[update] UK economy grows in Q1 2011

[Chrysalis]

I dont know anyone confident around here.

planned large cuts to public sector which employs 40% of working population.
planned clampdown on benefits with a large amount of people unemployed.
vat rise.

From the BBC Stephanomics blog

More interestingly, perhaps, they say we should be encouraged by what's been happening to the the claimant count, and to tax receipts. According to the Treasury, each of those has provided useful early warning, in the past, that something was going seriously wrong with the economy.

The claimant count actually fell very slightly in December, and tax receipts throughout the quarter came in almost exactly in line with the official forecasts - which, in turn, were based on the OBR's forecast of modest growth. That is not something you often observe in a shrinking economy.

There's been some support for this assessment from independent commentators - though remember they are the ones trying to explain why their forecasts were so wrong.

This is what Nida Ali, economic adviser to the Ernst & Young ITEM Club, had to say about today's public finance figures:

"Tax receipts seem to be growing nicely and it's interesting to see that VAT receipts were up almost 9% on last December. Though part of this reflects the higher VAT rate (17.5% against 15%), it also suggests greater consumer activity in December than other sources have reported."

[danielf]

Originally Posted by Hugh

From the BBC Stephanomics blog [/INDENT]

"Tax receipts seem to be growing nicely and it's interesting to see that VAT receipts were up almost 9% on last December. Though part of this reflects the higher VAT rate (17.5% against 15%), it also suggests greater consumer activity in December than other sources have reported."

Surely a VAT rise from 15% to 17.5% should result in an increase of VAT receipts of ~16.5% given equal consumer activity? The fact that it's up by only 9% suggests consumer activity is down.

[Ignitionnet]

Originally Posted by Chrysalis

I dont know anyone confident around here.

planned large cuts to public sector which employs 40% of working population.
planned clampdown on benefits with a large amount of people unemployed.
vat rise.

If the public sector employs 40% of the working population and there are large numbers of unemployed despite the state employing 4 in 10 your area was frankly in deep excrement before any of this and confidence was probably not exactly in plentiful supply anyway.

That your area came to depend on the state so heavily is disgusting but sadly not atypical.

[dazzer89]

Originally Posted by Ignitionnet

The above party political broadcast was brought to you by the Labour party, via Flyboy.

So when you're done with that Flyboy how about we discuss all the other economic metrics which make it seem pretty likely that this figure will be revised for the better, or that economies doing a zig-zag is very common when coming out of recession?

You know little things like graduate vacancies going up, business confidence improving, manufacturing improving, etc, etc.

I do agree with you that the ConDems have it wrong though, they are listening too much to the Dems and not following the Cons enough and this was most certainly not predicted beyond by the usual suspects in the Labour party who think the public sector is the economy, not really relevant to this anyway as noted as public spending in the quarter in question was enormous.

So the ConDems took over and growth figures have gone 1.1%, 0.7% and now -0.5% - seems like they have it all under control.

At least the first quarter figuers of a new year usually see positive growth...oh hold on the VAT rise, fuel rise and redundancy notices landing on people's door mats will hit those figures. Welcome to the double dip.

Presumambly the snow that they are blaming was that pesky socialist stuff as well was it?

[Lord Nikon]

Thing is, who would be better? The way I see it they are all as bad.
Labour has the 'spend spend spend' attitude, including when out of money.
The current coalition has to try to make the money back but seems to fail to grasp that the current way will only cost them more in the long run.
The other options are just as bad
The public votes for labour because the nasty tories hiked taxes, then for tories because labour pretty much bankrupted the country.

Who do we turn to for improvement? I can't see a single current party that's not part of the problem.

[dazzer89]

Originally Posted by Chrysalis

I dont know anyone confident around here.

planned large cuts to public sector which employs 40% of working population.
planned clampdown on benefits with a large amount of people unemployed.
vat rise.

Hi Chrysalis, look around the world. Look at the deficits that many countries have got. It wasn't just that too much spending was done here, it wasn't really that too much spending was done at all, it was just that public spending is a pretty normal thing to do. Government borrowing is a very normal thing to do.

