Why are we so fucked?
Well? Why are we? The last developed economy out of recession, and that with an anaemic dead-cat growth rate of 0.1%. The odds must surely be pretty good that we’ll tip straight back into negative growth in Q1 2010. The paltry growth rate clearly came as a hell of a shock – to economists, to journalists and most of all to the Government. Liam Byrne effectively admitted that the Government had front-loaded a substantial amount of public spending – ‘to avoid the VAT increase’ – and had clearly hoped that this, plus the annual Christmas boost, would have been enough to give a reasonably healthy 0.5-1% quarterly growth rate.
It hasn’t worked out that way. I’m not an economist, which seems frankly not to be much of a handicap given how far off so many of them are on forecasts at the moment, but I do have a thought as to why Britain is so stubbornly resisting a return to growth. Uncertainty. The Government has pursued an Augustinian policy of advocating a return to sound money and fiscal discipline – but not yet. Not until after the election at any rate. The election that they, and everybody else, knows that they will lose. For everyone else, then the situation is getting worse by the day, as public debt increases inexorably, but there is no real indication of what will be done to remedy it.
The only options are tax rises and spending cuts. And everyone knows that these are coming (even Peter Mandelson admitted as much in his pantomime dame performance on Channel 4 last night). The problem is that no-one knows when they are coming, or how bad they will be. In the circumstances, it’s not unreasonable for people to keep a tighter hold on the purse strings and try to put money away for the hard times ahead – especially when you consider that unemployment is always a lagging indicator, and job uncertainty is pretty strong.
So, it’s all Labour’s fault then, thank goodness for that.
It isn’t of course, there would be precisely this sort of uncertainty coming up to an election regardless of how forthcoming the parties were about their spending policies. But Labour’s current extreme reluctance to admit that things will have to change (a reluctance borne out of the fight between Brown/Balls and Darling/Mandelson over that old cuts/investment dividing line) has made matters worse.
All doom and gloom then, but there is a possible positive side to all this. Anticipation usually makes things even worse than they really are. After the election, and provided the Tories get the sort of majority I expect them to, the uncertainties will to a large extent be removed. And when we know the state we’re in, we are more likely to make the best of things. Fear really is the thing we are most frightened of.