Sunday, 29 June 2008

Recession and Unemployment

The levels of unemployment in the UK are expected to rise within the next two years as the economy declines. In 2005 New Labour fought the last general election on the back of an economic record showing 50 consecutive quarters of economic growth. Remember Tony Blair hailed Gordon Brown as the most successful Chancellor in a hundred years, whilst Gordon was happy to be seen in all modesty presiding over the longest period of sustained economic growth in 300 years.

New Labour's 2005 manifesto crowed that they had finally laid to rest the view that Labour could not be trusted to run the economy. Indeed, it boasted that the unprecedented economic success had enabled New Labour to link together the dynamism of the markets and social Justice in a way that would make globalisation work for all.

Nothing Travels Faster than bad news and a few weeks ago a report from the International Organization for Economic Cooperation and Development (OFDC) ripped into the British economy branding it the equivalent of a basket case. It criticized the way the UK has been run for the last decade, saying the options left to the Government were limited. It slashed growth forecasts for the year and next, and must have had the economist bods sprinting for their calculators. The OECD's conclusion was that Britain is heading for a worse slowdown than anyone has previously predicted, accelerating fears that the UK economy and recession are shorty to become familiar neighbors.

In upbeat forecasts both Alister Darling and Gordon Brown have serially declared their idea that the UK is well placed to withstand the shock waves that will inevitably flow from the global downturn.

Employment levels have also been questioned by the OECD, suggesting that unemployment will rise by more than 200,000 over the next 18 months, taking the total to 1.81 million or close to the 2 million mark. The way out? The OECD say there now isn't one, blaming the UK's "excessively lose fiscal policy" which is a coded way of pointing the finger at Gordon Brown and his policy of borrowing heavily and spending too much over the recent boom years. In the first three months of this year - unemployment was up 14,000 to 1.61 million......And worse will follow.

For those looking for a silver lining in the gathering storm there is not much to find. Alan Greenspan, the former head of the US Federal Reserve central bank, believes that, far from binging well placed to survive, Britain's economy is even more exposed to financial turmoil than that of the USA.

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