this you are simply shooting the messenger - he had nothing to do with the credit crisis and if he hadn't recapitalised the banks, then god help us."

    Thats debatable. Highly debatable. Governments provide legal and regulatory frameworks for banks and other businesses to function. Government should act solely in the interests of the populace, of the voters, of their citizens. Not the lobbyists or big business. So, unless it was an unspoken rule and part of the disaster plan for this biggest of "what ifs?" was always going to be recapitalisation, then maybe, just maybe, Central Governments, not just the UK should have been better financially prepared by running surpluses so that borrowing need not have been so damn high when the crash came. Or, by regulating the Retail and Shadow Banking Sectors both here and abroad a damn sight better than it did, rather than just seeing it as an endless source of golden eggs to be spent on pet projects. Brown has to take his fair share of the blame.

    "These figures mark the end of the benefit of the stimulus package Alistair Darling put in place - but we are about to feel thev full force of the "negative stimulus" of the spending cuts which are yet to bite - and as Stephanie Flanders points out, the rest of the world economy is squeezing us harder than George Osborne."

    I've just spotted a quote in the Spectator: "JK Galbraith so rightly said, the only function of economic forecasting is to make astrology look respectable."

    You pays your money, you takes your choice. Soothsayer or naysayer.

    "What would a sensible, pragmatic economist do as Chancellor now? Firstly in assessing the level of UK PLC debt, he/she'd discount the value of the bank holdings from the total debt because they are a realiseable asset we will eventually cash in and use the money to replay the debt - next he/she'd accept that the credit crisis wasn't "business as usual" it was a very serious crisis unrelated to the normal economic cycle - and one that should not be balanced out over a single cycle - i.e. probably two parliaments or more."

    You mean hide it. Dont you?

    "Should Brown have thrown on the brakes earlier, cutting spending harder, sooner, as the coalition endlessly restates? Clearly with the benefit of 20:20 hindsight, we now know that cutting spending would have kept UK PLC in recession with lower GDP, lower incomes and higher unemployment, all of which would probably have produced the same level of deficit anyway due to higher welfare payments and lower tax take."

    Are you quite sure about that? So what of the cuts that were already happening then? Or was that "Labour investment"?

    "The ConDems believe that they can cut the deficit over just this parliament and that there is "no alterntive". They propose to do this by £110 Bn of tax rises and spending cuts. As each £ borrowed and put into the economy circulates and changes hands several times, taking £110 Bn out is magnified - I'd say by a factor of up to ten. We call spending money in UK PLC as "aggregate demand" - and if you take my figure of 10, that equates to a fall of £1Tn."

    Hmmm. Sounds like page one of the Brownomics Manual.

    "In an economy barely keeping its head above recession that looks today that it is in real danger of going into reverse, with our export markets in a similarly fragile state, conventional wisdom says UK PLC will be tipped into a deep recession by the negative demand effect of the cuts."

    If by conventional wisdom you mean Ed Balls and the trade unions and the BBC, then God help us. If that is wisdom, I'm glad to be ignorant.

    "However, the Office for Budgetary Responsibility says we're going to get loads more new private sector jobs, billions of investment and our exports will surge - yesterday the CBI called this into serious question.
    This is because of a quasi-religious belief that the public sector "crowds out" the private sector, so hack back public spending and the private sector will expand to fill the gap - the "magic of the market" will ensure that underused resources are snapped up and applied to make money."

    Its all well and good spending that much when you've got it on the public sector. If you havent then you cant.

    "So who do you believe? did Brown splurge our money and leave us in so much debt that we need a stiff dose of spending cuts to pay them off?
    Or do you see the current plan as a dangerous gamble based on ideology not economics? Luckily we will find out who was right in the next 18 months."

    Maybe we will. It might take longer than that.

    "There is however a precedent for Osborne's plan - a very similar austerity plan was implemented in Eire, which he described as a "shining example" of a successful economy. Eire is now on its knees unable to service its debt and unable to stimulate its economy because the spending cuts have so surpressed demand that GDP shrank by 17% last year and house prices fell by 40%."

    Not comparing like with like though are we, Richard? Because they're tied into the Euro, Ireland is hamstrung and cant devalue like we did, cant print money like we did - their alternatives are very seriously limited.

    "The verdict of history will be that Brown was a boringly conventional Chancellor faced with an unprecedented crisis that left him little or no choice."

    The verdict of history is that he was an psychologically unstable megalomaniac and pathological liar who shouldnt have been let into the Treasury to sweep the floors, let alone run the place and should certainly never have been Prime Minister. The man was an unmitigated disaster.

    "Osborne on the other hand is likely to be seen as the man who drove UK PLC over a cliff in the winter of 2011/12. The "world squeeze" means that we pay more for less - Osborne's plan to cut aggregate demand by £1Tn as well flies in the face of both Keynesian and Monetarist economic theory - the risk of drastic deflation is simply too high and cutting public spending this rapidly will cause GDP to fall,which in turn cuts tax revenues and drives up the welfare bill - which will INCREASE public debt, not shrink it."

    Which, if you'd looked beyond page one of the Labour narrative, you'd see that over the course of this parliament that government spending is actually going to go UP by nearly 15% by the end of this parliament. Its been known since day one, but not publicised by you and your mates because it goes against your lets-scare-the-bejesus-out-of-the-proles narrative. Cameron and Osborne and Clegg are not the answer, but neither is another five or ten years of Labour.

    What is happening now and what will almost certainly happen again is a re-run of what happened between 1970 and 1979. Cameron is a Heath-ite. He will go the same way as Heath. Weak, spineless, lacking in conviction. The public will probably vote Labour back in, against all the evidence. The economy will be completely trashed by Balls as a result, there will be a vote of no-confidence and there will end up being a lurch to the right. You'll see.

    "Let's spin forward 18-24 months - I predict we will be reaching 5M unemployed and GDP will be shrinking fast. Public borrowing will be rising and inflation caused by the collapsing Pound will be over 10%."

    Yeah, and the tories will be eating the babies of the poor in the streets, when they dare go out after curfew. Dream on. You've already got 8 million economically inactive NOW and have had for YEARS. Why the sudden doomladen prophecy, why didnt you tell the truth three or four years ago? Where were you then Richard?

    "At this point we will hopefully have learnt our lesson - Hayek's "Road to Serfdom" is the ONLY theortical basis for the coalition's current economic policy - and as there will be millions of people trapped without work living on poverty benefits chasing non-existent jobs at the behest of private sector barons running "workfare" programmes, the poorest in our society will have reached Hayek's destination - they will be serfs, pure and simple."

    Rubbish. Utter, fanciful, doom-mongering rubbish.

  • Comment number 30.

    11#

    I dont always pour derision on them. I quite frequently question what he says, which as a licence payer, I'm quite entitled to do, as are you.

  • Comment number 31.