It is just that the system suffered a big, global crash. Which then required further public spending to prevent an outright collapse. To uphold the system. Hence the current level of the debt. But it was necessary to prevent collapse.

Public spending, in times of recession, keeps the economy from contracting in on itself. If you are a private company and economy starts to contract, then you stop spending. So companies stop doing business with each other. So then they lay off staff, because their business is down.

The private sector will turn in on itself and will make the problem even worse - fact is, it doesn't matter whether you are a socialist or a market fundamentalist - the private sector needs the public sector in order to provide a steady stream of cash flow and to smooth out the peaks and troughs of the economy.

Ideological fundamentalism will not solve the problem. But that is what we have in government - ideological market fundamentalists, so expect it to go pop.


Putting some money through the public sector ensures that people in the public sector keep their jobs. It also ensures that private sector companies can ride out a recession a little more easily, because they keep or win new contracts with the public sector, which is still spending Government money.

Cut the money and you pull the plug on the economy.


That's what the Tories have done, so that they could implement their ideological policies. Not required ones. We don't need to privatise the NHS, or the Post Office (which makes a profit for the country).

No. The wisest course of action is to keep spending through these bodies so that the private sector keeps ticking over.


But instead this government will continue with the opposite course of action.

Sorry for the rant but some posters on here are way off beam.

---------- Post added at 08:30 ---------- Previous post was at 08:28 ----------

Originally Posted by Lord Nikon

Thing is, who would be better? The way I see it they are all as bad.
Labour has the 'spend spend spend' attitude, including when out of money.
The current coalition has to try to make the money back but seems to fail to grasp that the current way will only cost them more in the long run.
The other options are just as bad
The public votes for labour because the nasty tories hiked taxes, then for tories because labour pretty much bankrupted the country.

Who do we turn to for improvement? I can't see a single current party that's not part of the problem.

Strange how Labour had the spend spend spend attitude, you seem to forget the Tories backed Labours spending plans.

[Ignitionnet]

Originally Posted by dazzer89

So the ConDems took over and growth figures have gone 1.1%, 0.7% and now -0.5% - seems like they have it all under control.

At least the first quarter figuers of a new year usually see positive growth...oh hold on the VAT rise, fuel rise and redundancy notices landing on people's door mats will hit those figures. Welcome to the double dip.

Presumambly the snow that they are blaming was that pesky socialist stuff as well was it?

Nice rant. Some kind of evidence that it related to ConDem policy would be good though.

Growth during recessions zigzags historically, it happens, my main concern about ConDem policy is that it isn't doing enough to encourage growth. The level of public spending cuts they are instituting I consider to be barely adequate.

---------- Post added at 09:28 ---------- Previous post was at 09:03 ----------

Originally Posted by dazzer89

Hi Chrysalis, look around the world. Look at the deficits that many countries have got. It wasn't just that too much spending was done here, it wasn't really that too much spending was done at all, it was just that public spending is a pretty normal thing to do. Government borrowing is a very normal thing to do.

Our deficit is the second highest in the EU27 behind Ireland, borrowing nearly 12% of your entire economic output is not a very normal thing to do.

I am astounded that you don't think too much spending was done. I haven't seen anyone, short of people on the extremes, who don't think Labour overspent during their period in government. They increased tax take substantially and ran deficits during a boom. We had the strongest economy in the G7 in 2002, by the time we entered the financial crisis we had gone from being in some of the best shape to weather the storm to worst, due to the structural problems Labour introduced.

Originally Posted by dazzer89

It is just that the system suffered a big, global crash. Which then required further public spending to prevent an outright collapse. To uphold the system. Hence the current level of the debt. But it was necessary to prevent collapse.

Deficit spending during 'boom' parts of the economic cycle is not a normal thing to do. Deficit spending during the 'bust' part is, which is why economies are supposed to pay down debt while the going is good. The UK rolled into the 'global crash' in some of the worst condition of any nation in the OECD, which is why we ran the highest deficit, bar Greece, and have now overtaken them.

Originally Posted by dazzer89

Public spending, in times of recession, keeps the economy from contracting in on itself. If you are a private company and economy starts to contract, then you stop spending. So companies stop doing business with each other. So then they lay off staff, because their business is down.

