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May 11, 2012 / politicsbitesize

No going back

The Office for National Statistics announced a double-dip recession toward the end of April after a contraction of 0.2% in the first three months of 2012.  The main reason for the UK’s return to recession is the fall in government spending and investment in the construction industry.  Another reason for the economic stagnation is the fact that prices for basics such as food, drink and petrol have increased substantially over the last few years but wages have remained the same.

For those in the public sector, pay has been frozen for a while but the rate of inflation has increased by 3.5%.  As a result, many families are finding it a hard to keep up with the increased prices of food and drink and have had to cut back on the basics.   The TUC general secretary Brendan Barber has said: ‘Inflation is not falling as fast as many hoped. With pay growth also weak, families are getting poorer every month.’

Unions are calling for the government to suspend the pay freeze because they believe it will allow the economy to grow by enabling people to spend.   UNISON’s general secretary Dave Prentis said: ‘The pay freeze across the public sector is already hitting hundreds of thousands of families hard.  Many are struggling to keep out of debt and are cutting back on essentials.’ The Chancellor’s Budget in March has not helped these struggling familes and nor is there a sign of him drawing up a Plan B that includes growth for the country.

But, after a crushing defeat last week in local elections, the Coalition government are finally hearing the message that growth is needed.  In a joint speech, given on Tuesday 8th May, David Cameron and Nick Clegg claimed there was ‘no going back’ on the cuts already implemented and those forthcoming. However, there was a glimmer of hope that the Coalition might decide to ease off in their aim to reduce the deficit.

During his part of the speech at a factory in Essex on Tuesday, Nick Clegg stated twice that ‘We must never forget that tackling the deficit is a means to an end and the end we all seek is growth.’  His statement was corroborated by David Laws, the former Liberal Democrat Chief Secretary to the Treasury, when he told Radio 4’s Today Programme that the first priority of both of the coalition leaders was ‘sorting out the mess in the public finances’ and boosting growth.

As part of this unexpected emphasis on growth, the Queen’s speech on Wednesday 9th May unveiled plans by the government to implement bills described as ‘pro-growth and pro-business’.  Two bills concerning pensions were introduced.  One is designed to replace the current state pension system with one payment of £140 a week and raise the age at which a person is eligible to claim it to 67.  The other is a reform of public sector pensions, which is already causing strike action by teachers and prison staff.  Also introduced is the Enterprise and Regulatory Reform Bill, which will reduce red tape for employers by enabling them to hire and fire staff more easily than before.

Despite the Queen having mentioned ‘growth’ in the opening sentence of her speech, the rest of it has been criticised for offering no hope of any change to the current legislative programme that deals with the economy.  The Labour leader, Ed Milliband, told MPs that: ‘For a young person looking for work, the speech offers nothing.  For a family whose living standards are being squeezed, this speech offers nothing’.  And, indeed, it seems that he is right.  If deficit reduction and restoring economic stability is Her Majesty’s ‘ministers’ first priority’, they have a lot more work to do.  Future economic growth in the UK is looking lacklustre but, so far, none of the political parties are presenting any other viable options.


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