    19#

    and if you think its that simple jon (as well as being completely inaccurate) then you really are as simple as you seem.

  • Comment number 32.

    "24. At 1:29pm on 25 Jan 2011, efan ekoku wrote:
    Damn. Shame Labour didn't win the election, we would definitely have been in growth right now... or fake growth at least, paid for by 'fiscal stimulus' as we have been for the majority of 2010 anyway. Seriously, did people not expect this? WE WERE NEVER OUT OF RECESSION. "

    Put me in charge and we'll never be in recession. I'll borrow, borrow, tax, borrow and tax us into growth. Oh yes. The State shall swell and swell, and all shall be happy.

    SmilingEdBalls

  • Comment number 33.

    "20. At 1:17pm on 25 Jan 2011, SleepingSpurs wrote:
    One group not suffering is the bankers, their bonuses are going up and up:

    https://uk.finance.yahoo.com/news/Half-bankers-UK-U-S-see-reuters_molt-3012899851.html?x=0

    So what are the politicians doing about this? Nothing. Because the bankers have them all in their pockets."


    Maybe because someone who gets a £1,000,000 bonus will pay £510,000 in tax and NI?

    How much tax and NI do YOU pay?

  • Comment number 34.

    How was the extreme weather at the end of Dec '10 any different from that in Jan '10? The ice and snow in Jan '10 seemed to last much longer, and yet the economy was growing. Explanations please.

  • Comment number 35.

    When contributors call for the people of Britian to "stand up" to the Conservative Government, what is meant by this? how exactly? who do they expect to stand up?

    As an example
    I was listening to Radio4 yesterday where some aged people were calling for something to be done about rising furnace oil prices, strangely enough they were living in leafy Oxfordshire.....a tory heartland I would guess,

    These people expected that there should be some functionary, maybe from Govt who would seek to protect them from the rapacious demands of oil suppliers, but guess what, there seems to be no one to do this.

    Still I imagine they were attracted to David Cameron and his "bye bye bureaucracy" banners during the campaign.

    This proves the point

    You get what you vote for.

  • Comment number 36.

    10. At 12:54pm on 25 Jan 2011, graham bailey wrote:

    In response to Mr Fubar.

    "They could never have gone with Labour as it would have been a Coalition of losers. and you no doubt would have slated them if they refused to join the Tories as being dithering politicians that are protecting their own interests whilst the country goes to ruin."

    First sentance, yes, totally agree. Would I have slated them had they refused a coalition? Depends on what grounds. If you're a conviction politician and you really believe in what you stand for, then you can argue a convincing case. Clegg had to convince his own party and his voter base. I think its safe to say the jury is still out on that. It could be argued that both sides of the coalition are busier protecting thier own interests and positions more than the welfare of the nation.

    I couldnt possibly comment. :o)

    "Cameron and Osbourne have cleverly been able to use Clegg, Alexander and Cable as Cannon fodder for most of the unsavoury announcements and the lib dems have shown little if no backbone."

    You could percieve it that way, yes.

    "However now we are getting down to brass tacks (economy) and the side shows of tuition fees etc. are put to bed they are going to satrt featuring more and more in the cross hairs of the press."

    Indeed. So, did they have the conviction of their positions? Or was there a more cynical interest at play here?

    "I personally don't think Osbourne stands a chance. no idea what he's doing and no experience to back it up."

    Every chancellor is a novice. Brown was. Balls was, he was an FT journalist, then a SpAd. Major was. Nothing new there.

    "What I'm struggling with is that although I disagree with pretty much everything David Cameron stands for I quite like him (I feel very dirty inside). He's a bit like Boris. Nice bloke but wouldn't want him running anything."

    I'm inclined to agree. I dont think he's evil, I'm sure he is a nice bloke deep down. Thing is, these kind of times dont call for nice blokes, they call for strong, decisive, conviction politicians who can lead. Not flaccid, paranoid megalomaniac bullies like Brown, but real leaders.

    And, I'm afraid I dont see any emerging on any of the current sets of benches in the HoC.

  • Comment number 37.

    21. At 1:20pm on 25 Jan 2011, Bob Pearce

    It is time that the state was rolled back, to encourage more people to be subjected to the market, and what people are prepared to pay for.

    ===============

    Growth = -0.5%

    It looks to me like you lot in the so called 'private sector' are being tested by the market ... and being found sadly lacking.

  • Comment number 38.

    richard bunning:

    I disagree with your assessment of Brown. You say he prudently balanced the economy, but he didn't as far as I can see. Throughout Labour's time in office, government spending went up in line with tax income, sometimes exceeding it (and by your own definition of good policy, Labour should have been running a surplus in the good times). From 2008 onwards, Labour were seriously overspending. They knew they were going to have to cut back (as shown by their post-election economic plans), but they weren't brave enough to do it before the election. The economic collapse should not have been a surprise to someone who knew their stuff and was paying attention: I suspect the signs were all there in the housing bubble, the level of personal debt and lending and trading habits in certain sectors.

    I don't know if the coalition have got it right, but Labour certainly didn't.

    As for your predictions... I think you may have a point (and I'm wondering how much of these 'unexpected' and 'unwanted' negative economic effects are actually intentional to try to make business and exports more competitive... or possibly to inflate away some debts?) though I don't think it will be as extreme as you predict.

    Do you think perhaps the coalition is pinning too much hope on a rise in exports on the back of a weakening pound?

    If they are, then perhaps our economy will just have to work like last time - with the financial sector making money off the rest of the world's economy?

  • Comment number 39.

    Sandy Winder says "The persistently negative attempts by left wing media like the BBC to run down the economy appear to have borne some fruit at last."

    of course, it was the BBC's fault. Correct and incompetent bankers (mostly right wingers) were completely inoocent. If only the reds under the BBC beds were not talking down the economy then we would be living in the land of milk of honey. Have you had a reality bypass? Did you complain when DC and GO were talking down the economy before the election?

    As for a left wing media - where?? No really where? The media is dominated by the Murdoch empire, he certainly has number 10 in thrall. don't see any left wing tendencies there. Extreme right wing, greedy, controlling tendencies with no regard for the interests of the UK, yes. Don't see much in the rest of the media either.

    As for the BBC - we have a Tory Government. The job of any political journalist and commentator will inevitably focus on what they are doing, not what the last Government did. They gave the Labour Government the same treatment. And good job too - the BBC plays a bigger role in protecting democracy and free speech in this country than most of our MPs. or would you like all of the media to be in the hands of biased, self-interested businessmen like the Murdochs?





  • Comment number 40.

