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Wednesday 25th July 2012 | 10:17
IPPR Press Release
The Office for National Statistics has confirmed that the UK economy remained in recession during the second quarter of 2012. Real GDP fell by a much bigger than expected 0.7 per cent and it has now fallen for three consecutive quarters and in five of the last seven quarters. Output is 4.5 per cent lower than at its peak at the beginning of 2008.
Tony Dolphin, IPPR Chief Economist, said:
“The UK economy remains mired in recession. There is now little chance of the OBR’s forecast of 0.8 per cent growth in 2012 being achieved and even the IMF’s forecast for growth of 0.2 per cent, made only last week, is now under threat.
“Before the financial crisis, the economy was expected to grow, on average, at an annual rate of 2¼ to 2½ per cent. So, output in 2012 will be almost 15 per cent lower than might reasonably have been expected before the financial crisis.
“The Chancellor should take immediate steps to implement a combination of Keynesian and supply-side policies to get the economy growing again in the next few years and to ensure growth is sustained well into the medium-term. These should include temporary tax cuts and a boost to infrastructure spending not offset by cuts elsewhere. This would mean borrowing more in the short-term.
“The IMF has given the thumbs up to this approach, saying ‘The UK has the fiscal space to make such adjustments’.
“In the light of the deteriorating situation in the euro zone, the Chancellor should also publish details of the Government’s contingency plans for a serious worsening of the euro zone crisis. Assuming these plans are credible, this would reduce some of the uncertainty that is holding back business investment and recruitment and be a cost-free way of potentially boosting the economy.”