The GDP figures for Qtr.1 2o11 tell us what we need to know on the vexed and central economic and political dilemma of how to cut the public deficit and grow our way to economic success. No economic growth for six months is bad news. I have commented in previous posts on the optimism of OBR forecasts and that they are consistently behind the curve – and wrong. They were wrong in their belief that the last quarter 2010 figures would be adjusted upwards and that this current quarter would come in at 0.8 percent growth, They are surely wrong in their forecast for 2011.
Does it matter? Yes, it does. Lower growth means higher unemployment and public debt and lowers confidence. If the Coalition intention remains ‘fixed as the Northern star’ another round of expenditure cuts, higher taxes and a spiral downward to economic defeat and long term recession is on the cards.
To echo Lenin, what do we do now? Something revolutionary? To enter into the spirit of things, bring the Coalition to a halt. In eight days time throughout Britain the electorate have an opportunity to inflict a mortal wound by voting against the Coalition parties, and then there is the time honoured tradition of a motion of no confidence in the Commons (Dream on the Constitution has been fixed. It’s not so simple as you might think). Alas the times may be revolutionary but we are not. ‘No Bolsheviks’ here is the sign outside the House of Commons. We are all Mensheviks now Well we might start by winning the argument. When Ed Balls advanced the proposition that even the Labour objective of halving the deficit in four years might not be achievable without economic depression he was widely derided. What we have seen is that the squeeze on expenditure started by Labour and intensified by the Coalition has already had a dramatic effect on the British economy. The Coalition tax increases and cuts have only just started. It is asking a lot of business and consumers to reverse that trend when personal incomes are squeezed and small and medium companies denied loan capital.
It may not be in Labour’s power to change things for the better BUT the much derided and humiliated Lib Dems could do it if they had the will. It is difficult to determine how long the tragedy needs to unroll before they pluck up the courage to say with one (or almost one) voice that enough is enough. I hate to write this but history does help. Look at what happened to the Mensheviks and subsequently to a whole country and a substantial chunk of the European map? If you think that I exagerate you may change your mind as events unfold. I will not write, I told you so.