GDP figures: are the mistakes coming home to roost?
One day we might get a proper public debate about why the UK economy remains so anemic after six quarters of shrinkage. And, more worryingly, is now starting to lag badly behind some other equivalent economies. For me there were four big mistakes made which need close investigation and which we need to work out ways of avoiding in the future. We clearly also need to take further remedial action to address the damage done.
1) the UK economy and the public finances were over-dependent on financial services for too long even though everyone not in thrall to the efficient markets hypothesis or their bonus knew this was a notoriously volatile and unreliable sector;
2) interest rates were held too high for too long in 2008 by the Bank of England even though the TUC, business groups and David Blanchflower were warning that the threat of recession was higher than the threat of inflation;
3) the Government did not seize the chance for a bigger stimulus before the Tories and the right wing press made public borrowing the big political issue;
4) the Government have not been proactive enough in preventing people losing work through interventions such as short time working subsidies which appear to have been highly effective in countries such as Germany and Netherlands in very significantly holding down unemployment; the CBI bear a big responsibility for refusing to call for this when the BCC, EEF and TUC demanded it throughout 2009.