    The worrying thing is that these flat figures (ONS says it would be 0% without the snow) are happening BEFORE huge amounts of money are taken out of the economy with VAT, the NI and petrol duty rise in April. This is on top of inflation rising.
    The problem is business confidence -for businesses who sell in the UK where is the money going to come from to buy their services when inflation and tax are reducing household spending power. The public sector workers losing their jobs will have no money to spend either.
    I have never understood the need to cut the deficit so quickly given we're not fully recovered from the effects of the worst recession ever yet. Cut it yes and have a plan to do it but try and ensure that you don't choke of the recovery as well. That's just stupid.
    During the last tory governments, all 18 years of them, even the blessed Margaret had more sense than to pay off the deficit completely. That task was left to the Blair Government! You know the one that is supposed to have run up a huge deficit over the whole of their 13 years in power.

  • Comment number 41.

    Have the libcons been talking to the rail companies instead of leaves on the line bad weather like SNOW has caused a dip in the so called economic recovery.It is failing, the economy is flat and with the VAT rise and all the cuts to come how the heck are we going to see any growth. It is sad to see this fine country going down the road to nowhere, you cannot blame the unions now !!!!!!

  • Comment number 42.

    #27 Richard,

    I fear it will be Blair/Brown Mark II unfortunately.

    Ed Miliband is (I fear) only there temporarily. Either Ed Balls or his brother will take the Labour leadership before the next GE

    I'm not convinced that Ed Balls is the man for the job of Chancellor, after all he did have a hand in the last government in that department. I also doubt that Ed Miliband can really control Ed Balls when it comes to the crunch

    What is clear is that the coalition needs to come out with some firm direction on how to create jobs in the UK, or at least to attract foreign investment - however that is a little hard given the UK's political climate at the moment, and the cost of employment

    Time will tell......

  • Comment number 43.

    Bob Pearce wrote:

    One poster suggests that the current plans will lead to poverty and unemployment..... well where have the 5 million current benefit claimants come from?

    They are the 'still with us' residue of the failed Thatcher experiment. That failure left massive structural unemployment which is about to receive another, probably permanent, boost.

    And just as an aside, if people want their comments on the economy to be taken seriously, please take the trouble to check spelling and grammar before hitting the 'Post Comment' button.

    Rob

  • Comment number 44.

    24. At 1:29pm on 25 Jan 2011, efan ekoku wrote:
    "Damn. Shame Labour didn't win the election, we would definitely have been in growth right now... or fake growth at least, paid for by 'fiscal stimulus' as we have been for the majority of 2010 anyway. Seriously, did people not expect this? WE WERE NEVER OUT OF RECESSION."

    Accurate conclusion,not certain about the preamble.

    "Never out of recession",that`s why the current figures are disturbing.The British economy slumped by around 6.8% in the depth of the crisis.GNP before the present quarter`s figures was still below its previous peak.

    Snow! Of course,experience of snow prone economies show that it has a severe but temporary impact which is quickly made up when the weather improves.But these figures relate to supply side,-services,construction,manufacturing, which would be less severely affected than consumption as Mr.Robinson points out.

    Manufacturing was the success story,but all the increase in output went to exports,domestic demand was flat.This success is double edged.Our exports are costed in a devalued pound,but so are imports, which become more expensive and through inflation suck demand out of the economy.Construction fell sharply as public sector contracts were completed or dried up,bad weather contributed to the decline.

    The contraction of domestic demand is the critical issue, inflation at 3.7%,a VAT increase,more part-time work and unemployment.Public spending cuts will be a major factor in 2011,not yet, because cuts so far have been relatively modest.

    So where`s the beef? Why is the economy flat lining when you factor out the snowstorm and spending cuts? Paradoxically it`s because the government have been too succesful in lowering consumer expectations who won`t spend because they think things will get worse and fear the future.

    Many were critical of Mr.Osborne when he became chancellor because he lacked knowledge of economics.He knows some and a little knowledge is a dangerous thing making him a kind of sorcerer`s apprentice to the Lady.He is dogmatic, while the British way is trial and error,an ability to learn from mistakes.

    If he fails to do this it will show the policy is ideologically driven rather than having an economic rationale.

  • Comment number 45.

    I can't decide whether to laugh or cry after reading the pathetic excuses spouted by Jeeves & Wooster with regard to these terrible figures.
    I'll declare an interest immediately by stating that I work for a local Authority in the north of England that is going to be severely affected by the austerity measures.
    I work in the Highways sector and am responsible for helping to design and construct highway improvement schemes, sometimes funded by developers as part of their proposals, but in the main funded by money provided by Central Government.
    As part of these cost cutting measures our whole department will be shedding at least 25% of the workforce over the next 12-18 months, starting in March 2011. This kind of excercise is taking place in every department, at most Local Authorities, resulting in hundredes of thousands of job losses, which is well documented.
    What I am struggling to understand, and I'm sure that there are many clever people out there who will be able to explain it to me is this:
    How will transforming current tax payers such as myself and hundreds of thousands like me into benefit claimers help the economy to recover?
    The idea that the private sector will just step in to save the day is ludicrous. If the money isn't available for me to do my job, it also isn't available for a private consultancy to do the work instead.
    To put it simply (as I'm only a Council employee), If I'm not going to design a road improvement scheme, I won't be giving the work to a contractor to build the scheme, that contractor won't be giving work to sub-contractors and trademen and they won't be buying materials from builders merchants and other suppliers.
    All of this hasn't happened yet as the full effects of these measures have yet to bite. Although my sector is only a small part of the Local Authority's remit, other departments, with services closer to public hearts will be similarly decimated and it is likely that there are many private companies, reliant on the public sector who will also have to shed many staff.
    I'm not denying that the apalling defecit needs to be tackled but this could be done at a more gradual pace and much more imaginatively that this government seems capable of. To put the blame for these figures purely on a few weeks of bad weather is priceless.
    I don't know if I will still have a job in April but I do know that I will not be making any large purchases, such as the car I would otherwise have bought and other luxury goods for many months and years to come while this uncertainty continues along with many other people.
    I'll be very interested to see what the chuckle brothers have to say in July and August when the cuts have really started to hit home, wrong type of sun preventing people from venturing out doors no doubt

  • Comment number 46.

    #21 Bob Pearce

    I'm not a government supporter, but in one sense I do agree with you. Before the figures came out commentators on the BBC were pointing out that one of the main features of a recovery is that it isn't going to be smooth. Unlike many on this blog I think I know what will work, but unlike many I have to admit that I could be wrong. For this reason I will not pass judgement on GO's policies on the basis of one set of figures. I also remember that the choice that we were offered at the election was basically 'a lot of hurt over a short period followed by a glorious future' or 'a little hurt for a rather long time followed by a glorious future'. The country just about believed that the former was the one which was most likely to succeed. We are now in that process.

    I'll ignore your comments about public sector workers because although it has an element of truth it is an over generalisation. As for your comment about the private sector being the only place where money is made. it rather ignores the fact that the public sector provides certain things which the private sector needs in order to make money. You may with a certain amount of justification criticise the standards provided by public services, but you would be worse off if your work force couldn't read at all, roads were not looked after and we didn't have a health service at all.

