Former US Treasury Secretary and White House Adviser, Larry Summers, was right to warn today, on the Today programme, that the UK government needs a plan B to get the UK economy moving.
While the US saw growth strengthen in the final quarter of last year, in the same period the UK’s recovery stalled. And while consumer spending is helping to drive growth in the US, we have seen this month the biggest fall in consumer confidence since 1992. The reason for this is the different choices being made on each side of the Atlantic about how to support economic recovery and deal with the deficit.
Our economy ought to be recovering more strongly. When Labour left office the action we took to support the economy meant unemployment was falling and growth was picking up. As a result the deficit last year came in over £20 billion lower than forecast.
But today – a week after the news that the UK economy ground to a halt at the end of last year – we now have warnings of “lacklustre” growth in 2011 from the National Institute (well below the Office for Budget Responsibility’s most recent forecast) – with the Institute’s acting director warning that “fiscal policy is too tight this year”.
In amongst the bad news this afternoon of 2,400 job losses as the Pfizer research & development facility in Kent closes and mortgage lending hitting a record low, it was good to see that manufacturing is strengthening – on the back of the depreciation of sterling we have seen over the past few years. Manufacturing is a key part of our economy and its needs support in order to fuel future jobs growth. But the government needs to explain why they are cutting Labour’s investment allowances for manufacturers by £75,000 and using the money to give a corporation tax cut which will overwhelmingly benefit the banks.