Depends whose train of thought you follow, some might say that reducing taxation would be a better course of action. You know, keeping the money in people's pockets in the first place rather than taking it out and putting it back.

Originally Posted by dazzer89

The private sector will turn in on itself and will make the problem even worse - fact is, it doesn't matter whether you are a socialist or a market fundamentalist - the private sector needs the public sector in order to provide a steady stream of cash flow and to smooth out the peaks and troughs of the economy.

The private sector expands and contracts. Interesting you talk about smoothing the peaks of the economy. In what way was running deficits during the good times smoothing anything?

Originally Posted by dazzer89

Ideological fundamentalism will not solve the problem. But that is what we have in government - ideological market fundamentalists, so expect it to go pop.

The cuts being instituted are nothing more than a correction back to the already frankly unacceptable trend. They feel severe due to the extent of the previous overspending.

No need to take my word on it of course.

[img]Download Failed (1)[/img]

The second lesson is that, even by post-war standards, the increase in public spending from 1999-2000 until 2009-10 was exceptional. Spending rose by 53% in real terms over this period. In effect, the coalition is "only" planning to unwind half of that increase, to take the growth in spending back to its long-term trend. But that doesn't mean it will be easy.

Originally Posted by dazzer89

Putting some money through the public sector ensures that people in the public sector keep their jobs. It also ensures that private sector companies can ride out a recession a little more easily, because they keep or win new contracts with the public sector, which is still spending Government money.

Constantly expanding the public sector crowds out the private one and the taxation required to support this expansion stifles growth, or clocks up debt which then has to be repaid or inflated away. The previous growth was largely an illusion anyway.

Originally Posted by dazzer89

Cut the money and you pull the plug on the economy.

Keep spending you saddle the economy with even larger debts which require increases in taxation to be supported and reduce funds available for future investment.

Originally Posted by dazzer89

That's what the Tories have done, so that they could implement their ideological policies. Not required ones. We don't need to privatise the NHS, or the Post Office (which makes a profit for the country).

The Post Office has veered between profit and loss, it requires substantial investment and has a huge unfunded pensions liability, it's not that simple. The NHS is not being privatised, such a statement is ideological.

Originally Posted by dazzer89

No. The wisest course of action is to keep spending through these bodies so that the private sector keeps ticking over.

Most mainstream economists vehemently disagree. The money markets disagree. The business community disagrees.

Originally Posted by dazzer89

But instead this government will continue with the opposite course of action.

Sorry for the rant but some posters on here are way off beam.

The rant is fine, but disagreeing with the suggestion that the country should borrow its way out of debt isn't being 'way off beam'. It's not even like they could claim following Keynesian economics, they threw that down the toilet when they ran deficits when they economy was expanding.

Originally Posted by dazzer89

Strange how Labour had the spend spend spend attitude, you seem to forget the Tories backed Labours spending plans.

Interesting how you call the Tories ideological in their desire to cut the public sector then note that they backed high spending, and that you ignore that some elements of Labour were nervous over deficit spending some 4+ years ago, which was ignored by mssrs Brown and Balls.

This government isn't Tory, it's Tory-Lite, nowhere near strong enough on the Tory side and nicely watered down enough obsessing over fairness to take the decisions that promote growth.

This government is just like the old one in many ways, slimy, say anything to stay in power, try and appeal to everyone. Just a slightly bluer shade of grey.

[dazzer89]

Take a look here.

http://blogs.channel4.com/factcheck/fac ... ne-it/5559


The claim

“They are clearly disappointing figures but the statisticians tell us that the weather had a huge effect – we had the coldest December for 100 years, businesses were closed, people couldn’t get to work… So we’re not going to be blown off course by the bad weather.�

George Osborne, Chancellor of the Exchequer, 25 January 2011

Cathy Newman checks it out

David Cameron told us before Christmas that the economy was out of the danger zone.

Not any more it ain’t. We now know the economy shrank by 0.5 per cent at the end of last year – hardly the recovery the prime minister cheerily predicted in December.

Ed Balls pounced on the figures as evidence that Britain’s emergence from recession has come to a juddering halt. He urged theTories to come up with a plan B, and fast.

