Tuesday, 26 January 2010

The frail recovery of the rich ... and increased misery for the poor

BBC News gives us reason to pause, wipe the sweat from our brow, and breathe a sigh of relief that it's all finally over;
The UK economy has come out of recession, after figures showed it had grown by a weaker-than-expected 0.1% in the last three months of 2009.

The economy had previously contracted for six consecutive quarters - the longest period since quarterly figures were first recorded in 1955.

There have been recent recovery signs - last week UK unemployment fell for the first time in 18 months.

The UK's had been the last major economy still in recession.

Europe's two biggest economies - Germany and France - came out of recession last summer. Japan and the US also emerged from recession last year.
Except that it's not, really.

Whilst economists may be able to display cautious optimism in the name of big business, the fact remains that over 1.3 million people were made redundant during the past year, which is "is double the fall in employment and equivalent to 4.4% of people in work before the downturn."

As in America, Europe, and elsewhere, we can expect the class war against workers to continue unabated. That "there were 6.2 million fresh claims for jobseeker's allowance between April 2008 and November 2009," which is "seven-and-a-half times the rise in the unemployment claimant count during the recession," gives us some indication of the true impact of the downturn on real people. And the irony is that signs of "recovery" in GDP are only going to make that worse.

John Wright, of the Federation of Small Businesses, told the BBC;
In order to strengthen the recovery it is important that we boost consumer confidence and demand and that interest rates are held steady as continued investment in the economy will be the key to ensuring a sustainable recovery.
But what does this mean in terms of working people? With pay and conditions under a steady and sustained attack from both bosses and ministers, and a steady increase in costs as the recovery continues onwards, misery in the real world only looks set to worsen. As Richard Evans points out in the Telegraph, "recovery can bring its own problems; for a start, rising demand tends to stoke inflation, which could prompt the Bank of England to raise interest rates – good news for savers, but not something that hard-pressed home owners would welcome."

And Mark Dampier of Hargreaves Lansdown is even more pessimistic;
We have been living through a phoney war, mainly because of the electoral cycle. No political party has the heart or the courage to tell it as it really is. So we won’t get a real Budget until after the election and this will probably be worse than the infamous 1981 Geoffrey Howe Budget. So the real war will begin probably some time in July.

What can we expect? I strongly suspect that the big tax takers – basic-rate tax and VAT – will rise, VAT to 20pc and basic-rate tax by 2p to 5p in the pound.

The high level of government and consumer debt makes me feel quite pessimistic. It took over 300 years for us to have £380bn worth of public debt. It has taken this government 12 years to bring it to £850bn. Reducing it will mean a huge shock to our finances.
The worst is yet to come and as usual the burden will fall - heavilly - on the poorest. As Dampier points out so blithely, "the recession is not over for most of us."