Last year, when the Tories, the media and other economists were proclaiming a UK economic miracle, I suggested this miracle was a mirage, and that the UK economy was about to turn down sharply. And so it has been. At the time that post was written only second quarter data was available, and had been revised up from 0.8 to 0.9% (subsequently revised back to 0.8%). But, as I predicted, when third quarter data came in, it showed that the economy was already slowing significantly. The growth rate was down from 0.9% in the first quarter to just 0.6%, a reduction in growth of a third. That same trend continued in the final quarter of 2014. Now, growth for the first quarter of this year has come in at a meagre 0.3%, and, given the direction of travel, its likely that, when the full data is in, the revised figure will show growth even lower than that.
This paltry level of economic growth is a direct result of the economic policy of austerity that the Liberal-Tories have adopted over the last five years. In fact, the slight improvement in growth, that occurred from the end of 2012 until the second half of 2014, was the result of a combination of factors, mostly nothing to do with the Liberal-Tory policies. Firstly, during that period, Britain benefited, as did every other economy, from the global growth resulting from the three year short run cycle. Secondly, as set out in that post, there had been more than £7 billion put into the economy, as a result of a, more or less, one off boost from PPI compensation payments, made to consumers. Thirdly, the Liberal-Tories had reversed their austerity measures, in relation to capital programmes, which gave a temporary boost to construction spending. Fourthly, consumers had resorted once more to debt financed consumption. Fifthly, the Liberal-Tories had thrown the kitchen sink at trying to keep the property bubble inflated, with all sorts of bribes related to “Help To Buy”.
All that, plus the fact that interest rates remained at unsustainable, near zero levels, meant that if there was not going to be some growth during that period, there never would be. But, the trouble was that none of those things were sustainable, and given that the three year cycle, from which they had benefited, since the end of 2012, was set to go into reverse, a downturn in the economy was inevitable, and so it has been.
For all the Liberal-Tories crowing about having rescued the economy, and brought about an economic miracle, nothing could be further from the truth. Since they came to power in 2010, there has been effectively no economic growth overall. The only growth in the economy has been due to increased population, mostly from immigration, as large numbers of, mostly young, immigrants have come into the economy, and engaged in productive activity, whilst simultaneously stimulating demand. Take out the effect of this increase in population, and the economy has gone backwards since 2008!
Today's, growth figure is, in fact, less than a third of the growth figure in the last quarter for which Labour was wholly responsible, in 2010. In fact, in no quarter, during the whole five years of the Liberal-Tory government, have they even equalled the 1% figure achieved by Labour in 2010. What is worse, not only is the sham nature of the Liberal-Tory economic miracle being exposed, but a closer look at the data, shows that things are even worse than the headline figure suggests. Despite huge construction projects like Crossrail, Construction as a whole fell by a whopping 1.6%. Meanwhile, emphasising the point that the Liberal-Tories promise to rebalance the economy back towards production and manufacturing, has been as hollow as all their other promises, Production also fell by 0.1% and Agriculture by 0.2%.
In other words, the only area of the economy that grew was in Services. No wonder that the Tories backers are getting the jitters, and rumours are rife that Boris Johnson and his supporters are getting ready to knife Cameron in the back, just as Thatcher's supporters readied the chop for her, when it became clear she was a loser. Cameron has been criticised for himself looking as though he had thrown in the towel, and his new found verve looks and sounds as fake and empty as his support for Aston Villa.
Its time the Liberal-Tories themselves got relegated.
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