Monday, 23 July 2012

U-turn required

Three reports in the last few days have only sought to confirm that the government’s economic strategy is simply not working.

The International Monetary Fund, in its annual report, says that the government’s tax rises and spending cuts have cut economic growth by 2.5% and that the current economic policies risk causing permanent damage to the UK economy. Britain is one of only two of the G20 countries in a double-dip recession and with long-term employment rising.

Then, the IMF’s critique was confirmed, when it was revealed the following day, that UK government borrowing increased by £500 million in June compared to just 12 months ago. David Cameron keeps saying that his priority is to reduce UK government debt, but his policies are meaning that it keeps rising, month in month out.

With the double-dip recession and rising long-term unemployment leading to a bigger benefits bill, the Government has now borrowed £4.5 billion more in the year so far than in the same period last year. This is a rise of 11.7 per cent, compared to the 4.6 per cent fall predicted at the time of the Budget. And this borrowing of £42.9 billion is the highest amount ever recorded in the first three months of any financial year.

This all comes on top of the extra £150 billion the Government has already admitted it will have to borrow to pay for the costs of high unemployment and slow growth. Trying to raise taxes and cut spending too far and too fast has badly backfired and the Government’s pledge to balance the books by 2015 is now in tatters.
These reports were followed by the employment figures. Although the UK headline figures showed employment up and unemployment down – although this wasn’t the case in Yorkshire and Humberside where unemployment rose again – long-term unemployment is continuing to rise significantly. Older women are being hit the hardest, with a 41% increase in the last year alone.

This year, George Osborn has already made more u-turns than a car thief desperately trying to shake off the traffic cops. Unfortunately, he still shows no sign of making a u-trun on the change that really matters.

Unless he takes urgent action to boost the economy with a plan for boosting jobs and growth, he will end up borrowing billions more to pay for economic failure and cause long-term damage too.