But the Chancellor blamed the figures on little more than a spot of bad weather. The wrong kind of snow, or at least too much of it.

The weather was indeed pretty extraordinary. But can meteorology explain away all our economic troubles?

The background

George Osborne was right about one thing: it was damn cold in December. The Met Office told FactCheck the average temperature in the UK that month was -1C, and that trumps the previous record of 0.1C in December 1981.

But we all knew it was cold, so why did the figures come as such a surprise and how much of a difference did it really make?

The Federation of Small Businesses (FSB) did a snap poll this month and found that the weather did hurt small businesses: 30 per cent said half their staff took at least one day off work, and 24 per cent said they had to close for up to five days.

But the FSB found that businesses were far more worried about the economic impact of the rising taxes. 39 per cent of small businesses said the hike in fuel duty will have a ‘significant impact’ in them; 27 per cent thought VAT would do they same. That compares to 24 per cent who said snow had had a similar impact.

And the Office for National Statistics seemed to echo that – saying today while GDP was “clearly affected� by the weather in December, if you strip out its impact “GDP would be showing a flattish picture rather than declining by 0.5 per cent�.

Beyond businesses closing and people not being able to get to work, you might expect the retail sector to take a hit during the snow.

But in fact retail sales (which account for 5.4 per cent of Britain’s GDP) actually increased by 1.5 per cent in December 2010 – although much less than the 6 per cent increase in December 2009.

The British Retail Consortium said that big ticket buys were hit largely by concerns about inflation, and fears over jobs and income.

One of the sectors worst affected was services, which suffered a 0.5 per cent drop. Not good news, as the service sector accounts for 74 per cent of the economy. There was also a collapse in construction, with a contraction of 3.3 per cent.

So, the weather is by no means the whole story.

It’s also worth pointing out that these stats are just preliminary estimates, so the ONS hasn’t really been able to measure the impact of the snow.

It’s only had 40 per cent of data from the last 3 months – and most of that is from the earlier months of October and November. The rest is an estimate.

Cathy Newman’s verdict

It seems the Chancellor’s claim – repeated ad infinitum in interviews today (16 times in one interview) - that the snow shrank the economy should be taken with a pinch of salt (if indeed there’s any left after the big freeze).

While there’s little doubt the weather was the last thing Britain plc needed, clear skies wouldn’t have given us the economic rebound we were promised by the prime minister.

That’s allowed Labour to forecast a gathering storm – namely that the austerity measures are stifling the recovery.

If the opposition is right and the government’s wrong, watch out for the chancellor blaming leaves on the line for derailing the British economy.

[Chrysalis]

ignition that is the one single biggest thing you say that makes me baffled, cuts = growth?

I would say keeping people employed is more important than a deficit, there I said it. I suspect some others agree with me but its not a popular thing to say out loud. The government will keep ticking over, its not going to send the world crumbling down around us, those working can support more tax if required, I am a firm believer of the broadest backs should take the biggest part of the burden. I dont like people been taxed just for the sake of it, but I think taxes should go UP during recessions and down during booms. But not down too far of course. Money cycling is key to any economy. People saving up in savings does not = growth.

The manufacturing the shining part of osborne's figures, yet manufacturing took a battering from the last tory government and is now a show of its former self. One reason my city is so dependant on the public sector is that it used to be a major hosiery employer but thats now mostly all gone offshore in typical capitalism drive for profits.

These financial experts arent very good are they, I predicted a double dip and I am not on some 100k a year for been an expert.

[dazzer89]

Originally Posted by Chrysalis

ignition that is the one single biggest thing you say that makes me baffled, cuts = growth?

I would say keeping people employed is more important than a deficit, there I said it. I suspect some others agree with me but its not a popular thing to say out loud. The government will keep ticking over, its not going to send the world crumbling down around us, those working can support more tax if required, I am a firm believer of the broadest backs should take the biggest part of the burden. I dont like people been taxed just for the sake of it, but I think taxes should go UP during recessions and down during booms. But not down too far of course. Money cycling is key to any economy. People saving up in savings does not = growth.