  • Comment number 47.

    29

    Wow - I really got to you, didn't I?

    Five years ago I tried to convince Channel 4 to do a series on the risk of the banking system collapsing due to the con trick of "collateralised debt obligations" and sub-prime mortgages - they said my idea was "fanciful" and that the banking system was "too strong to fail...."

    In the 1980s the BBC turned down a hypothetical series idea from me entitled "Germany Reunited" - they told me "German reunification is an impossible dream".

    In 1985 I wrote part of the script for a programme called "Kabul Autumn - the other side of the Afghan War" - I said "We may regret arming, equipping and training islamic fundamentalists because once they're got rid of the russians, they may well attack the West" ITN's correspondent called me "a dangerous apologist for communism".

    However, I share your concern about 8 million economically inactive and I'd propose we prioritise this and do something to create jobs.

    Changing our balance of trade is essential. We need to stop importing and start being self-sufficient in manufactured goods, food and energy.

    Globalisation and a supine government is not going to deliver this - we need trade and industrial policies to stop the tidalwave of imports and put our people back to work.

    All that our open door policy to globalisation will do is to further erode jobs and add another generation to the scrapheap.

  • Comment number 48.

    Sure, the snow in December has played a part, but these figures were for the quarter rather than just one month.

    But if the snow really played that big a role, then the next quarter's figures will bounce back with a vengeance.

    If they don't, then who or what are the Tories and their stooges going to blame?

  • Comment number 49.

    RB 7

    I normally avoid long pieces because I have a limited attention span.However I read yours on Giselle`s recommendation.You have clearly thought deeply about this and while I would disagree with some of the detail,in general it`s right on the money.

  • Comment number 50.

    Is anybody really surprised by the economic results - I'm not, people are quite naturally restricting their spending in the current environment.

    What is the cause of this? - fear generated out of the slash and burn economic plans of the Tories. Scratch the surface of the current government and all you get is thatcherite policies dressed up in a very thin veil of Blairite PR. Anyone who tries to say that current economic direction is anything less than ideologically driven is living in cloud cuckoo land.

    @7 - Richard bunning makes some very salient points and crystalises the situation very well, I suggest you give it a read.

    As for me, I would just; ask are people so myopic that they couldn't see this coming when they voted the Tories in? Have people really such a memory laspe that they forgot what ideology drives the tory political machine? I have the get out clause of living in a devolved region and so could choose not to vote for any of the cretins on offer in England. However, given that central government ultimately controls the purse strings - my devolved administration are as much at the mercy of the thatcherite agenda being pursued as anyone else.

    As for the future let's see - I've spent a large amount of time, money and effort getting a very high level education, and acquiring usable and transferable skills, but could only get a job in the pariah that is "the public sector" due to an absence of the private sector opportunities which are supposed to rescue the economy.

    So being proactive, do I sit and watch the economy being driven into the ground - no, I and many of my peers are quite happy to take our skills, training and qualifications abroad and are planning to do so.

  • Comment number 51.

    Lets go back 1 year, Gordon Brown "Cutting the deficit now, before growth has got a foot hold will send us into a double dip recession"....

    Those words where dismissed as being out of touch, wrong economic policy or even a nail in the UK economy!

    I believed him then, i still do now and unfortunatly for us, it looks as though he was right all along.

    This Coalition government is driving our country into the ground with their idiology.

    You only have to look at the choices made by the last labour government to see they had very limited options, yet managed to introduce growth back into the economy; this is now being ruined by each stupid decision made by the bullie boys and the fib dems. If this does turn into a double dip recession then this government has failed in its most important task, and in my opinion parliment should be dissolved and a general election called. They have gone back on the good things they planned to or not to do, and have ruined the one thing they have stuck to their guns on.

    Ps, DC i have a good contact in the removals business if you want his number (unless he sent out of business first)

  • Comment number 52.

    Where is Growth going to come from - that is a question which should really be restated as "Where is real growth going to come from".

    We had growth in the first part of 2010 in large part as a result of Labours action to support the economy. But that support only provided artificial growth. What is more, it actually made it harder for growth to come later, as it brought forward spending from the future.

    The car Scrappage scheme is unlikely to have created sales that would not have come soon anyway. It just brought them forward - that means fewer sales in the future.

    The boiler scrappage scheme will have brought forward future sales too.

    The reduction in VAT was intended to bring forward large items of expenditure - meaning the future sales would be diminished.

    Support for the economy of the type that Labour introduced was not maintainable over the long term as it robbed from the future to provide growth at the time. It also cost money.

    The Banks produced a great deal of our GDP in the past, yet we don't want the banks to engage in the reckless activities that provided it in the past - so we cannot expect the Banks to provide as much of the GDP in the future.

    Gordon Brown did not save the world, he certainly didn't save our economy, he just put it on a short term life support machine, one that could not be used long term. Then, when some of the vital signs being produced by the Life support machine seemed to show improvement he claimed recovery of the patient.

    The patient has not recovered, the Life Support machine cannot be used forever, and we must now learn to live without it... that may mean that the economy will not be as healthy as we 'appeared' to be before the crash.


  • Comment number 53.

    #32

    SOLD! Call an election :)

  • Comment number 54.

    37. At 1:55pm on 25 Jan 2011, jon112dk wrote:
    21. At 1:20pm on 25 Jan 2011, Bob Pearce

    It is time that the state was rolled back, to encourage more people to be subjected to the market, and what people are prepared to pay for.

    ===============

    Growth = -0.5%

    It looks to me like you lot in the so called 'private sector' are being tested by the market ... and being found sadly lacking.

    ++++++++++++++++++++++++++++++++++++++++++++++++++++++
    It is not "so called" private sector. It IS the private sector. This is the part of the economy where owners, managers and staff have to plan to provide goods and services that people and companies will pay for. The part where your job is always at risk if you fail, and your income at risk not only as a result of your own efforts, but also those "efforts" of the public sector and political class. We try to cope in an environment with ever more "jobsworths" implementing and monitoring ever more regulation, but strangely, only those that try to follow the rules get regulated. Cheats and criminals are avoided by the public sector because it makes life "difficult". Consequently:-
    social workers snatch kids from hard working families, but "forget" or are "too busy" to visit the dangerous ones;
    Police can stop and fine someone with no insurance, because the computer in the cab tells them, but they fail to get the 20% (apparently) that NEVER have insurance;
    Of course these are just examples.
    I personally worked for the public sector for 11 years in my earlier career. Starting full of enthusiasm to "make things better" and to "serve the public", I soon learned.
    What I learned is as true today as it was then. The public sector do NOT serve the public. They are almost completely self-serving.
    Completely wrapped up in internal politics, "grade-changing", they are unionised, benefit seeking, overpaid, very much underworked, clock watching, with excessive benefits and guaranteed jobs. For the last 13 years it has been worse than ever with massive wage increases for the public sector and relative decreases and pension reductions for the private sector. Labour bought (as it always does) votes.

