The quarterly GDP figures tell us little we don’t already know. December GDP is down by 0.3% on the previous (albeit Olympic-boosted) quarter. The UK economy is in the doldrums, more so than those of Germany and the US, though less than the eurozone’s.
And, if further confirmation were needed, today’s figures come hot on the heels of the December borrowing figures of £15.4bn, which mean UK borrowing may exceed the limit set for this year (£108bn) with December’s borrowing up on the same month last year.
The figures matter only in one sense: politically. Critics will use them to demand a slowdown on deficit reduction and a more fiscally lax approach. Indeed, they have already done so. But they are wrong. More time is needed to reboot an economy which lost its way, by fuelling unsustainable sectors with unsustainable public and private spending, at a time of historically low interest rates and low inflation. The chancellor intends, as he told his Davos audience yesterday, to hold firm. It would be even better if he aimed at lower levels of public spending and tax along with making the structural reforms which have brought crisis economies rapidly back to growth.
*Dr Sheila Lawlor is the Director of Politeia
Read the full post on The Guardian website here.