Coali­tion cuts un­der fire as fig­ures re­veal stronger UK growth

The Scotsman - - News - Christo­pher MACKie

govern­ment min­is­ters were ac­cused yes­ter­day of be­ing “growth de­niers” and of putting the UK’s frag­ile eco­nomic re­cov­ery at risk, af­ter of­fi­cial fig­ures re­vealed the econ­omy grew at its fastest rate for nine years be­tween April and June this year.

Po­lit­i­cal op­po­nents queued up to at­tack Chan­cel­lor ge­orge os­borne’s bud­get plans in the wake of an of­fi­cial re­vi­sion from the of­fice for na­tional Statis­tics (onS) that showed the growth rate was bet­ter than ex­pected in the sec­ond quar­ter of this year – up from 1.1 to 1.2 per cent.

they said the up­ward re­vi­sion showed the govern­ment’s plans threat­ened the re­cov­ery.

Shadow Scot­tish sec­re­tary Jim mur­phy warned: “these fig­ures show that the tories are tak­ing a mas­sive gam­ble with growth. ge­orge os­borne’s emer­gency Bud­get was based on a big lie that the econ­omy was worse than thought, when ac­tu­ally we now know the re­verse was true.”

the SnP’s trea­sury spokesman Ste­wart Hosie said: “these fig­ures un­der­line the fragility of the econ­omy, and raise the real threat to re­cov­ery from the coali­tion’s cuts agenda, which, by cut­ting too far and too fast, threat­ens to drag the coun­try back into re­ces­sion.”

But, ac­cord­ing to the In­sti­tute of eco­nomic Af­fairs think-tank, the fig­ures un­der­lined the need for the govern­ment’s deficit re­duc­tion work to con­tinue. mark Lit­tle­wood, its di­rec­tor gen­eral said: “the lat­est onS fig­ures re­veal the ab­sur­dity of ar­gu­ing cuts will trig­ger a dou­ble-dip re­ces­sion. Al­though the road to re­cov­ery will be a rocky one, the over­all trend will be bet­ter the more stri­dent the ac­tion the govern­ment takes.”

Fears re­mained over a slow­down in the global re­cov­ery yes­ter­day af­ter a sharp down­grade in Us eco­nomic growth trig­gered fresh mar­ket volatil­ity.

The move came as Fed­eral re­serve chair­man Ben Ber­nanke left the door open to fur­ther quan­ti­ta­tive eas­ing amid fears the Us econ­omy could lapse back into re­ces­sion.

In an ad­dress to a gath­er­ing of global pol­i­cy­mak­ers at Jack­son Hole, Wy­oming, Ber­nanke de­scribed the eco­nomic out­look as “in­her­ently un­cer­tain” and said the econ­omy “re­mains vul­ner­a­ble to un­ex­pected de­vel­op­ments”.

Us govern­ment data showed GDP grew at an an­nu­alised rate of 1.6 per cent in the sec­ond quar­ter, com­pared with the 2.4 per cent pace es­ti­mated last month. The down­grade was mostly due to the largest surge in im­ports in 26 years and a slow­down in com­pa­nies’ re­stock­ing of goods. It com­pares with a 3.7 per cent an­nual growth rate in the open­ing three months of the year.

While the sec­ond-quar­ter re­vi­sion was bet­ter than many econ­o­mists had fore­cast, Wall street trad­ing was choppy yes­ter­day, with the Dow Jones In­dus­trial av­er­age see-saw­ing be­tween pos­i­tive and neg­a­tive ter­ri­tory.

The Us econ­omy – the world’s largest – has now grown for four straight quar­ters, al­though the an­nu­alised growth rate has av­er­aged 2.9 per cent, com­pared with the 3 per cent nec­es­sary to keep un­em­ploy­ment in check.

sa­muel Tombs, an econ­o­mist with Cap­i­tal eco­nom­ics, said the GDP fig­ures showed there was “in­creas­ing ev­i­dence that the global re­cov­ery is fal­ter­ing”.

Ber­nanke raised the prospect of an­other Fed pur­chase of se­cu­ri­ties, most likely govern­ment debt or mort­gage se­cu­ri­ties, to drive down rates on mort­gages and other debt to spur more spend­ing by amer­i­cans.

Jim Mur­phy said Bud­get was ‘based on a big lie’

Ben Ber­nanke left open the quan­ti­ta­tive eas­ing op­tion

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