    If we are "sadly lacking" it could be that we are so few in number, and with relatively little resource to invest, that our take up of opportunity is slower than we would like.

  • Comment number 55.

    Meanwhile Manufacturing seems to be showing resilience in the face of these disappointing figures.
    Ironic isn’t it; the one area of the economy that has had little, if any attention from the British Government since the Thatcher years is turning out to be the shining light.

    I’ve zero confidence in Osborne & don’t know why Clarke wasn’t given the job.
    Where is BATMan when you need him?

    Blaming the snow is almost pathetic as the railways blaming leaves on the track & we can now see why the Tories kept Osborne in the garden shed during election time.

    It seems Osborne is following Brown with his delusions of grandeur & self denials:

    https://uk.reuters.com/article/idUKLDE70O0UL20110125

    The CBI is voicing concerns over the Condems lack of vision (maybe because they don’t have any – wake up boys):

    https://www.bbc.co.uk/news/business-12267007

    The Condems are a one trick pony & seem to have no plans past slash & burn which is rather sad, because the IMF predict faster than expected growth in the world economy:

    https://www.bbc.co.uk/news/business-12273200


  • Comment number 56.

    It amuses me to see the idiotic postings here about which political party can run the economy better than the other.

    Meanwhile the banksters, who really run the economy, pay themselves even bigger bonuses. Recession? What recession?

  • Comment number 57.

    1. Economy shrinks:
    Opposition blames Government
    Government blames Opposition

    2, Economy grows:
    Opposition takes credit
    Government takes credit

    3. Economy static:
    Opposition say this is bad
    Government say this is good

    They are all uterly wet and weeds. I diskard them.

  • Comment number 58.

    @ 35 - Andyc555 wrote :
    "Maybe because someone who gets a £1,000,000 bonus will pay £510,000 in tax and NI?

    How much tax and NI do YOU pay"

    C'mon Andy, we all know that that's a falacy. It is the preserve of people who get paid those exhorbitant salaries to be able to indulge in tax avoidance through any number of loopholes. Anyone who earns 1,000,000 and doesn't use some kind of loophole to escape their full contribution is a fool, whether this means that commuting some of it to shares or stashing it in some dodgy off shore account.

    You also seem to miss the point of basic maths when it comes to your comparison. Someone paying half a million in tax and NI will still have half a million in their pockets. Someone paying tax at the basic rate may statistically pay less in contributions, but their take home and thus spending power is much less. Further the premise that people earning 1 million in bonus actually deserve this amount is questionable. How many nurses or doctors do you know who earn bonuses for number of lives they save.

    If you are, as I suspect, a city boy, then your contrbituion smacks of the arrogance displayed by someone who gets paid a huge amount and isn't affected by the recession or the dodgy economic policies of government and the fly by night economic operations carried out by the banks.

  • Comment number 59.

    Don't worry George, I'm sure it'll be a nice summer and that the Great North Star will cross the Parabolic Path of Pluto. Then all will be well.

    Last thing you should do is change your "policy" for the UK economy.

  • Comment number 60.

    50. At 2:16pm on 25 Jan 2011, ak35 wrote:

    "As for the future let's see - I've spent a large amount of time, money and effort getting a very high level education, and acquiring usable and transferable skills, but could only get a job in the pariah that is "the public sector" due to an absence of the private sector opportunities which are supposed to rescue the economy."

    I think you could more accurately describe that as "only the public sector had jobs that would pay me a suitable salary", especially if you come from one of the devolved areas where the public sector pay is national but demand and other costs local. That is the problem in a nutshell.

  • Comment number 61.

    54. At 2:27pm on 25 Jan 2011, Bob Pearce

    Cheats and criminals are avoided by the public sector because it makes life "difficult".
    ==========================

    Yep - most of the cheats and criminals seem to be in the so called 'private sector'

  • Comment number 62.

    "I'm not convinced that Ed Balls is the man for the job of Chancellor, after all he did have a hand in the last government in that department. I also doubt that Ed Miliband can really control Ed Balls when it comes to the crunch"

    Careful..........

    SmilingEdBalls

  • Comment number 63.

    This looks like a typical post recession blip. All of the other economic indicators are pointing in the opposite direction. I could be wrong but I believe this figure will be revised upwards and Q2 will see a return to growth. The Left are squealing about the cuts causing this blip. The cuts haven't even started yet.
    And as for Post 39, the BBC form one third the Labour supporting left wing media tripartate of Channel 4, The Guardian and the BBC. There is plenty of evidence that the BBC is hideously left wing, even though it is a public broadcaster and should remain neutral. Perosnlly I would welcome an truly independent investigation into the BBC's political agenda. Peter Sissons recently offered us an insight into the inner workings..

  • Comment number 64.

    Nick is absolutely right, the political debate is now shifting as is the view of the coalition government. The honeymoon period is well and truly over and the real battle is just beginning. They had a bad week last week, and now the substance is making this week even worse.

    These are devastating results for the economy and ordinary people and the cuts have barely started. No one expected these figures. This year could be even worse than the doom mongers on the left said it would be.

    https://extranea.wordpress.com/2011/01/25/cbi-says-no-growth-strategy-and-the-economy-contracts-by-0-5-is-the-coalition-strategy-falling-apart/

  • Comment number 65.

    Anyone of any political pursuasion who believes they know how to handle the current economic situation obviously doesn't know what they are talking about.

    As no-one has ever been in a similar situation of a potentially highly inter-connected, Global financial melt-down, every "solution" suggested is just an un-tested theory. Consequently we must also consider the competing theories on their proponents reasons for supporting them.

    It may well be true that in a recession the UK should spend more than it's income to stimulate the economy, but that does not explain why Gordon was doing that when he became Prime Minister (and so long before the recession began to bite) or why he continued to spend so much after recession arrived - especially on warships.

    You might also consider why Gordon refused to make significant "savings" anytime before the election date when it was startlingly apparent that significant cuts in spending had to be made and that some cuts made sooner would help reduce the need for much greater "savings", later.

    It could be suggested that Gordon's stated economic recovery plan was actually only intended to ensure Gordon Brown's political survival and not our economic wellbeing.

    Whether it was so or not, economic privation post-election would have forced him to bin it and start again. If so, should he have won the election even Gordon Brown would not have been be applying this recovery model (and I wonder if it's supporters would be condemning him for changing his mind?)

    The Electorate had no faith in Labour's recovery plans before the election and there is no significant reason for the elctorate to have faith in them now - especially as Gordon would be unlikely to be carrying it out had he been given the opportunity.