The manufacturing the shining part of osborne's figures, yet manufacturing took a battering from the last tory government and is now a show of its former self. One reason my city is so dependant on the public sector is that it used to be a major hosiery employer but thats now mostly all gone offshore in typical capitalism drive for profits.

These financial experts arent very good are they, I predicted a double dip and I am not on some 100k a year for been an expert.

Hi Chrysalis, George Soros on the Beeb on Wednesday:

- Market Fundamentalism doesn't work
- UK cuts could trigger a recession

And that's from someone who knows the workings of the markets pretty well.

http://www.bbc.co.uk/news/business-12291527

[Ignitionnet]

Yes Chrysalis, tax cuts.

dazzer89 - I could quote a blog as fact too. Especially one called 'Fact Check'. Doesn't change that the ONS themselves said that it would have been an essentially flat quarter without the influence of the snow. The rating of 'fiction' is entirely arbitrary and is the writer's opinion.

Opinions do not facts make - we'll only know the full story of the GDP figures when everything has been worked through.

Regardless none of it in any way supports reversing the austerity measures. Perhaps Ms Newman should have mentioned that in December the government spent the largest amount of money it ever has, and that various business confidence metrics, usually a good indicator of GDP, were far better than the figures suggested. She should really stick to the facts rather than her opinion of them.

The BoE Governor noted that this drop was a natural adjustment, it looks bad because the Tories engaged in political opportunism when they were in opposition and are now reaping the rewards

---------- Post added at 10:35 ---------- Previous post was at 10:34 ----------

Originally Posted by dazzer89

Hi Chrysalis, George Soros on the Beeb on Wednesday:

- Market Fundamentalism doesn't work
- UK cuts could trigger a recession

And that's from someone who knows the workings of the markets pretty well.

http://www.bbc.co.uk/news/business-12291527

Though not the UK Economy.

From your above link:

And Mr Soros himself refused to elaborate on his remarks, acknowledging that he did not follow the UK economy "that closely".

A reputation does not an informed opinion make. His thoughts sound like they were based on ideology rather than first hand knowledge by his own admission.

[dazzer89]

There was bad snow in January last year, but there was still growth. The ONS, who produce the figures, said growth would have been flat even without the snow. And the spending cuts havent even started to be implemented yet.

You didnt need to be an Economist to see that it was all going to end in tears. Another quarter like the last one and we'll be in double dip recession territory, the LibDems will get even twitchier, the Tories will faction and implode and we'll see an election before Spring next year.

[Ignitionnet]

Originally Posted by dazzer89

There was bad snow in January last year, but there was still growth. The ONS, who produce the figures, said growth would have been flat even without the snow. And the spending cuts havent even started to be implemented yet.

You didnt need to be an Economist to see that it was all going to end in tears. Another quarter like the last one and we'll be in double dip recession territory, the LibDems will get even twitchier, the Tories will faction and implode and we'll see an election before Spring next year.

Except the LibDems won't get twitchier as they are relying on the economy recovering to justify their support for the austerity measures and restore their popularity to some extent with the electorate. They know that leaving the coalition right now would be suicide as they leave with little to show for it in the way of genuine results.

You don't need to be an economist to have an opinion, it's just a measure of how educated that opinion is.

[dazzer89]

Originally Posted by Ignitionnet

Except the LibDems won't get twitchier as they are relying on the economy recovering to justify their support for the austerity measures and restore their popularity to some extent with the electorate. They know that leaving the coalition right now would be suicide as they leave with little to show for it in the way of genuine results.

You don't need to be an economist to have an opinion, it's just a measure of how educated that opinion is.

Anyway. A further argument against and demonstration that this Tory-led approach of huge cuts to public services, uber capitalist, market fundamentalist approach to the economy and generally low tax, low spending approach doesn't work:


Sweden. High taxes. High public spending, allowing tax cuts to fight recession. No austerity shocks. Lots of jobs around.

Public spending, like it or not, is the key to a smoothly running, shock resistant economy. Also, Germany. Increased spending, came out of recession before anyone else.

UK. Increased spending initially, rode out the worst of it, and now since this government came in, we've had 3 successive quarters of slowing growth and now shrinkage of the economy.


They're simply incompetent, but not only that, downright bloody irresponsible.