Teaching Comparative Government and Politics

Tuesday, January 25, 2011

More economics and politics

The coalition government in the UK is intent on solving Britain's economic problems, but the economy seems to have its sites set on the coalition government. Will Labour be able to benefit from the disaster?

UK economy suffers 0.5% contraction

The UK's economy suffered a shock contraction of 0.5% in the last three months of 2010, figures have shown…

The Chancellor, George Osborne, said the numbers were disappointing.

But he added the government would not be "blown off course" from its austerity programme.

The figures are set to raise concerns over prospects for the economy, with large public spending cuts expected to come in this year…

"This is a horrendous figure. An absolute disaster for the economy. We knew that retail sales were heavily affected and that services output would be weak, but the collapse in construction was a major contributor to the downside surprise," said Hetal Mehta from Daiwa Capital.

"While today's GDP figures are backward looking, they are nevertheless crucial to understanding the resilience of the economy to shocks. It seems that the economy is incredibly vulnerable. And with the fiscal tightening yet to fully bite, we will have to brace ourselves for a bumpy ride."…

"These are obviously disappointing numbers, but the ONS has made it very clear that the fall in GDP was driven by the terrible weather in December," Mr Osborne said.

"There is no question of changing a fiscal plan that has established international credibility on the back of one very cold month. That would plunge Britain back into a financial crisis. We will not be blown off course by bad weather."

But shadow chancellor Ed Balls said the figures were a matter of "great concern" and due largely to the speed and scope of the coaltion government's deficit reduction programme.

"The fact is the recovery has completely stalled in the last three months of last year. This is an economy which was growing in the middle of the year, which has now ground to a halt," he said.

"We have inflation going up, unemployment rising, now the economy not growing. And all those boasts from George Osborne and David Cameron that they'd secured the recovery - it seems as though the opposite has happened."…