It’s recession or depression for the UK

What analysts at the National Institute of Economic and Social Research call recession or depression might cause perplexity among trade union members. For the rest of the people who live and work in Britain, this dichotomy can sound even worse: it probably makes little difference. But in the race ahead of next week’s Budget, this is a semantics war in which advocates of austerity and champions of stimulus will seek victory before the public opinion–after all, it is a powerful tool that shapes cabinet decisions.

Dave Prentis, general secretary of Unison, fired his shot Wednesday describing the risk of a triple dip recession as “close to reality.” The reason? “We know that public service jobs have been cut too far, too fast. Lift the threat of unemployment and people will start buying again, boosting manufacturing. Give public sector workers a decent pay rise and more money will flow through to local shops and businesses.”

Were Chancellor George Osborne to follow his advice, Prentis could be spot on and trigger real economic recovery. But the UK government would increase its deficit, and the British economy would lose competitiveness as labour costs go up in the private sector to retain and attract skilled workers.

The fact that NIESR monthly estimates indicate that the GDP declined by 0.1 percent in the three months ending in February, after a decline of 0.2 percent in the three months ending in January 2013, suggests that Unison is partially right. Public spending was to be reigned in, but instead of cutting waste, the Coalition policies have hit domestic consumption excessively.

The NIESR interprets the term ‘recession’ to mean “a period when output is falling or receding,” while ‘depression’ is “a period when output is depressed below its previous peak.” Thus, unless output turns down again, the Institute’s experts explained in their latest paper, “the recession is over, while the period of depression is likely to continue for some time.”

It’s all pain for everyone. According to Optimum Research data, “the relentless bill hikes are placing unprecedented levels of pressure on consumers. Over half (55%) say that the rising cost of living is their biggest cause for concern at the moment […] 39% are worried that they simply do not have enough money and 18% are concerned about job security.”

The choices look grim for a Chancellor who must reduce the state’s debts and wants to be re-elected. Yet, union leaders shouldn’t just focus on the 500,000 public sector jobs that have gone since David Cameron came to power with Nick Clegg’s support. Why can’t unions acknowledge that the public administration forces onto taxpayers too large a payroll? Where are their alternative plans? The British economy deserves some effort.

It does not deserve another lazy Budget, though, finding easy targets in social services and missing the opportunity to implement a rational re-organisation of the public sector. The game is about efficiency and welfare, not capitalism against the people.

About the Author

Victor Jimenez
London contributor at thecorner.eu, reporting about the City and the Eurozone economies. He regularly writes for Spanish newspaper group Prensa Ibérica--some of his features include shared work with journalists of The Daily Telegraph and the BBC.

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