Posts Tagged ‘recession’

Five questions to determine the next general election

16/05/2020, 10:48:56 PM

by Jonathan Todd

It is not a sprint to the next general election. Nor a marathon. It is more like 800 metres.

You cannot win it in the opening straight, but you can lose it. Every step counts. And – as Covid-19 has painfully illustrated – new obstacles can appear from nowhere.

Here are five questions to help comprehend this 800-metre random assault course:

1) What will the UK economy be like in 2023/2024?

Sir Charles Bean, a member of the Office of Budget Responsibility (OBR), has referred to it being “not implausible” that for as long as the lockdown is in force, economic activity will be reduced “by somewhere between a quarter and a third”, and that a three-month lockdown “would knock something like 6-8 percentage points off annual GDP”.

Two months into the lockdown, however, it does not seem likely that all economic activity will return to pre-lockdown levels a month from now. Therefore, the annual contraction in GDP seems likely to exceed 8%.

Perhaps significantly so if a second wave necessitates a return to lockdown and/or the government fail to deliver a track, trace, and isolate system effective enough to enable more economic activity alongside suppression of a second wave.

Even after two months of lockdown, there are still thought to be around 3500 new cases each day. But where are these? Who have they interacted with? Are the sufferers and all of those that they have interacted with in isolation?

It is a massive task to constantly stay on top of these questions. More so than challenges that the government have struggled to overcome, e.g. delivering adequate PPE and tests.

2020 brings depression-era economics, an ongoing and uncontrolled public health crisis, and the rupturing of around 40 trade agreements with over 70 countries. All of which will create a big hole in public finances.

If the Tories respond to this with the “medicine” of the past decade (austerity), our economic and social problems will deepen. There have been worrying signs that this may be where we are headed.

A dozen years after the global financial crisis, we still live in a world of very low interest rates. Instead of austerity, government must listen to this market signal and seize this opportunity.

2) How will the government be perceived to have performed on the economy?

While the economy recovered after our exit from the ERM, the then Tory government’s reputation for economic competence did not.

Even if today’s government were to leverage very low interest rates to drive an investment boom, their standing on economic competence may be poor if they are blamed – as was the case with the ERM – for having caused the calamity from which we are recovering.


Facebook Twitter Digg Delicious StumbleUpon

We have wasted a decade. We cannot afford to waste another

20/04/2020, 10:30:57 PM

by Jonathan Todd

We have wasted a decade.

All my son’s life, twice my daughter’s life, a quarter of my life. Lived since the last Labour prime minister – as David Talbot has recalled for Uncut – launched a general election campaign in a Labour seat in the home counties, which now has a 17,000 Tory majority.

Wasted by Labour, the UK, the world.

We are all in this together. I want to believe it now when I see it on the t-shirts of Tesco workers. I never did from David Cameron.

Fixing the roof when the sun is shining. That is what the Conservatives said Labour did not do.

The Sunday Times casts severe doubt on the extent to which Boris Johnson was on top of NHS capacity and pandemic preparedness. Sadly, this is not the only roof unfixed in our decade of austerity.

“The world is on fire, from the Amazon to California, from Australia to the Siberian Artic,” begin Christina Figueres and Tom Rivett-Carnac in their book on our climate crisis, as its impacts begin to ominously manifest. “The red wall” submerges under Tory MPs and flood waters.

As Prospect illustrate, child poverty in the UK, after falling under the last Labour government, has returned to a similar level to what it was two decades ago, when Tony Blair said it would be eliminated in 20 years.

Austerity, we were told, was the price to be paid to ease the burden on future generations. Trapped in poverty and destined to confront catastrophic climate change do not expect gratitude.

There are footballers whose transfer value rises when they are injured. What they bring to their teams becomes more apparent in their absence. Gordon Brown is that footballer in the politics of the last decade.

Brown’s defiant listing of Labour achievements at conference 2009 is now proudly replayed. It can be forgotten that the prime minister went into that conference under threat of potential challenge from David Miliband. To whom the camera cuts half-way through Brown’s listing, as if to say, who are you trying to kid?

As today’s world leaders fall short of the coordination that Brown helped to bring about in the 2008/9 financial crisis, we ask the same of them.


Facebook Twitter Digg Delicious StumbleUpon

Self-interest not the national interest is driving each party’s economic policy

31/08/2012, 07:00:13 AM

by Peter Watt

For three successive quarters our economy has contracted.  And this week there is yet another report painting a gloomy picture for the foreseeable future.  This time it’s the CBI reporting that they expect the economy to contract by 0.3% this year.  The CBI’s director general, John Cridland, said:

“At present I believe the economy is flat rather than falling but, nonetheless, momentum seems to have weakened and the latest official figures put the UK in recession for the second quarter of this year.”

