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Reuters: UK Recession Due To Spending Cuts

From an outraged Reuters:

Britain in recession, intensifying government woes

By David Milliken and Fiona Shaikh
April 25, 2012

LONDON (Reuters) – Britain’s economy has fallen into its second recession since the financial crisis after an shock contraction at the start of 2012, heaping pressure on Prime Minister David Cameron’s government as it reels from a series of political missteps.

And by "political missteps" Reuters really means their minuscule spending cuts.

Britain’s Conservative-Liberal Democrat coalition has seen its support crumble after weeks of criticism over unpopular tax measures in last month’s budget, and is under further pressure from revelations about its close links with media tycoon Rupert Murdoch.

We are supposed to believe that associated with Rupert Murdoch ranks up there with huge tax increases in terms of making the government unpopular.

With local elections taking place on May 3, there could hardly be worse timing for Wednesday’s news from the Office for National Statistics that Britain’s gross domestic product fell 0.2 percent in the first quarter of 2012 on top of a 0.3 percent decline at the end of 2011.

If their bureaucrats are anything like ours, these numbers will probably be quietly revised up later, after they have done their damage.

Still, how old fashioned of the British to define recessions as two quarters of negative growth. Unlike our news media which threw out that silly standard so that it could backdate our recession to December 2007, so more blame could be put on President Bush.

Most economists had expected Britain’s economy to eke out modest growth in early 2012, but these forecasts were upset by the biggest fall in construction output in three years, coupled with a slump in financial services and oil and gas extraction

None of which would be due to cutting spending. But much of which could be the result of higher taxes.

The figures pose a conundrum for the Bank of England, which had appeared poised to end its second round of quantitative easing asset buying, having said that it was more persuaded by survey evidence that the underlying economy was strengthening.

"This could be something of a game changer for monetary policy," said Investec economist Philip Shaw. "With the weakness in the economy pervasive … there is a genuine debate to be had over whether it is wise to suspend QE." …

So they have been doing quantitative easing, too? And yet they went into a recession? How is that possible? (This is sarcasm.)

Cameron has had a torrid time since his government’s annual budget last month was attacked for cutting taxes at the top end of the income scale while taking from pensioners.

Newspapers and allies who once fell over each other to sing his praises now accuse the expensively educated Conservative Party leader of "speaking for the few" and of "vanity globe-trotting" as the economy sputters and Britons suffer the harshest state spending cuts for a generation

None of which is even remotely true, needless to say. But it sure sounds familiar.

Britain’s economy contracted 7.1 percent during its 2008-2009 recession and has recovered less than half this lost output due to headwinds from the euro zone debt crisis, public spending cuts, high inflation and a damaged banking sector.

Public spending cuts do not cause recessions in a healthy economy. Especially tiny ones, such as they have done in Britain.

Finance minister George Osborne made clear that he saw no scope to loosen the government’s purse-strings to boost growth as he tackles a budget deficit that still totals over 8 percent of GDP – higher than most of the embattled economies on the euro zone periphery

He doesn’t want to spend more? Hasn’t he seen the miracle of Obama-nomics?

This article was posted by Steve on Wednesday, April 25th, 2012. Comments are currently closed.

One Response to “Reuters: UK Recession Due To Spending Cuts”

  1. GetBackJack says:

    I think we need to redistribute the incomes of all members of the media so they understand that there are people out there for whom their only way to drink and party and wire-tap friends and enemies is by way of someone else’s income.

    Hell, why stop there?

    Let’s start redistributing Bylines and Credit while we’re at it?

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