Wednesday, 26 January 2011

Growth figures have shaken the coalition's confidence

It is far too early to talk about a split inside the cabinet on economic policy, but today's shockingly bad and unexpected growth figures shook the confidence of the coalition.

The stakes could not be higher. No one doubts that the next election will be won or lost on whether the coalition made the right call on the scale of the spending cuts, so everyone will now watch with bated breath for the first quarter growth for this year, due in April, after the budget.

The cabinet is nervously content to blame the freakish weather, or possibly the inaccurate statisticians, but a minority want some contingency plans in place. In particular they want to see a willingness to reprofile the public spending cuts so that the biggest weight of spending cuts is delayed until the final two years of the four-year deficit reduction programme.

George Osborne was at his most Thatcherite today insisting there was no alternative to deficit reduction, and in one interview blaming the weather no less than 20 times.

The valedictory criticism of the outgoing CBI director general Richard Lambert claiming the government did not have a detailed growth strategy hit home at a sensitive time.

But the worry in No 10 is that these figures are bad even before the economy feels the impact of the VAT rise and the start of four years of spending cuts. If the ONS growth figures remain bad in April, Osborne knows he has fewer credible excuses, and to make matters worse, he will have the Rottweiler in Chief Ed Balls biting chunks out of him. It cannot be an enticing prospect.

Courtesy of the Guardian

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