Economists and politicians continue to argue about whether Britain is facing a double-dip recession or a “jobless recovery”.
Chancellor George Osborne hailed the latest gross domestic product growth figure of 0.8 per cent for July to September – twice the widely suggested worst-case prediction of 0.4 per cent – as proof that the British economy is well on the way to recovery even if “the global situation remains choppy”.
He said Britain’s “triple A” credit rating had been “restored” by the ratings agencies, even though economists said it had never really been in doubt – except in election campaign rhetoric by Mr Osborne himself.
Nobel Prize-winning economist Christopher Pissarides, an expert on the jobs market, said Mr Osborne’s plan to take £81 billion out of the economy would send the jobless total soaring.
Professor Pissarides said George Osborne and David Cameron were “exaggerating” Britain’s indebtedness by comparing it to Greece and misleading voters.
Fellow prize-winning economists Paul Krugman and Joseph Stiglitz criticised Mr Osborne’s assault on jobs as a gamble with no real upside. They also expressed puzzlement at his deference to the same credit rating agencies whose own failures contributed so much to the 2008 banking collapse.
Professor Krugman said of the planned cuts: “The British Government’s plan goes in exactly the wrong direction. It would cut Government employment by 490,000 workers at a time when the private sector is in no position to provide alternative employment.
“It would slash spending at a time when private demand isn’t at all ready to take up the slack.”
His concerns were echoed by Labour leader Ed Miliband, who told the CBI that the Government has no “credible” plan to replace the 490,000 jobs that it is planning to cut.
He said that the Government’s rapid deficit reduction is “a big gamble with growth and jobs”.
Mr Miliband added: ”Even more importantly, it doesn’t address the deeper risks and flaws in our economy. To think that deficit reduction is the only answer for our economy is actually to be quite
pessimistic about what our economy can achieve.”
Labour also sought to pour cold water on the Chancellor’s claim that the latest growth figures showed the British economy is recovering. It said 0.8 per cent growth was just a fraction of the earlier spring surge of 1.2 per cent and showed the economy is, in fact, losing momentum even before job losses and VAT hikes hit households.
