Inflation Up: Unemployment Up: Government Spending Up

With inflation up, unemployment up, government spending up, VAT up, and the majority of job cuts still to come, you would have thought something had to come down.
The day before the announcement of the fall in GDP, the out going head of the CBI Sir Richard Lambert said: "We have to have growth in employment". He criticised the coalition of failing to come up with policies that support economic growth. "It's failed to articulate in big picture terms its vision of what the UK economy might become under its stewardship”
He went on to say "Public spending cuts and private sector growth are two sides of the same coin."
Hence, without initiatives supporting private sector growth, the spending cuts would not only be futile; they would be actively detrimental, he reasoned.
"It's not enough just to slam on the spending brakes," he said.
"Measures that cut spending but killed demand would actually make matters worse."
Ed Balls Labour's shadow chancellor “These are damning criticisms from such a respected figure in the business world”
Sure enough the day after, news broke that growth had come down to -0.5%. George Osborne clutching at straws, appeared in as many TV and radio programmes he could, saying the appalling figures were down to the cold weather. He even quoted the Office of National statistics as saying so. But unfortunately they actually said that, without the cold spell, the growth figure would have been 0.0%. Not an achievement to be proud of, well it’s not really an achievement at all, more a dramatic failure. The stock market lost ground as a result of the announcement, and the Pound fell against the Euro and the Dollar.
My colleague Ron Gold did say that Inflation and unemployment would rise, Mervyn King has said he expects inflation to hit 5% in the coming months. Mr King noted “that they have been hit not only by rising prices and lagging wages, but also by high existing debt levels, high interest rates from banks, and often an inability to borrow at all. He blamed the high inflation rate - which rose to 3.7% in December, well above the Bank's 2% target - on three factors:”
• higher import prices thanks to the weak pound, which is needed to make the UK economy more competitive
• rising energy prices and other commodity prices, such as cotton, food and metals, driven by growing demand from the developing world
• rises in VAT, as the government begins to stabilise its finances
In total, Mr King estimated that these factors were contributing the equivalent of three percentage points to the inflation rate each year for four years. He also said the “UK wages were stagnant, and - coupled with high inflation - this had led to the longest decline in the real value of take-home pay in the UK since the 1920s”

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Inflation Up-Unemployment Up-Government Spending Up

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