Am I the only one who thinks 0.2% is fancifully optimistic?

In the first two quarters GDP shrunk by a total of 0.7%.

To reach 0.2% up by the year’s end – we thus need 0.9% growth over two quarters.

That’s an annualised rate of 1.8% gdp growth.

The last time the UK managed that over two quarters was… the two quarters immediately before we elected this government.

A debt downgrade must be imminent.

Then this appalling chancellor’s career will deservedly be over.

Osborne and austerity were never going to work and many fanatical
Tories are looking for much more swinging cuts. To suggest they are misguided is kind, to state they are mad is accurate.

Inevitably there will be speculators taking a position on the UKs failure so that they can make billions and these will be friends of Osborne lauded by the right who blindly believe in the forces of the free market economy.

And whilst our economy is burning the inept Clegg is fiddling with the House of Lords – he and the LibDems should never be forgiven for their crass support for the biggest failure of a Government anyone can remember.

Again Sunny isn’t being quite honest here. IMF has downgraded global growth, not just UK growth, and they’ve downgraded some countries several times, so the cumulative odwngrade in those places has been worse than the UK.

You might also – just for full disclosure of course – give the IMF’s reasons for downgrading UK grwoth forecasts.

@Tyler

What will it take for you to admit your economics is spectacularly, damagingly wrong?

BenM

Nothing – some people are so utterly blinkered that evidence isn’t really useful to them.

And again I ask – why is the IMF so outlandishly optimistic about the UK still? 1.8% annualed growth over the next two quarters seems a ludicrous prediction.

And that’s what they have downgraded to.

“And again I ask – why is the IMF so outlandishly optimistic about the UK still?”

Because their models are as rubbish as their economics.

Historians will consider the last two years as up there rivaling the great economic policy mistakes in British history. There is no getting away from the fact that the economic policy of the coalition has achieved precisely zero. A complete waste of two years. If they had done absolutely nothing from May 2010, our deficit would be at the least the same and probably lower. That is the bizarre level of their failure.

If we ignore the partisan bickering and just consider where we would have been in the absence of additional policy by the coalition. The deficit is where it was forecast to be without additional policy action. Moreover, this is the level of deficit that the coalition said was too high and needed additional policy action. They did not dispute that is where we would be because that was the OBR forecast, they just said it was not enough of a reduction.

It is even fair to assume that if they had done nothing the deficit would be lower than what they have actually achieved. Their early ridiculous hyperbole of apocalypse just around the corner unless we act collapsed confidence in the household and corporate sector. That killed investment and growth and the private sector took a lead from government that if the government was going to slash investment so would they cut investment. In the absence of killing growth the deficit would have been lower, so doing nothing would have been an improvement.

The fiscal consolidation with front-loaded tax rises and back-loaded spending cuts was the exact opposite of what was required. The economy was too weak to cope with the tax rises and they should have been back-loaded. The only real spending cuts that they have achieved is through cutting capital investment. They are not to blame for every problem in the economy and the BoE must shoulder considerable blame for the lack of growth. However, Mr Osborne will go down in history as one of the most useless and ineffectual chancellors in British history, that actually is quite an achievement.

“Their early ridiculous hyperbole of apocalypse just around the corner unless we act collapsed confidence in the household and corporate sector. ”

This is a very important point. It is as much the way they went about announcing the deficit reduction that collapsed confidence as it is the actual cuts. They seemed to take delight in the idea of making public sector workers redundant and in slashing the benefits of people, and it was these 2 actions that frightened people and destroyed confidence.

They could have handled it differently. They could have announced they intended to reduce the deficit but would try to avoid redundancies (whilst accepting the inevitable) and work with the workforce to identify savings and make the redundancies voluntary. They could have announced that they intended to reform welfare to simplify the system and create better incentives, but that they would work with charities to ensure that people didn’t lose out in the transition. And they could have announced that whilst they would be looking for ways to deliver services cheaper, they accepted the need for public services and the contribution these made to the economy.

But instead osbourne and IDS decided it was more important to show core activists he had a big penis, and that tax cuts prior to the next election were the priority.

Richard W

Actually – the last two years in the UK is probably pretty good proof of the physocological aspect to generating GDP Growth.

There has always been a view that government should talk the economy up rather than down. This is because it supports a sense of recovery and confidence – rather than doom and gloom.

With the economy growing at a good rate in 2012 – the opposition came into power (oppositions talk economies down, governments talk economies up) and carried on talking the economy down. This at least correlates with a transition from good rates of growth in the first half of 2010 to stagnation in the second half of 2010. And it is worth noting – this was not a global or european issue. It was a UK issue. Germany and the USA, for example, carried on growing well beyond Q2 of 2010, having seen almost identical paterns of contraction and recovery up until that point.

It seems, therefore, that along with the announcement that government would cut GDP (by cutting spending) that the public were unconvinced that the private sector (which caused the recession) would fill the gap – and so understandably hedged against further economic malaise – reducing their spending and holding on to their savings – bringing about a downturn well before the government actually cut any spending.

It seems to me that students will in future see this last two years as a brilliant case study of how to talk an economy into recession.

(and for tories out there – yes there is a deficit – yes it existed before May 2010 – and yes Greece is broken – none of which has any baring on why the UK suddenly fell back into recession while other countries with large deficits didn’t.)

“There has always been a view that government should talk the economy up rather than down. This is because it supports a sense of recovery and confidence – rather than doom and gloom. ”

Unless what you are intending to do is unleash the biggest set of neo-liberal reforms to public services that can only be achieved if the public are shocked and frightened into seeing them as unavoidable. Naomi Klien wrote the guidebook on how to do this, although I suspect she intended a different outcome.

Well unemployment is down today and they are unleashing growth policies so I guess the Tories are turning a corner.

Planeshift

it’s a great book – and I have often pointed out the shock doctrine parallels in the attitude taken by this government. Of course, whether any of their policies are right or wrong is a slightly different matter to the method they have used to sell them.

Steve

The Olympics has just taken on untold numbers of temporary staff – so if unemployment were not down we’d really be in trouble. And in regards to the growth policies – a relatively small ammount of money for the railways in several years time – and a big announcement on guarantees that may not actually be needed (a big part of the problem isn’t raising initial capital for infrastructure, it is how it gets paid back by government – hence the rows about PFI and the confusion with the pension investment platform) suggests only that they have realised they need to be seen to be a bit more keynsian.

It does not mean they’ve actually seen the light and become more keynsian.