by Ian Vallely
I believe that everyone is entitled to my opinion!
It's the economy, stupid
The announcement at the end of April of a second quarter of economic shrinkage made it official - Britain is back in recession. Even before this bad (if not entirely unexpected) news, the big economic picture already looked pretty gloomy. We are making a slow comeback from a deep slump, the slowest and deepest since the 1930s.
Economist Vicky Pryce, a former senior government adviser, said recently: "We are still about 4 per cent below the levels we were before the recession hit us... but we are not the only country that's suffering and that is the real problem for the UK economy.
"We depend a great deal on what goes on in Europe. European forecasts have been revised downwards constantly - the latest IMF forecast is for a decline of 0.3 per cent over 2012 and a very minor recovery in 2013. So the environment is not very conducive to us achieving fast growth in the coming months or years and that must be worrying the Chancellor."
Not just the Chancellor. Notwithstanding behaviour verging on the criminal from the banking sector in the years leading up to the recession's beginning in 2008, we started from a difficult place because both consumers and the Government over-borrowed before the crisis hit. Now, both are trying to retrench at the same time and that makes the situation tougher than it would otherwise be.
There are bright spots, at least according to DeAnne Julius, former Bank of England Monetary Policy Committee member and chairman of the foreign affairs think tank Chatham House: "There seems to be a lot more optimism in the industrial sector... Unemployment fell for the first time in a year in the last set of data. Employment is growing, with more jobs added in the private sector than lost in the public sector and retail sales had a reasonably good month in March. So, there is some evidence that consumers are returning to the shops and that boardrooms are getting a little more optimistic about investment. We could be at a turnaround point."
However, any recovery is likely to be sluggish, not least because the UK entered this downturn in worse shape than many of our competitors (for example, our budget deficit in 2009 was 11 per cent of GDP whereas Germany went in with a 3 per cent deficit after two years of surplus).
We spent our way into this hole and we are deeper in it than many others. The only way to recover is to spend our way out with serious Government capital investment in construction to create jobs and encourage consumer spending.
Even a year and a half into a savage deficit reduction programme, the Government is still borrowing 23 per cent of what it's spending.
Deficit reduction clearly isn't working. That's why I believe the only way out of the current crisis is to spend even more.
It's time to get on as sustainable a footing economically as we are attempting to achieve environmentally. And that means providing a big stimulus to our moribund economy by taking the counter-intuitive step of investing money we don't presently have by borrowing additional cash.