Matt Falloon’s Profile
It’s snow joke
Snow or no snow, these GDP figures are a nightmare for the Conservative-Liberal Democrat coalition government and throw up the risk of a self-fulfilling spiral of gloom.
When the shock 0.5 percent drop in economic output at the end of 2010 hits television screens on Tuesday night as families sit down to dinner, already-cautious consumers will feel more than a winter chill.
These numbers are likely to knock confidence just when the government needs businesses and households to step up to the plate.
Will businesses unleash investment and take on hoards of new staff now, or will they wait for signs of improvement?
Will families, facing a hike in VAT sales tax and high inflation, flash the credit card on big purchases or tighten their belts and hope for cheaper prices in the future?
If either of those scenarios play out over the next few months, Britain’s economy faces a real risk of stagnating or worse — and that doesn’t even start to take into account the spending cuts waiting in the wings this year.
Even without the snow, the economy still ground to a halt in the last three months of 2010.
All this plays into the hands of Labour’s new finance spokesman Ed Balls, who has staunchly opposed the coalition’s austerity plan. Labour will be hoping this is be the point at which the coalition’s economic strategy starts to unravel.
Before this morning, Conservative finance minister George Osborne had won over the confidence of hard-to-please financial markets and sceptics who thought he was too inexperienced to pull off his ambitious deficit reduction programme.
Voters had bought into the idea that the only way back to sustainable economic growth was to deal with the deficit as fast as possible.
The Conservatives emerged from last year’s election as the biggest party in parliament and claiming victory in the economic debate, labelling Labour as the architects of the financial crisis and the deficit.
The tables could be about to turn.