David Prosser: If public spending is behind the recovery, what happens when we cut it?

Consumer spending fell back – and that wasn't because people were saving more for a rainy day, which might have reassured us, as the savings ratio fell too

The headline number for the performance of the UK economy during the first quarter of the year may have been left unchanged by the Office for National Statistics (ONS) yesterday, but the data on which it is based was revised – and not in a good way.

Growth of 0.3 per cent during the first three months of 2010 was hardly an achievement to celebrate, even before this latest update, but the ONS's figures suggest even more of that pick-up than previously thought was accounted for by Government spending. It rose three times faster in the first three months of the year – at 1.5 per cent, rather than 0.5 per cent – than the ONS had initially estimated.

On the other hand, the ONS now thinks that household consumption – consumer spending – actually fell back slightly during the period. And that wasn't because people were saving more for a rainy day, which might have reassured us – the savings ratio was down too.

Just to add to the gloom, the ONS has also had to revise downwards its estimate of the UK's exports – these fell by 1.7 per cent during the first quarter, the worst figure for a year.

Put all that together and this is the picture: Britain's economy has come out of recession only because of a boost to public spending. The private sector has not benefited from a return to growth in consumer spending and nor is it picking up much help from the weak value of sterling, which might ordinarily have been expected to help exporters.

These are backward-looking figures, of course, but there is not much reason for optimism about the way the picture may have changed since the end of March – or how it might develop further during the months ahead.

On exports, for example, our most important market, the European Union, is not performing any better than us and the eurozone's financial crisis may have damaged confidence and demand further. Not much hope there, then. As for consumer spending, higher taxes, depressed wage settlements and elevated unemployment hardly augur well. And let's not even talk about government spending, previously the only source of growth in the economy, which is now set for unprecedented cuts.

Back in April, when the first quarter growth figures were unveiled, 0.3 per cent seemed pretty lacklustre. It may not be long before we're looking back on such highs with great fondness.



BT to reverse its pension charges?

Who is responsible for BT's £9bn pension scheme funding deficit? While the answer is at first sight obvious – the company itself, of course, both morally and legally – there is a complication, a tricky little issue that a week-long High Court hearing began examining yesterday.

Back in 1984, when the Conservative government of the day proposed privatising BT, one concern was what the sale might mean for the company's pension scheme members. In the private sector, what would happen to these savers in the unlikely event of their employer going bust? To assuage such concerns, Mrs Thatcher's administration pledged to stand behind BT workers' pensions should it ever prove necessary to do so.

More than a quarter of a century on, what's not clear is what that promise actually meant. Did it cover only pension entitlements built up prior to privatisation? What about the pensions of staff who have joined BT since it was sold off? Should the pension enhancements that the company has offered at various times, often to sweeten redundancy deals, fall within the crown guarantee?

The best-case scenario for BT is that the High Court rules the 1984 promise was all-encompassing. The company reckons that would imply the Government was effectively standing behind around 75 per cent of its liabilities.

The principle is not purely hypothetical. While the issue of the crown guarantee only becomes practical in the event that BT goes bust, the company is in the process of trying to persuade the Pension Regulator to clear its plans for closing its whacking deficit. Since it wants to do so over a 17-year period, much longer than the watchdog generally feels comfortable with, there is some doubt that BT will get the sign-off it needs.

If, however, the High Court rules that the Government is ultimately responsible for three-quarters of BT's pension promises, the Regulator might then be persuaded to take a more relaxed view about the company's plans. If the case goes against it, on the other hand, BT might find the Regulator's resolve suddenly hardens.



Nuclear energy will be finite too

One of the fascinating nuggets in the latest Chatham House report into energy security, published this week, concerns nuclear power, rather than fossil fuels, where we already know there is good reason to be worried about the forthcoming energy gap. It says that at current rates of production, we will run out of the uranium needed for the process of generating atomic energy within 80 years.

In fact, the timescales may be much shorter. While the amount of electricity generated from nuclear plants – around 14 per cent globally – has been broadly constant for 20 years or so, that's likely to change sooner rather than later. Many countries around the world, including the UK, plan to step up nuclear power production as they contemplate dwindling fossil fuel resources and ever tougher climate change regulation.

Let's not be alarmist. Nuclear technology is evolving, there will be new uranium finds and other elements are possible fuels for these power plants in any case.

Still, the Chatham House warning is a useful reminder that while nuclear power may help us solve some of the energy policy challenges facing us over the next century, it is not a panacea. More renewables, please.

PROMOTED VIDEO
News
i100
News
Prince Harry is clearing enjoying the Commonwealth Games judging by this photo
people(a real one this time)
Extras
indybest
News
Richard Norris in GQ
mediaGQ features photo shoot with man who underwent full face transplant
News
Gardai wait for the naked man, who had gone for a skinny dip in Belfast Lough
newsTwo skinny dippers threatened with inclusion on sex offenders’ register as naturists criminalised
News
Your picture is everything in the shallow world of online dating
i100
Life and Style
Attractive women on the Internet: not a myth
techOkCupid boasts about Facebook-style experiments on users
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

HR Business Partner - Banking Finance - Brentwood - £45K

£45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...

PA / Team Secretary - Wimbledon

£28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...

HR Business Partner (Maternity Cover 12 Months)

£30000 - £34000 Per Annum 25 days holiday, Private healthcare: Clearwater Peop...

Business Analyst - London - Banking - £400-£450

£400 - £450 per day: Orgtel: Business Analyst - Credit Risk - Banking - London...

Day In a Page

The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
Countries that don’t survey their tigers risk losing them altogether

Countries that don’t survey their tigers risk losing them

Jonathon Porritt sounds the alarm
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz
A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on