By Ed Balls: It is clearly a matter of great concern that Britain’s economic recovery has now ground to a halt. As the independent Office of National Statistics has confirmed, even after the effects of December’s bad weather, the UK economy saw no economic growth in the final quarter of 2010.
With families and businesses already facing both rising unemployment and rising inflation, the fact that the economy is now shrinking means the Conservative-led Government’s claims to have saved the economy and secured the recovery will ring very hollow indeed.
With consumer confidence low and public spending starting to be cut at the end of last year, it is no surprise that construction and services are the sectors hit hardest in these figures. But they are all the more worrying because they cover the period before the Government’s VAT rise and sharp public spending cuts have even begun.
It is now becoming even clearer that when David Cameron and George Osborne complacently congratulated themselves in the autumn for securing economic recovery, this was in fact the result of decisions taken by the Labour government to get the economy moving again.
The Government inherited an economy that was strengthening, with growth of 1.1% in the second quarter - thanks to decisions we took to support jobs and get the economy moving. It also meant last year’s deficit came in £20 billion lower than previously forecast.
Now we are seeing the first signs of what the Conservative-led government’s decisions are having on the economy. The fact is cuts which go too far and too fast will damage our economy. And shrinking growth and rising unemployment is not only bad news for families but will actually make it more difficult to get the deficit down.
As the head of the CBI said only yesterday, this Government has no plan for growth and it is taking political decisions regardless of the damage they will cause to job creation and business. Simply slamming on the brakes is not a credible economic policy.
It is not too late - George Osborne and the Treasury must urgently re-think their reckless plan to cut the deficit too far and too fast and start putting growth and jobs first.”
David Cameron claimed the British economy was out of the danger zone and recovering,
“Britain's economy is out of the danger zone and recovering.”
PMQs, 15 December http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm101215/debtext/101215-0001.htm#10121530000010
Borrowing came in £20bn lower than forecast in 2009.
PBR 2009 forecast 2009/10 borrowing at £177.6bn. The latest HMT figures puts outturn borrowing at £156.3bn and is available at http://www.hm-treasury.gov.uk/psf_statistics.htm