Tuesday, 25 January 2011

Economics for Sickies 4

Any minute now we're going to get the growth figures - how much GDP has risen in the last three months. Gross Domestic Product. GDP. How much we all produced, bought etc together as a country.

Since the coalition came to power we've seen 1.1% growth in July (multiply this by the 4 quarters of the year, and it would have meant  annual growth of 4.4%! Osborne hadn't affected the economy at all at this point - none of his policies or cuts had come into effect and many of the Labour stimulus plans were still in place. Changes in the economy are a bit like turning a battleship - nothing takes effect for months if not years.

The next figure was 0.7% (annualised this would still have meant 2.8% which is pretty health growth too.) This figure was higher than expected and came as a bit of a shock to economists. Today we get the results from the last 3 months of the year and if you listen carefully this morning, you can hear the sound of politicians clucking. "Oh it was the snow/it was lack of confidence/it was a slow Xmas." I do hope you won't believe a word of it.

Like a stuck record, many of us have predicted pretty confidently, that Q2 2011 would see the UK back in recession. It's not really until then that little-lord Osborne will be the true creator of the economic situation we experience. The cuts will be biting, unemployment will be up (government own figures) and we will officially be sucking growth out of the economy rather than injecting support for it in. 

Predictions for today's GDP figure range from 0.1% (flirting with recession like Jordan at a nightclub after 17 slammers) to .7% (all ticketyboo) I'll predict 0.2% (annualised this would mean growth of 0.8%. With inflation at 4% ish, this is not good.

Why? Because the economy has to grow to pay for everything. Improved health care, higher population, more pensioners. High inflation means that "things" cost more. If the cost of a £1 loaf of bread goes up by 4% it then costs £1.04. Trouble is, with growth of just 0.8% £1 of your wages is only worth 1.00.8p. Effectively, you're feeling a recession whatever the official figures say.

I wonder what excuses they'll use in April when the 1st quarter results are due? Leaves on the track? Labour are secretly stashing money under their mattresses? Ireland/Greece/Spain are dragging us down?

It won't be any of these things. When people lose their jobs, you have to pay them unemployment benefits. When you cut elderly care, patients spend longer in hospital, costing much more. When you cut loans to businesses, they go bust - no growth from them any more. When people's homes are repossessed the government have to house them, another drain on our finances.

In the last few months of a Labour government, before the May election, stimulus measure had reduced the annual deficit prediction from well over 170 Billion to around 150 Billion. What is it predicted to be today?

"With three months of the fiscal year remaining, the government may struggle to keep the deficit to the 148.5 billion pounds forecast by the Treasury’s fiscal watchdog in November. "

Geddit? Austerity doesn't work repeat 100 times, austerity doesn't work, austerity doesn't work.... Hasn't worked in Portugal, certainly hasn't worked in Ireland, didn't work in the 30s won't work now. 
We all feel the pain, nothing gets better anyway. 

I know you still probably don't believe me. When we see a real probability of recession you might start to wonder, but it would be lovely if everyone woke up today, did the slappy forehead thing and said "Now I see. Let's sack this lot pronto."

Sickies Bit

The astonishment sickies feel when they hear all three political parties, the Conservatives, LibDems and Labour defending the totally indefensible - basically ending the right to almost any kind of Social Security if you get sick - they just can't understand it. When Ed Miliband visited ATOS offices in Scotland a few days ago, praising the very company that are charged with finding 91% of the long term sick and 20% of the more physically disabled fit to work, jaws drop in confusion. 

Well, think about this for a second. People are living longer. They need pensions and elderly care and extra NHS care. 
People are having fewer children (who's job it is to create the money to pay for pensions etc through the tax they pay while they are of working age)
The NHS needs to do ever more and costs ever more.

So what can we no longer afford? Something has to give? If we have to take a really tough decision about who we can afford to provide support to and who we can't, it can't be pensioners can it? You can't stop sending people to school!!

One might think we can't stop caring for transplant patients and cancer victims and those fading rapidly from terrible pain and disease, but apparently we can. We can and we are. It started under Labour with ESA, now Osborne has taken away the principle that if you paid into the system through NI you get a modest stipend if you find yourself too sick or disabled to work, by now limiting support to one year. I'm not a conspiracist or even much of a drama queen, but it really does look as though there is a political consensus that we just can't afford to look after the sick and disabled any more. Families and friends will have to pick up the slack and if they don't? Well God help us all. 

Update : Spot on!! 0.2%. On reflection perhaps I shouldn't be pleased about my accuracy :(
Update 2 : In my shock, I failed to notice it's worse than I thought! Growth wasn't half a % lower than last quarter, oh no. It FELL by 0.5%!! One more quarter of that and it's double dip. Quick go buy plasma screens and holidays. Oh I forgot, we can't. Osborne is tightening our belts.....


  1. The 1000 richest in the UK quadrupled their wealth from 90bn to 400bn since the banking crisis of 2008 ... I wonder how much it will go up by this time?

    A one off windfall on the super-rich could clear the structural deficit and still leave them in profit! Compare their wealth with the impact of the cuts to the welfare budget. This is a government of the rich who are governing for the rich!

  2. This is clearly not good news. What I hate about the official figures is that, of course, when they look at who is "working", volunteer work doesn't count as work, looking after someone doesn't count as work, only people in paid jobs count as doing anything. And most politicians just don't seem to understand this or to care.

  3. I am SERIOUSLY thinking about moving to Scotland, joining the SNP and voting for independence!

  4. I have a letter from the minister's lackey on my desk - another one same old same old and the key thing is that they are saying that they only intend to protect benefits for the SERIOUSLY disabled thus trying to drive a wedge between us. And if you are not SERIOUSLY disabled you will work no matter WHAT the consequences for your health and well-being - if it kills you well ....that's money saved isn't it!

  5. Like Sue I am - and have been for a long time - horrified with Labour's approach. They've worked out that there are votes to be had from kicking the poor and sick. Isn't the mark of a civilised society how its treats its sick and disabled?

  6. @suedavies18

    "A one off windfall on the super-rich could clear the structural deficit and still leave them in profit! "

    Err no. Our debt is approximately £1000bn. Our deficit at £150bn measures the difference between the government's income and its spending in one year and is effectively the rate at which that debt is growing. Your one off tax proposal might mean we have no deficit this year, but we get a shiny new one next year and still have the debt.