    Mr. Osborne may well not have got it right yet, but the Conservatives are doing what they said they would do regardless of how unpopular they are and I have no doubt they will alter their policies should the un-predictable situation make that necessary (unlike Labour before the election).

    Like it or not, the Coalition has earned the benefit of the doubt until hindsight proves them wrong.

    Everything else is just whinging.


  • Comment number 66.

    At last, the time of drift and complacency is over. It is now time for the Coalition to get a grip and rebalance the economy away from the bubble economics of the past.

    There is no need to fear Mr. Balls. Mr. Balls is part of the problem and thus can be no solution. He is an architect of the economic collapse and so is quite irrelevant to our futures. If anything, we should get out the garlic every time he appears.

    The issue is not just growth: it is about rebalancing the economy so that it can grow. The Coalition has not done anything to rebalance the economy and so they need to get busy otherwise we run out of time.

    Given that the economy has gone from boom to bust in two years it should not surprise anyone that we have hit negative again. The so-called growth before was more a consequence of a GBP 158 billion fiscal deficit and so much QE money that I have actually forgotten the figure. Now those so-called stimuli have worked through into inflation we are once again at a risk of sinking further into the pit.

    What should be exciting everyone is that manufacturing and agriculture sectors actually grew in a difficult period. This is where our future lies and we should commit what resources we have to developing these sectors.

    It is now time to rebalance our economy away from the banks and their risk-taking. What the banks do is not genius: it is stupidity. We can't afford any more of their nonsense. It is time to get some real value- adding work done; build manufacturing, generate jobs thus allowing all the country to recover.

  • Comment number 67.

    22. At 1:21pm on 25 Jan 2011, IR35_SURVIVOR wrote:
    we need dear Margaret Back, like our one other great leader whom held the soil of this country inviolate new what to do. It took 18 years after 79 to get the uk BACK ON TRACK , it will take at least that long but we have the problems of china and India to cope with.


    ====================

    IR, the last person we need back is dear Margaret. For some of the neccesary changes under her leadership far more damage was done to the basic wealth creation mechanisms of this country than you will ever believe.
    Her favourite businessmen left such an indelible mark on companies in this country that even their companies largely no longer exist having being asset stripped to extinction. In going about their business they caused otherwise potentially good British businesses to under invest (to fund dividends and takeovers - borrowed and wasted their resources to avoid falling prey to hatchet jobs) resulting in their inability to compete on the world stage and one by one go the way of the dinosaurs.
    The strategy basically fed the city which was already successful as being the growth engine - and we have had yet another reminder of what happens if you permit your country to turn into a one trick pony. When the pony breaks a leg - the country gets a huge medical bill.

    I was hoping to see an industrial policy which the current government had made all the right noises about broadening the economy, export led growth (which is still) etc etc. Yet still they have done nothing - no bonfire of the red tape, distraction by fiddling with immigration in the least useful area, fluffing the banks lending to businesses, failing to stop even the banks we still own funding asset stripping by multinationals resulting in lost jobs and yes, then by over doing the doom scenarios created more fear of the cuts than was needed. Confidence is everything - the private sector had enough fear already and was recovering but not so fast as the public sector lost it.

    We should see a rebound when the retail figures are added in for next months revision but the growth based on trading reports would indicate that the growth is anaemic at best and the cuts have barely even started.

  • Comment number 68.

    richard bunning @ 7 ->

    A very well reasoned argument - well said!

    As for fubar's attempts to discredit what you said - fubar by name, FUBAR by nature. Never has a name been more apt ;-)

  • Comment number 69.

    No7 Richard,
    Most of the politically thick Tories that spend so much time on here probably think that a Hayek is a device used on the Austrian ski slopes.

  • Comment number 70.

    47. At 2:10pm on 25 Jan 2011, richard bunning wrote:

    29

    "Wow - I really got to you, didn't I?"

    Not really, it takes a died in the wool lemming like lefty to do that.

    "Five years ago I tried to convince Channel 4 to do a series on the risk of the banking system collapsing due to the con trick of "collateralised debt obligations" and sub-prime mortgages - they said my idea was "fanciful" and that the banking system was "too strong to fail....""

    Ah, a bit of a lost opportunity that. Probably not quite risque enough for C4. Maybe you should have approached Auntie Beeb.

    "In the 1980s the BBC turned down a hypothetical series idea from me entitled "Germany Reunited" - they told me "German reunification is an impossible dream"."

    When in the 1980's may I ask? Until 88, until Gorbachev & Perestroika, it was looking quite dim and distant a prospect.

    "In 1985 I wrote part of the script for a programme called "Kabul Autumn - the other side of the Afghan War" - I said "We may regret arming, equipping and training islamic fundamentalists because once they're got rid of the russians, they may well attack the West" ITN's correspondent called me "a dangerous apologist for communism"."

    So... all I know about you so far is that you're a failed screenwriter with a penchant for sniffing out possibles 15-20 years down the line. Possibly.

    "However, I share your concern about 8 million economically inactive and I'd propose we prioritise this and do something to create jobs.
    Changing our balance of trade is essential. We need to stop importing and start being self-sufficient in manufactured goods, food and energy."

    I dont dispute any of that at all. I completely agree in fact. One of the things that has narked me for a long while is the lack of strategic reserves of oil and gas in the UK, after we have come out of the other side of being a net exporter of these products. We have at the moment, no more than 15 days supply in reserve. I venture this is not enough and exposes the country to the vagaries of the market and sharp practises by suppliers. I would venture that a programme to expand this to the point where we have a minimum of 90 days reserve on shore at any one time, dispersed at various UK locations, would create a construction programme and attendant trickle-down business and generate jobs in the sector, not to mention the service industries needed to run it on behalf of the state, because IMHO the infrastructure should be owned and operated by them, not the private sector. So far as manufacturing is concerned, that is a bit trickier, but not impossible. What manufacturing there is left beyond the German and Japanese owned car plants (and elements of the defence industry that arent owned by BAe) is highly specialised, esoteric, low volume. This needs to be encouraged and nurtured, but it is unlikely that we are going to be able to compete directly on cost and quality with the far east, on a high volume basis. But, we can certainly encourage R&D and as we own one and a half big banks, we could certainly protect these interests from over-leveraged hostile takeovers by overseas based asset stripping multinationals. Everybody else does. Germany does, France most certainly does, America does. Food... well, education is necessary there more than anything else. Getting people used to not having strawberries in December, going back to proper home grown seasonal produce, when all they want to tip down their throats is sugar laden junk is going to be a generation long trip. Government can try and educate and maybe gently steer, but that will take a long time to come through.

    "Globalisation and a supine government is not going to deliver this - we need trade and industrial policies to stop the tidalwave of imports and put our people back to work."

    Yes. Totally, totally agree. But, the problem is, with three Europhile main parties, where is that vision going to come from? Certainly not from Cameron, Clegg, Balls or Mili Junior.

