Bold steps needed to boost recovery

Friday 26 October 2012

Reasons to be cheerful are fewer than yesterday's GDP figures suggest.

Custom byline text:

Preliminary data for the UK economy in the third quarter shows 1% growth. If confirmed, that means not only that the UK is out of the double-dip recession but that the economy grew faster between July and September than in any quarter since 2007.

No wonder UK Government ministers were sounding cock-a-hoop. We can now expect David Cameron and George Osborne to start rehearsing the rhetoric that will take them into the next General Election: times have been tough but the economy is now back on track.However, on closer examination, the gloss quickly disappears from the figures, especially in Scotland where a string of recent economic indicators point firmly in the opposite direction.The first observation is that two factors – the Queen's Jubilee holiday and dreadful spring weather – depressed the second quarter and another – £580 million worth of Olympic and Paralympic ticket sales and the London-focused mini-boom in the hospitality sector – boosted the third quarter, distorting the scale of the apparent recovery between the two. Remove those distortions and underlying growth comes out at something like 0.3%, half of the average quarterly rate over the past 50 years. The economy is still 3% smaller than before the 2008 crash and barely bigger than when the Coalition came to power. Even out the ups and downs of the past 12 months and the economy is stagnant. In Scotland, even that is overstating the position and there could be worse to come following the Scottish Chambers of Commerce outlook survey, showing gloom right across the economy. It is important to remember that around 80% of the Coalition's cuts are still to come, further depressing demand. And, though lower inflation figures are good news, there is no sign of a let-up in the squeeze on living standards, as wages stagnate. Add to that what Will Hutton of the Work Foundation describes as the "enormous millstone" of private debt. Mr Cameron constantly talks about the supposed growth in employment but this talk is misleading. If a country's population rises, as the UK's has, the number of jobs required to service that population rises. It is the unemployment rate that matters and that remains stubbornly high, especially among women and the young. And while many of the jobs disappearing from the economy of high quality, full-time work, such as the Ford jobs in Southampton and Dagenham lost yesterday, much of the new work is temporary, low-paid and part-time. The gloomy outlook in the eurozone, the destination for half of Britain's exports, also remains a big worry.Instead of hiding behind the Londoncentric Olympics boost, the Coalition should admit that Mervyn King is right to predict a "zig-zag" path to recovery. Then it should take some bold steps to stimulate the economy. National Insurance holidays for thousands of small firms taking on new staff? A temporary cut in VAT? Reversing radical reductions in infrastructure budgets? Doing nothing is the only option that should not be on the table.

Contextual targeting label:

Finance

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis. If you're a relatively new user then your comments will be reviewed before publication and if we know you well then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules, which are available here.

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.

Bold steps needed to boost recovery

Commenting & Moderation

MOST READ

SPONSORED LINKS

MOST COMMENTED