Where's Plan B? The UK's abysmal economic performance is reminiscent of the 1970s, when we were last the undisputed sick man of Europe: Hardly a moment to break out the Bollinger. Other countries have exited recession sooner and faster than Britain, and the sluggishness of our response to global growth and huge monetary and fiscal stimulus suggests underlying competitive, structural problems in Britain. Even if the numbers are subsequently revised upwards, as they have so often recently, we will still be bottom of the international growth league tables. If we carry on like this we won't even remain in the top 10, and by the middle of this new decade we may find ourselves lucky to stay ahead of Australia or Indonesia.
A shock then. But perhaps we knew that our economy had run into a few problems, disguised during the long boom that ended so abruptly two years ago – too much reliance on the City and financial services, too much consumption in the decade when we used our homes like cashpoints, and far too little investment, manufacturing and exports.
The uncomfortable question thrown up by yesterday's feeble figures is this: if cutting VAT, running a £174bn budget deficit, and having the Bank of England slash rates to 0.5 per cent and print £200bn won't work, what will? Indeed, there is a plausible case for arguing that if it were not for the last-minute rush to the shops to beat the VAT hike and the car scrappage scheme, the UK might still be mired in recession. Look closer and you'll find that that 0.1 per cent figure is in fact rounded up from 0.09 per cent; near enough negligible.
It all rounds off a rough year – GDP down 5.2 per cent in 2009, the worst annual performance since 1921. Altogether our slump has cost about 6 per cent of GDP – £100bn or more in lost output. It has pushed 1.3 million out of jobs, while 50,000 families have lost their homes and our national debt has spiralled to unsustainable levels. By any standards it has been an economic disaster, whomever you want to blame.
Here's another ugly truth; the credit crunch is still on. With nearly £1 trillion in official funding pledged to the banks it is apparent that they cannot raise enough funds anywhere else, and this level of support for the banking system cannot be sustained indefinitely. Economists usually call this "the ongoing impairment of the financial system". It means the banks are still bust.
More bad news, if you can bear it. Er, there is no Plan B. Britain, more than any comparable nation, is faced with high inflation – thanks to higher commodity prices and the weak pound – and stagnating production. There's a word for that – stagflation, an ugly word for an ugly phenomenon – and last on everyone's lips in the 1970s. So, nothing to celebrate really.Reuse content