British Recession Deepens, Pressure on Coalition Mounts

Conservatives cannot continue to hide behind their Liberal Democrat coalition partners.

View of the Houses of Parliament in Westminster, London, England, June 22, 2010
View of the Houses of Parliament in Westminster, London, England, June 22, 2010 (nyyankee)

Britain’s economy contracted for a second quarter in a row in the first three months of this year, technically plunging the United Kingdom in the second recession since the 2007-2008 financial crisis.

Pressure will mount on Britain’s coalition government of Conservatives and Liberal Democrats to offer a more convincing plan for economic recovery.

Prime Minister David Cameron faces criticism from right-wing lawmakers who believe that his program of austerity hasn’t been tough enough and attacks from the Labour opposition which rejects it altogether. The left blames austerity for the lack of economic growth. The right is keen to point out that there haven’t actually been cuts, rather reductions in projected spending increases.

Total public-sector spending, in real terms, was almost 4 percent higher last year than it was in 2009, Labour’s final full year in power. It is projected to grow further this year. The government seeks to spend £40 billion more than Labour did in 2009, necessitating some £120 billion in borrowing and raising the nation’s debt to the equivalent of 62 percent of gross domestic product.

Conservatives can lay the blame at their more centrist coalition partners who are wary of austerity and the sort of market reforms that could produce growth but as the conservative newspaper The Telegraph editorialized on Wednesday, “That excuse is beginning to wear a little thin.”

It cites a survey which suggests that a third of British businesses would take on more workers if employment laws were relaxed. The newspaper also laments the lack of corporate tax reduction.

Such game changing measures are needed to inject life into a moribund economy. Instead, we have a disappointing and insipid absence of radicalism that is routinely and conveniently blamed on the intransigence of the Liberal Democrats.

David Cameron last year vowed to fight the “enemies of enterprise” and cut regulations but hasn’t. He says that “the real solution” to Britain’s economic woes “is more enterprise, competition and innovation” but one out of five Britons is still employed by his government which accounts for half of the country’s annual economic output.

Polls suggest that Cameron’s Conservatives wouldn’t win a majority if parliamentary elections were held today. Neither would Labour although it is 10 percentage points ahead in a YouGov survey that was published in the tabloid newspaper The Sun this week.

Neither party has offered a bold plan for growth. If the prime minister is to regain the confidence of his voters, he should stop pretending that halfhearted measures to stimulate economic recovery are somehow audacious. Nor can he rely on the Bank of England to revive the nation’s economic prospects with its program of monetary stimulus. He should take a stand and demand conservative action.