Ditch austerity Boris tells Osborne amid fears the economy is heading towards a trip dip recession
Office for National Statistics announces negative growth for final quarter of last yearResults mean there was no growth overall for the whole of 2012
Nick Clegg admits government was wrong to cut funding for big building projects, damaging jobs and growth
Boris Johnson says it is time to 'junk the rhetoric of austerity'IMF chief economist says the Chancellor should use the Budget in March to 'take stock' and change courseExperts warn of longest depression in living memory
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The Office for National Statistics said the economy shrank by 0.3 per cent in the last three months of 2012, which meant there was no growth overall last year
Construction grew by 0.3 per cent, but not enough to make up for sharp drops in the last year
In a very public challenge to
mainstream Conservative policy, London mayor Mr Johnson warned that the
‘hair-shirt’ agenda set by the Chancellor and gloomy remarks from the
Bank of England threaten hopes of a recovery.
And in a sign of coalition tensions
over the flatlining economy, Nick Clegg made clear the Liberal Democrats
will demand higher capital spending on infrastructure projects in the
next public spending review – a shot across Mr Osborne’s bows.
IMF chief economist Olivier Blanchard said the Budget in March would be a good time to slow the pace of austerity
The slump rounded off the worst four-year period for the British economy, excluding the aftermath of war, since the 1830s.
It is feared it could be followed by
another quarter of decline at the start of this year, which would mean
Britain was in recession again.
The ONS report said that the British
economy did not grow at all in 2012 and has now shrunk for four of the
last five quarters, with the only growth coming between July and
September when output rose 0.9 per cent with the help of the Olympics.
The economy is still 3.3 per cent
below its pre-crisis peak in 2008 and fears are mounting that Britain
will be stripped of its coveted AAA credit rating as tax receipts
dwindle and debts soar.
Addressing British business leaders
at the World Economic Forum in Davos, Mr Johnson called for a change of
tack from the Government.
‘We need to junk talk of austerity
and recognise that the single biggest inhibitor of demand is lack of
confidence, and that if only some of the people in this room would
invest some of the cash in their balance sheets we would see that
confidence rewarded in a virtuous circle,’ he said.
He attacked the downbeat rhetoric
emerging from both the Treasury and the Bank of England and alluded to
the painful age of austerity overseen by post war Labour Chancellor Sir
Richard Stafford Cripps.
The sharp drop in output was caused mostly by contraction in production, wiping out a small rise in construction
‘I don’t think austerity is a
terribly useful concept in this sort of climate,’ he said. ‘The hair
shirt stuff, the Stafford Cripps agenda, that is not the way to get
Britain motoring again.’
Mr Johnson said he backed the
Chancellor’s plans to cut the deficit but said more cuts would need to
be found to invest in housing and infrastructure.
Mr Clegg warned that ‘there is some
way to go before the recovery really takes root’ and conceded that it
would be ‘a long, painstaking job before the British economy fully
A day earlier he admitted in an
interview that the Government should not have cut capital spending so
much when it first came to power.
Aides said he is not challenging the
Chancellor’s overall levels of government spending. But they said he
will argue for even more capital expenditure on infrastructure projects
in the next spending round. ‘This is a priority for us,’ one said.
But speaking in Davos yesterday, Mr
Osborne insisted he would not change course. ‘We have a reminder today
that Britain faces a very difficult economic situation,’ he said.
‘A reminder that last year was
particularly difficult, that we face problems at home because of the
debts built up over many years and problems abroad with the eurozone,
where we export most of our products, in recession.’
VIDEO GDP sector-to-sector break-down from Chief ONS Economist
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