    "All that our open door policy to globalisation will do is to further erode jobs and add another generation to the scrapheap."

    I dont doubt it. I dont doubt it at all.

    So, why didnt you just say that in the first place? :o))

  • Comment number 71.

    Ed Balls comments on the figures are very revealing

    'the fourth quarter figures are all the more worrying because they cover the period before the government's VAT rise and sharp public spending cuts have even begun".

    Indeed. In other words the figures for the 4th quarter, as with those for the 2nd and 3rd quarters, are a legacy of the last government. New Labour did a decent job of gerrymandering the economic stats just prior to the last election but got the timing out by one quarter.

    The measures taken by the coalition will only now be starting to kick in and we'll only be able to fairly judge the net impact of these measures in 2-3 years time.

  • Comment number 72.

    61#

    You really dont have a single sensible thing to say about anything, do you jon? Whats the matter, are you scared your jaw will seize up if you're not moaning enough?

  • Comment number 73.

    Is it just me or is George Osbourne some kind of a sick joke? Of all the people in the coalition we could have as a chancellor this is the best we could do? Any chancellor who uses the 'wrong kind of snow' excuse for his economic policy is worthy of the Tag 'worst chancellor in my lifetime' Worse than Brown, Darling and Lamont rolled together. If my business wasn't on the line I would be looking forward to next quarters excuses which will surely be from Michael Jacksons blame it on the boogie

  • Comment number 74.

    I think that coalition style politics broadly represent a more helpful approach to politics in England than the old 'death-match' adversarial sort that we have had decades of.

    Nevertheless, it is the job of those who are not necessarily fully aligned into this Coalition's objectives to sound warnings where appropriate.

    So if Ed Balls and Richard Lambert raise concerns about the economic growth (or non-growth) agenda, then that is the correct thing to do in the circumstances.

    The National Debt, or as it should more correctly be known, the Public Sector Debt total, is now over one trillion pounds and will have another £250 billion added to it over the next 24 months so it is now crucial that strong economic growth resumes asap or else ... the money will simply be electronically printed, which brings its own problems.

    PS. The Coalition must be doing well if more rats are joining the Downing Street ship.

  • Comment number 75.

    The figures across different sectors vary considerably, it was entirely predictable that retail and construction sectors would struggle and will continue to do so in the immediate future but very encouraging to see some recovery in manufacturing.

    It should be remembered that the manufacturing sectors have taken a long hard hit over the past few years and having experienced some lean years may not be entirely sympathetic that some of the economies are now being spread across the public sector.

    However balancing the economy is a delicate business and I would not be surprised to see the growth figures fluctuate for some time to come and it is imperative that the government should not be too dogmatic in its response to events.

    The coalition wants to achieve as much as they can in the first few years but against the backdrop of an uncertain economy, it is debatable whether their plans for reform may be a tad ambitious over such a short timescale.

  • Comment number 76.

    73#

    Compared to Brown... it might be just you Brucie. I'd stick to coaching womens rugby if I were you.

  • Comment number 77.

    Just to clarify my own comment @ 74 referencing Ed Balls, this is in the context of his role as Shadow Chancellor, in that whoever takes that role would be expected to raise issues if he/she disagreed with the thrust of Government policy.

    As it happens, Ed Balls has a very bad track-record as a Brown special advisor, being one of the reasons why we, as a country, are in such a poor financial situation in the first place (no thanks to Brown/Balls, we are some £400 billion more in the mire than we might otherwise have been).

    Therefore, his counterparty, Osborne, can in this case, shoot the messenger and I'm sure he will.

    PS. Rodents have no problems in establishing a heirarchy.

  • Comment number 78.

    There are more reasons for the lack of UK growth than just the lack of consumer consumption or the impending decrease in public spending.

    Long-term we also have to look at global economic conditions, at the world wide flows of capital, have to ask where international investments are made, from which societies investments are withdrawn, in whose pockets profits end up, who were the first receivers and main beneficiaries of the trillions of pounds and dollars newly issued by the UK and US governments, who in turn has to pay taxes and who pays nothing or little, the role of tax havens (today's trillion dollar safe havens for financial pirates) and we have to look at the very profitable role of the banks that are the primary dealers doing financial business with governments.
    Please find more information to further explore these issues here:
    https://globalinsights.wordpress.com/

  • Comment number 79.

    Politics to one side, people are going to suffer what ever happens who ever is in charge.
    If it turns out that the coalition is wrong, and they may be, all it will do in reality is prolong the misery for those who cannot afford the misery in the first place.

  • Comment number 80.

    7 Richard

    It seem that everyone wants to run a deficit during the bad times but no-one wants to run a surplus during the boom years.

    Brown only avoided breaking his own economic rules in 2006 by changing the dating of the business cycle in 2005, a clumsy piece of manipulation that the IFS (amongst others) were wise to.

  • Comment number 81.

    72. At 3:04pm on 25 Jan 2011, Fubar_Saunders
    61#
    You really dont have a single sensible thing to say about anything, do you jon? Whats the matter, are you scared your jaw will seize up if you're not moaning enough
    ==============================================

    Hey fubar, just a bit of tory baiting, no harm in that.

    On the topic of 'sensible things to say' ....

    I thought you tory boys reckoned cuts would make the economy bloom and the private sector's stunning growth would rescue us all?

    Ho, ho, ho.

  • Comment number 82.

    IPGABP1...

    I appreciate that the labour party apologists on here don't have as much time to spend these days...

    Too busy looking for new people to fund your bankrupt party now the backers are withdrawing funding.

    Has it occured to you that no-one supports the clapped out fantasy government sponsored growth policies of labour?

    it's grim up north London...

  • Comment number 83.

    Richard Bunning 7

    'So who do you believe? did Brown splurge our money and leave us in so much debt that we need a stiff dose of spending cuts to pay them off?

    Or do you see the current plan as a dangerous gamble based on ideology not economics?'

    Well if Ed Balls is to be believed Gordon Brown left us in so much debt that we need a stiff dose of spending cuts to pay it off. He now agrees with the spending cuts outlined by Alistair Darling that, as we all know, were more severe than anything contemplated under Margaret Thatcher.

    And this of course answers the 2nd question posed. If spending cuts are nececssary then they can hardly be described as ideological.

  • Comment number 84.

    These results, although not influenced by the Osbourne cuts will have been influenced by the fear that many people have of losing their jobs in the near future. The slowing down of growth will limit the reductions in the deficit that the cuts are supposed to achieve. It is likely that Osbourne's statements will already have actually reduced the reduction in deficit which naturally occurs on emerging from recession.

    For every debtor there must be a creditor. So an alternative way of looking at the high level of debt in the UK, is as a very uneven distribution of wealth. A reduction in this uneven distribution must be a feature of any reduction in indebtedness.

