Much the most important item of news last week was the announcement that the UK's GDP fell by 0.5% over the last three months of 2010. This was both surprising and disappointing. The Chancellor believes GDP fell into negative territory as a consequence of the wintry weather throughout December - but George Osborne acknowledges that GDP would have been 'flattish' even if the sun had shone. What has instigated this blog post is some of the utterly ridiculous commentary that has followed this disappointing announcement.
Firstly, some people who should know better are claiming that Coalition Government 'cuts' are the cause. Well the problem with this is that there have not been any cuts. For sure, there's been plenty of discussion about 'cuts'. But during the last three months of 2010, public spending rose substantially on the previous year. Public spending increases are like a very big 'tanker' - very difficult to stop and turn around when steaming ahead at full throttle. If public spending really does equal economic growth, the UK economy would have been flying. The painful (to come) reality is that it absolutely doesn't - not while there's a huge structural deficit issue anyway.
And then we've had the barely credible comments from the Shadow Chancellor today. He's dismissed the public policy statements of the Governor of the Bank of England as being not what he actually believes. This is tantamount to accusing Mervyn King not telling the British public the truth. I wonder if anyone believed his nonsensical comment. Its also now become clear that the Labour opposition intend to claim that the difficulties facing our public finances are nothing whatsoever to do with the previous Government. Can't we have the more sensible and credible Alistair Darling back!
Its only one set of figures so we cannot take it as a trend. But since private sector growth is fundamental to the Government's economic strategy, its inevitable that there will be calls on the Chancellor to look seriously at reducing the costs and regulations which hold business back when he finalises his budget next month. And there will also be more calls on the banks to lend the money needed for the private sector to be able to compete for infrastructure projects. Its going to be an interesting budget.