Cameron warns of economic slog as survey shows bleak outlook
“What is happening in Britain is a rebalancing of our economy,” said David Cameron. Speaking to the Radio 4 Today programme, he described the challenges facing the British economy. “We need more private sector growth; we need a smaller public sector; we need to make more, sell more overseas and manufacture more,” lamented the prime minister, before adding that rebalancing is: “a slow and difficult healing process, but it is taking place”.
Cameron, expected to deliver the keynote speech at the Conservative party conference in Birmingham today, was at pains to defend his economic record, noting that there are “positive signs” of economic revival and that the government is “on the right track”.
The PM’s words, however, come as the IMF has slashed its forecast for the UK economy, predicting a contraction of 0.4% in economic output for the year 2012, in line with the Euro area growth forecasts, and only 1.1% growth for 2013, in a fresh blow to the credibility of the government’s economic strategy. Meanwhile, the Office for National Statistics has released its index of production, which revealed a reduction of 0.5% in output, with a 1.1% drop in manufacturing.
Shadow Chancellor Ed Balls, commenting on the IMF figures, said: “Coming just hours after George Osborne complacently insisted he would cling on to his failing plan, these downgraded IMF forecasts are another damaging blow to the government’s economic credibility.”
“Twelve months ago, the IMF forecast a growth of 1.6% in 2012 and said a plan B would be needed if growth were to be lower than expected. A year on, with Britain in a double-dip recession, borrowing rising as a result and growth forecast to be minus 0.4%, there can be no question that a change of course is urgently needed.”
The Treasury retorted, in relation to the IMF verdict, that the Fund is praising all the measures undertaken by the British government, including “[allowing] the automatic stabilisers to operate, monetary policy easing and measures to ease the flow of credit”. The downgrade was quickly seized upon by SNP representatives, who, comparing the UK’s dismal figures with the 3.7% growth expected in Norway thanks to its oil fund revenues, criticised the government’s approach to investment.
At the same time, a cross-sector survey of commentators has revealed widespread pessimism regarding the UK economic performance in the coming year among consultancies, businesses, charities and public sector organisations.
In the survey, commissioned by the DeHavilland Consultancy, over three quarters of respondents believe there will not be an overall improvement in the economy, and furthermore 56% of respondents estimate that the government’s austerity policies have stumped economic growth. This compares unfavourably with the same survey taken last year, when most respondents had expressed optimism for the country’s economic outlook: the government’s comprehensive spending review was still viewed as having been detrimental to the economy.
Over half of commentators surveyed have predicted that they will be investing less in research, data, and research services in the next 12 months. Among the solutions proposed to improve economic performance, increased government investment and reductions in red tape for business were backed by 27% and 26% of those surveyed, respectively. The report found very little support for either tax increases (the preferred choice of 2% of respondents) or further spending cuts (1%).
The DeHavilland 2012 State of the Nation Survey was commissioned in anticipation of the party conference season and the data was taken from approximately 1,500 respondents belonging to the public affairs community.