It is possible to argue that the UK economy is doing better than popularly suggested. Although the rise in GDP in the first quarter was only 0.3%, an annual growth rate of 1.2%, and over the last twelve months only 0.6%, there have been special factors – mainly financial services, North Sea Oil and construction.
Against this the private sector has created over one million new jobs and the UK comes second behind Germany among the G7 countries in terms of the rise in living standards. We still lead the way in aerospace, high-technology, engineering and pharmaceuticals. Our tourist industry is growing and we are exporting education by attracting record numbers of overseas students.
The real drag in the economy is the lack of consumer spending. Forecourt sales of petrol plunged to a record low in March since records began in 1990. UK drivers bought 1.37 billion litres of petrol in the month compared to 1.43 billion litres in February. Price rises have taken their toll. Even if the price of a litre falls to 134p (as is happening at present) that is still 12p per litre higher than three years ago.
Earnings are static and prices (particularly energy) are rising. Following dire local council elections the Chancellor is under increasing pressure to increase liquidity in the economy. Mr. Osborne, however, is sticking to his guns. In the last week he has published the formal remit of the Financial Policy Committee (“FPC”) which, in April, gained full statutory powers to curb boom-and-bust cycles in the banking system.
The FPC’s main task is to ensure that the banking system is properly capitalised. Mr. Osborne has said that “it is particularly important that the Committee does not undermine growth, given the fragile nature of the economy.” He is worried that the FPC may require banks to hold greater amounts of capital thus restricting their lending activities.
The present desperate performance of Ed Miliband is mainly because Labour has no creditable alternative policies. Ed Balls’s reduction of VAT in isolation simply has no credibility.
So, all in all, nobody knows whether the bottle is half full or half empty.
That is why so many people voted for UKIP.