The economy is worse than the weather

by Caroline Colebrook

BRITAIN’s economic prospects are grim and getting worse more quickly than any other major advanced economy, according to the latest forecast from the International Monetary Fund.

Last Monday the IMF reduced its global economic growth forecast for 2012 to 3.5 per cent, which is slightly lower than the forecast given in April. But the forecast for Britain has been cut to 0.2 per cent, just a quarter of the 0.8 per cent forecast in April.

Chancellor George Osborne rejected IMF advice for a temporary cut in VAT but the Bank of England did agree further monetary easing.

On Tuesday the Government announced that it would underwrite a further £50 billion in credit for major infrastructure projects.

This is not the same as the Government spending its own money on rebuilding Britain’s crumbling roads, schools and so on — or bailing out bankrupt NHS trusts.

It means that the banks will be able to lend money for such projects without having to fear they will be out of pockets if the lenders have problems paying back the loans. Whether the banks decide to go ahead and do this is another matter.

But it does mean that the major plan for school building renewal prepared in great detail by the Brown Labour government in 2010 and then scrapped as soon as the Con-Dem Coalition came to power might be resurrected.

It also implies that if the plans had not been thrown out so hastily the economy might be stronger now than it is.

TUC general secretary Brendan Barber said: “For the IMF to slash its growth forecast for the UK by more than any other advanced economy is a damning indictment of the government's economic strategy.

“Last summer the IMF predicted economic growth of 2.3 per cent this year. Since then the UK has experienced its first double-dip recession in 40 years and the economy is now not set to recover for at least another year.”

The IMF report followed a similar bleak forecast from the Government’s Office of Budget Responsibility (OBR), which said that Britain’s long-term fiscal policy is “unsustainable”.

This largely boils down to yet another warning that pensioners are going to bankrupt the country by living too long. This of course is nonsense. As technology is constantly improving the rate at which fewer and fewer workers can generate more and more wealth the problem is not that there is not enough to go round but that it is not fairly distributed.

In other words the filthy rich are not paying enough tax on all this wealth the workers are generating for them.

Brendan Barber said the OBR's predicted deficit could be met with higher productivity and "progressive" taxes. He also pointed out that the report is based on forecasts that can be "highly uncertain”.

“Who could have predicted our current economic mess back in 1962? While the UK economy will face real challenges over the years ahead, the OBR’s analysis also shows that higher productivity, higher employment rates and progressive taxation could allow us to meet them.

“We know that austerity is already failing, with falling taxes and rising social security costs leaving the Government’s borrowing targets in tatters. The last thing our economy needs is years more of the same failing medicine.”