And so it goes on; it’s hard to remember when the economy was doing anything else other than struggling or worse.  Behind the headline numbers jobs are under threat, family budgets are squeezed and uncertainty stalks the land.  And on top of an economic contraction we have public finances that are in a pretty dire state.  No party expects an end to the current public sector budget squeeze until 2017 at the earliest.  In fact, after the most recent government borrowing figures even that looks optimistic.  In July 2011 the chancellor had a surplus of £2.8 billion and in July 2012 he had to borrow £600 million!

Some experts are saying that he may end up borrowing £30 billion more this year than last when the OBR had been predicting a significant drop in the amount needing to be borrowed.  Not quite the progress that George intended.

So now is the time for strong and bold leadership and honesty with the public about what our increasingly dire economic position means.  And yet none of the parties seem capable of either.

Firstly the government is increasingly wrapped up in its own navel gazing and appears rudderless.  For months now it has seemed bereft of any sense of purpose other than deficit reduction.  But now that this seems to be failing the lack of a vision is telling.  You would really struggle to say exactly what the government is for and what it wants to do.  There are exceptions; you might not agree with Michael Gove or Iain Duncan Smith but you at least know what they intend to do in their departments.

But beyond that, what are the government trying to do?  They chop, change and squabble giving the impression of being all over the place.  Policy is announced and then reversed and the briefings and counter briefings are now endemic.  Who’d be a government whip right now?!

Most importantly there aren’t many government MPs left who really believe that George Osborne is the man to save the country’s economic, and their political, bacon.  David Cameron appears bemused but is caught in the contradictions of the coalition.  But the one thing that still binds the coalition is the central plank of their coalition, their stated core purpose, deficit reduction.

To challenge their hitherto agreed approach right now maybe sound economics but risks exposing the schisms within and between the parties.  It risks further damage to that which keeps them all in government – their shared parliamentary majority.

Yet that doesn’t stop the deputy PM announcing wild and ill thought emergency taxes on the rich.  He might have thought that it would make him look in tune with the concerns of those who once voted Lib Dem but everyone else just laughed!


Facebook Twitter Digg Delicious StumbleUpon

The coalition’s new clothes

11/03/2011, 04:40:38 PM

by David Seymour

One of the first rules of politics is that the big lie is the one you get away with. If you tell a little fib, bend the truth a bit, you will be savaged, mocked and denigrated, while the utterer of the breathtakingly dishonest outrage will escape unchallenged. Rather like the foolish citizens who were embarrassed to point out in the emperor’s new clothes that his majesty was actually walking around stark naked because they thought there must be something wrong with them not to be able to see his finery, no one wants to be the first to stand up and boldly proclaim that a monstrous untruth is just that.

The government’s big lie is that the cause of the historically large deficit is entirely due to Labour’s profligate spending on public services. That simply is not true, but almost no one is contradicting the Tories when they say it. And they say it all the time.

Not only ministers but backbenchers never miss an opportunity to utter the mantra that this is all Labour’s fault. How this big lie works is simple, as most big lies are. All that has to be done is to proclaim it with absolute certainty and ridicule anyone who dares to contradict. It is crucial for the big liar that serious analysis is avoided. So let’s analyse how we got this size of deficit. (more…)

Facebook Twitter Digg Delicious StumbleUpon

Beware of Osborne’s traps on the economy, says Jonathan Todd

27/09/2010, 02:00:54 PM

Ostensibly, Manchester hasn’t greatly changed since Labour conference was last here. The buildings are all in the same place. The distinctive cool and charm remains. The corned beef hash at Sam’s Chop House still does the job.

Yet the British economy suffered a recession which shrank it by 6 percent in the intervening period. This is officially more than half way to a depression and a very big deal. Labour at the general election lost the trust of the people to steer the recovery from this. We won’t return to government unless we again become recognised as the party of economic competence.

The leadership election hasn’t flushed out a fully formed economic offer. Perhaps it was unrealistic to imagine that it could. However, some consensuses emerged. We want tax to play a bigger role in deficit reduction than does the government. But this risks the perception that we are a party of high tax, which is electorally arid terrain. And, while Danny Alexander may have suggested that this won’t happen, it would create a marked contrast between ourselves and the government if they do offer tax cuts in the second half of this parliament, upon which the Tories seem likely to insist.

Another consensus to develop during the leadership contest is that we want deficit reduction to begin later, proceed less aggressively and be more sensitive to GDP growth than does the government. But this risks the view that the party which built up the deficit in government lacks a serious plan for correcting it. That we are, in other words, reckless economic vandals. This is slightly hyperbolic, but isn’t so far removed from how many voters, whose support we need to form a government, see us. Consider, as an illustration of this, that 47 percent of voters in the south of England, according to new research by You Gov and Policy Network, thought that the last government’s spending had been “largely wasted”.


Facebook Twitter Digg Delicious StumbleUpon