Prime Minister’s Questions – 28th November

Image by Victoria Kettlewell

The economy was on the tips of everyone’s tongues in the Commons this week (but when isn’t it?). After the initial expected tributes to those involved in flooding rescue and clean up operations, the Commons immediately descended into the brawl between Cameron and Miliband, both blowing their own trumpets about their economic policies. Miliband continued to rely on quoting Cameron’s words and twisting them to his advantage when questioning Cameron’s Work Programme as the “biggest and boldest programme since the great depression” to which Cameron reeled off, at a pace most couldn’t keep up with, a horde of statistics about why his policy was good and Labour’s previous policies were not. Quoting 700,000 people in work as a result of the programme, Cameron was left susceptible to criticisms from Miliband that only 2% of those on the programme were in sustainable jobs (although it was quickly pointed out that Miliband’s math didn’t quite work out). The infamous “calm down” jeer was called from the Labour benches as Cameron tried to defend his policies with a flustered face and glances to his ministerial colleagues for support. Questions were also asked about the results of the Leveson inquiry, but Cameron continuously evaded them only saying that we need a strong and robust independent regulatory service for our media.

 

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Don't Be Fooled - We're Not There Yet

Today, the news that the UK had finally shown economical growth of 1% and, hence, exited a recession was announced. It is pleasing news to the country, and the Government and the media are spinning into brilliance; yet I am sceptical. Now I know I'm not an economist but I can offer a short outsider's perspective on this item. I offer caution and definitely think it's no time for celebration yet.

First, and foremost, we must recognise that the quarter that has shown growth encompassed the Olympic period. The mixture of tourism, hospitality and sporting fever practically guaranteed that there would be no financial downturn over the three months from July to September; there were millions of people touring the city of London, an expensive place to be on the quietest of the day, and heightened prices (particularly within the Olympic park itself) for the events will more than definitely have seen a rise in profits amongst the companies. But, this is a onetime event; the aftermath of the Olympics is already over. In fact, if you're like me, I'd not thought about the Olympics at all for a while until this announcement. Despite the fact that it's only been announced that 0.2% of that is from the Olympic tickets, I'm sure the majority of this income is from the Olympics and it's not something that will be repeated. So don't hold your breath for massive growth in the next quarter.

Next, the Government is still announcing and planning further and further cuts that will have huge impacts on the incomes and budgets of households across the country. Hence, there will be little money to spend. People's bank accounts are already squeezed enough as it is without having to deal with a reduction in funding. With no internationals and no sporting events on, people will not spend anything other than on the basics, especially whilst having to save for Christmas.

And that's the final point. We are unlikely to see an immediate drop in growth next quarter, as Christmas will undoubtedly have some increased spending (on those tight budgets) that will cause some small amount of growth. But this will all cause a feeling of false hope; the Government and the media will spin it to say it's a good thing and something to congratulate the Government on, but in reality, they have done little. The Olympic project was set up under the Labour Government; this, plus the spending, was not a result of their policies, but the result of international and national patriotism and celebration.

I warn you, we will be back in a recession before long - unless, by chance, this happens to be the kick up the backside that the economy needs.