It was all too predictable that the Governor of the Bank of England would once again be forced to revise his forecast for economic growth downwards.
A year ago Sir Mervyn King predicted a 2% increase in GDP; three months ago that was reduced to 0.8%; yesterday he foresaw no growth for 2012. The conundrum is where, despite the UK now mired in the longest double-dip recession since records began, he has found the evidence for his claim that the economy is healing.
The welcome increase in the employment rate, for example, must be treated with extreme caution. Before being hailed as a positive indicator it should be remembered that it includes increasing numbers of people in part-time or temporary posts who cannot find full-time work.
Further evidence of this was provided by a survey yesterday showing the number of people placed in permanent jobs has fallen for the second month in a row. The UK Government's hopes of a boost from the Olympics will depend largely on ticket sales and television rights. Most of the jobs created by the Games will disappear once the Paralympics are over and the retail figures available so far show little boost from London 2012 as additional spending by visitors is cancelled out by people avoiding central London.
What is to be done? George Osborne's gamble that the private sector would generate jobs to more than replace those lost in the public sector has proved not just over-optimistic but based on a flawed premise. Cutting corporation tax has yet to prove an engine of growth as the eurozone crisis hits exports and reduces consumer demand in every area of the economy from house building to retail sales.
This is not only the direct consequence of job losses. Benefits cuts to reduce Government spending have also had a significant impact on retail spending. It is clear from the growth of charity-run food banks that when benefits are cut so is spending on basic items, while those in work have curtailed their discretionary spending and record low interest rates, with a further 0.25% cut possible, has made savers equally nervous.
With the UK economy 0.3% smaller than when the Coalition came to power in 2010, the Chancellor has been forced to apply jump leads. His £80 billion Funding for Lending scheme will ease the cost of borrowing for banks but could reduce the cost of borrowing rather than increase the credit flow to more businesses and home buyers.
The Government should use its ability to borrow cheaply to provide the direct stimulus of moving ahead with planned infrastructure projects to provide jobs, apprenticeships and a demand for materials as well as the benefits of new schools, roads or railways.
Last month the International Monetary Fund gave a stark warning that the Government should ease its austerity measures if recovery remained stalled. Unless Mr Osborne's boast of applying "110% attention and effort and energy to getting the economy moving" results in acting on that warning he can justly be accused not only of arithmetical nonsense but of sacrificing the economy to empty rhetoric.
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