    True to Tory form, Osbourne's proposals are likely to increase the differences in wealth and therefore cannot reduce private indebtedness.

  • Comment number 85.

    71. At 3:04pm on 25 Jan 2011, jobsagoodin wrote:
    New Labour did a decent job of gerrymandering the economic stats just prior to the last election but got the timing out by one quarter.
    =========================

    Labour gerrymandered a global upturn?

    Wow.

  • Comment number 86.

    'Nevertheless, today's news that the economy shrank rather than grew in the last quarter will change the political climate.@
    ............................

    Why? Most of us know that GDP statistics are nonsense ... it may also under some circumstances ... wait for it... be good news if GDP is lower/reducing e.g.

    -reclycling more?
    -sucking in less imports?
    -buying more British goods and services?
    -using more green energy saving equipment?
    -producing more goods and services in the UK
    -being more efficient at distribution

    So as economists, we need to look at 'output' as well as monetary transactions to get a clearer picture.

    Remember, ... 'GDP' is fuel for politicians' twaddle ... comparative living and other indices are a better indication of how the UK is doing in terms of us ...

    Does the UK have any real rationale for priority of its economic indicators?

    Unemployment?
    Net disposable incomes?
    Inflation?
    Debt/deficit?
    Balance of Payments?
    Economically inactive?
    No of people earning below average wages as a % of working population?

    Perhaps tracking the above (or similar) in a weighted index would be more meaningful than GDP 'throw in the kitchen sink' twaddle?

    So when GDP is increasing and the other measures are getting worse (as happened in the preceding quarter 2) - How do we interpret that as a performance issue.

    This is too much piddling over small figures as GDP is not that accurate an 'indicator' of anything but ... GDP.

    How does the ONS adjust GDP for 'inflation' ... has anyone got hold of that one yet ... and plotted the trend line?

  • Comment number 87.

    73 Brcue

    Any chancellor who uses the 'wrong kind of snow' excuse for his economic policy is worthy of the Tag 'worst chancellor in my lifetime'.

    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

    If you read the ONS Bulletin then you will see that they estimate that the contraction is almost all down to the bad weather. GDP would have been flat otherwise, which is still poor, but not as bad.

  • Comment number 88.

    70

    you old pussycat...

  • Comment number 89.

    It's not good news.

    But I'm amazed at those from the left criticising the coalition. Personally, I'll be wanting the coalition to have a look at their policies, see if any are not working, perhaps consider a change.

    But on the left, why aren't you just shrugging and saying that it's a world economy and there's nothing anyone can do to influence their own country? You've been saying that for nearly 2 years now.

  • Comment number 90.

    Is history repeating itself? the activities of 'socially useless' greedy, irresponsible bankers, gangsters and others in the world of finance capitalism led to the Wall Street Crash and a world wide depression lasting ten years.The situation was made worse by the wholesale adoption of a range of policies virtually identical to those now being implemented by the Bullingdon Kids. Will the outcome be the same?

  • Comment number 91.

    66. At 2:47pm on 25 Jan 2011, stanilic wrote:
    "It is now time to rebalance our economy away from the banks and their risk-taking. What the banks do is not genius: it is stupidity. We can't afford any more of their nonsense. It is time to get some real value- adding work done; build manufacturing, generate jobs thus allowing all the country to recover."

    Agree completely.

  • Comment number 92.

    AS71 @ 80

    You say that Brown only avoided breaking his own economic rules in 2006 by changing the dating of the business cycle in 2005, a clumsy piece of manipulation that the IFS (amongst others) were wise to.

    Did anybody really take seriously the Brown/Balls golden rules?

    What always amazes me, when looking at countries, not just here in England but around the world, is just how damage politicians can (inadvertently/dogmatically) inflict on the populace and yet still these countries somehow stagger on.

    To be fair, there are countries where politicians have done a good job, mostly Scandinavian countries it seems, just a pity it is not here in our England and that is probably mostly because it is not our England (in the political sense).

  • Comment number 93.

    Richard Bunning 47

    So if it was possible to predict the banking crisis as you clearly did (we believe you) then how is Gordon Brown not responsible for failing to predict it ?

    As for the 8 million economically inactive. Is Gordon Brown blameless for this as well ?

    I think everyone would agree we need a rebalancing of the economy. But why is the economy so unbalanced in the first place? Don't tell me, it's got nothing to do with Gordon Brown.

  • Comment number 94.

    No82 RockingRobin,
    You must have the wrong man. I am not a supporter of the Labour Party, I am not a 'deficit denier, or a socialist.
    Am I right to assume that you are determined to live up to your growing reputation on here as the No1 Tory Toytown commentator?

  • Comment number 95.

    jon112uk 85

    They gerrymandered a spike in UK economic activity designed to coincide with the May general election. They were out by one quarter. How sad.

    The contraction is a legacy of the last government just as the 2nd and 3rd quarter figures were.

    Perhaps you'd care to explain what policies the coaltion implemented between May and October 2010 (the start date of the 4th quarter in question) that lead to the contraction ?

  • Comment number 96.

    Don't panic, don't panic!!!

    Well done Auntie(British Bolshevik Corporation), I do hope your chronic myopia is not exacerbated by the imminent NHS re-organisation!

  • Comment number 97.

    #7 Richard Bunning wrfote:
    "Brown's gold rule was that the surpluses and deficits should balance each other out over the cycle - "prudence" in his own words - but IMHO he didn't change this rule"

    In my (not particularly humble) opinion, this is nonsense. After 2000 Brown/Balls ran a significant structural deficit during an artificial asset boom. Not only that, they maintain that this was the right policy even with the benefit of hindsight.

    Of course Labour also failed on their sustainable investment (40% of GDP) rule.

  • Comment number 98.

    "Either Ed Balls or his brother will take the Labour leadership before the next GE" - MC @ 42

    Oh god, Chewster, surely not. Not Barry Balls. He's clueless. Been in his big bro's shadow for ages and rightly so.

  • Comment number 99.

    I've always stated and commented like many others that the key to getting the economy out of the recession will be private sector growth and jobs alongside public sector cuts that needed to happen.
    There has to be a credible plan to boost the private sector investments, particularly financial support for SMEs, start-up businesses and encouraging entrepreneurship which will be key to private sector growth. Increase in VAT was not helpful either.
    The situation can still be redressed if the Coalition can set out a proper, well articulated and joined up vision and road map/path for private sector growth to complement shrinking public sector expenditure. The IMF has warned of economic turbulence with the market pressures in Europe and the effect of the regional banks which will impact the region and the economy of individual countries because they are inter-twined.

  • Comment number 100.

    Welcome to reality.

    After years and years of growth, built on the back over government and private spending ,its no surprise to me that we have had a slight dip...

    Growth based on borrowing is not growth its just debt..

    The Tories are doing the right thing in balancing the books is absolutely spot on .

 

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