Labour cannot rely on economic recovery….
A couple of pieces of economic news will doubtless make pleasing reading in government circles. Official unemployment fell by some 7,000 for the first time in 18 months in November 2009 leaving the jobless rate at 7.8% which is impressive considering the rate in the US stands at about the 10% mark. Meanwhile, retail sales rose by 0.3% across November and December and its widely expected that the last quarter of 2009 will record economic growth.
However, voters remain unconvinced by this slew of good news if the latest Politics Home poll is to be believed. As well they might be; the rise in retail sales is poor considering the figures encompassed the Christmas period and the last months of the VAT reduction. Furthermore, the drop in unemployment mask a fall in those in full-time employment of 113,000. It also encompasses the seasonal period when the retail sector traditionally recruits and then sheds jobs in January.
On-top of this it is also more than off-set by the continued depression of wages;
Colin Ellis, economist at Daiwa Capital Markets, was concerned that wage growth had slackened and that it could affect consumer spending this year. “The rise in unemployment during this recession has undoubtedly been smaller than expected, which should support consumer spending. But the flipside of a smaller-than-expected adjustment in labour market quantities has been greater adjustment in terms of prices, with earnings growth weakening markedly.”
In other words the notion that the recovery is ‘established’ is a little non-sensical to say the least. In fact, voters are right to be sceptical that things are on the mend. This is doubtless why despite Mervyn Kings attempts to sound Conservative-friendly by warning the government it must cut the deficit the Bank of England’s Monetary Policy Committee voted by 9-0 to keep interest rates low and continue with quantitive easing. How is Kings political posturing going to save the economy or logically consistent with how he votes on the MPC?
David Blanchflower and David Drew are right; the MPC is not fit for purpose and should be abolished at the earliest possible opportunity. The independence of the Bank of England should be reconsidered at the earliest possible conveinence. So, what does all this mean politically? For one thing it means that Labour strategists have to stop pinning their hopes on an economic recovery to win a fourth-term. It isn’t likely to happen in time and even were it too its questionable whether Labour would b credited by the voters for it.
Instead it will have to present a radical program for economic change and growth that can inspire people to go out and vote for it.