UK recession appears to be over

The UK recession ended in the last quarter of 2009.  This is according to the first official estimate of Gross Domestic Product, released today.  The economy grew by 0.1%, which means that GDP fell 3.2% in 2009.  This was a bit below expectations but still the move into postive territory is welcome.

 

It's worth looking back at previous recessions and recoveries.  The path to recovery tends to be bumpy with quarters of slow, no, or negative growth even after the first post-recession increase in GDP.  So we might expect the same this time, although this recession has been unusual in that sectors in the economy experienced a drop in confidence at around the same time last year.  So it is early days.

 

What does this mean for Labour?  Well, first imagine what the outcome would have been without any economic stimulus.  Or even worse, if the country had adopted Tory plans and put cuts in public spending in place last year, or even now.  So the thrust of economic policy is on the right lines; delivering a credible approach to public finances while not risking recovery.

 

Yet even if the economy has grown slightly, we must remember that it takes time to recover from a recession, and this one is the worst since the 1930s.  So it will take time for unemployment to fall and for businesses to get back to growth.  That's why economic policy needs to remain focused on economic growth.


Stephen Beer, 26/01/2010


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Obama announces banking separation - the UK should do the same

It is time for wise reform in the national interest

President Barack Obama today announced that he wants to separate the activities that banks engage in.  These reforms are along the right lines.  The UK should do the same.

 

The Obama announcement today heralded legislation to limit the scope of bank operations.  Announcing the 'Volcker Rule', after Paul Volcker, a former Federal Reserve chairman who has advocated such measures, President Obama announced that he wanted to 'ensure that no bank or financial institution that contains a bank will own, invest in or sponsor a hedge fund or a private equity fund, or proprietary trading operations unrelated to serving customers for its own profit.'  Obama is concerned that banks are relying on government support to take excessive risks.

 

President Obama also announced that he wanted to put a limit on the size of banks, preventing institutions in future being 'too big to fail'.

 

This is a significant announcement today.  It echoes the Glass Steagall Act that separated banks after the 1929 Wall Street Crash, until the legislation was reversed in 1999.  Why doesn't the UK do the same?

 

There have certainly been calls for separation of banking operations.  The Christian Socialist Movement for example has an Early Day Motion (no 531) before Parliament calling for just that.  Yes, it's true that Northern Rock was not an investment bank - but it got involved with toxic assets traded and promoted by investment banks.  And of course, Lehman Brothers was an investment bank and was not involved in retail banking at all - but many retail banks got themselves exposed to the racy assets Lehmans was trading.  Systemic risk occurred because banks went beyond their core functions.  That is why we need a return to more narrow, or utility, banking.

 

So, what's stopping us?  Up until now, it has been collective political will.  No government could act, it seemed, without international cooperation.  Yet the US has done just that.  There is another reason - the stakes are higher in the UK than the US.  The financial sector is a larger proportion of the UK economy and the risks of reform can appear larger.  It is understandable perhaps that politicians might hesitate - indeed they are wise to think things through.

 

However, eventually they must act and before it is too late.  It is time for vision.  They must also guard against both a 'Treasury View' which is stuck in the pre crisis mindset (ie let the financial sector alone) and the intensive lobbying and screaming from banks.  The banking sector has demonstrated extremely poor judgement.  It cannot reform itself now and it does not want to do so.  Its bluff should be called because government's responsibility is to the people.  Only clear government (and legislative) action can prevent another crisis.

 

 


Stephen Beer, 21/01/2010


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Unemployment falls - behind the numbers

Figures out today show that unemployment fell in the three months to November for the first time since May 2008.  This is good news because it marks a pause, or a halt, to rising unemployment much earlier than most people had feared only a few months ago.  Labour should see this as vindication of its employment focused policies.  Cutting public spending now as the Conservatives call for (actually they wanted to cut spending months ago) would probably push unemployment much higher.  But we should not get carried away.

 

As the Office for National Statistics states, unemployment fell by 7,000 (the claimant count fell for the second month in a row) but employment levels fell too, by 14,000.  There were 28.92 million people in work in the quarter.  There were 1.03 million people working part time because they were unable to work full time.  This is the highest level since 1992 when the data were first collected.  This may represent a change in our  labour market ie it is more flexible.  This can be grim going into a recession but can mean employment picks up with growth.  This recession seems to have affected many sectors of the economy at the same time but it doesn't appear to have knocked out whole industries, despite some very hard times for people.  Firms seem to have this time around reduced the hours worked by employees too.

 

People are more confident about the future economically when they have less fear of rising unemployment.  These figures today may help there.  However, we need to see a trend before we can draw conclusions.  At least however, it does suggest that there is a drag on unemployment rising at the moment, which is a good thing.

 


Stephen Beer, 20/01/2010


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On the radio talking about faith, politics, and Europe

I was part of a discussion on Premier Radio today.  The debate was about some comments the Czech Cardinal Miloslav Vlk, the Archbishop of Prague, was reported to have said.

 

He was quoted in the Daily Telegraph as saying that Europe had denied its Christian roots and was in danger of being 'conquered' by Muslims.  Despite that very unfortunate phrase (which I criticised), his main point seemed to be that there is a 'spiritual void' in Europe and that Christians have not been bold enough in their faith.

 

My point was that our values of equality, freedom of conscience, and freedom of speech are based on our Christian heritage.  That means everyone is free to choose their faith, and to choose their political beliefs.  When I hear someone talk about Muslim faith in Europe, I just think about the 3% of my fellow British citizens who happen to hold a different faith than I do (though we may come to some similar conclusions about how to build a better society).

 

My main point was that the Church would surely argue that any spiritual void it found in Europe was being filled with materialism.  Yet that worldview had been severely threatened by the financial crisis and recession.  Political leaders and others are looking to the Church and Europe's Christian heritage for a foundation for better values in life (eg Gordon Brown at St Paul's Cathedral last year).  It's up to the Church to speak up and engage further in that debate.

 


Stephen Beer, 07/01/2010


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Family politics

The New Year has begun with Conservative plans for health unravelling and, on the same day, David Cameron appearing to dilute their policy on marriage tax allowances.
 
The whole area of family policy is fraught with difficulties. We all have experience of family in one way or another and each family is unique.  That said, surely there must be an alternative to either rewarding traditional family models or adopting a laissez faire approach to family policy, with the state sorting out the consequences? Dare I say it, is there even a ‘third way’ for the politics of the family?
 
That’s the approach I took when co-writing the lead article for the Common Good, the Christian Socialist Movement’s magazine. Each issue focuses on a theme, with a variety of articles on a subject giving different opinions and perspectives. The lead article introduces the theme with both opinion and some key facts and explanations. The new issue is looking at the family.
 
What matters is stable families. It’s not the government’s job to dictate how people should organise their lives – relationships can be hard enough work at times as it is. Indeed if the most stable families do indeed tend to have married parents (which does not mean being married leads to a more stable family necessarily), we should be focusing resources on those who most need support. That means lone parents and families with children in poverty. It’s also those people for whom things haven’t worked out as they hoped. It’s possible for Labour to do this while being positive and supportive of marriage too – most people celebrate weddings for example whatever their own take on relationships or particular circumstances at the time. After all, if two people are prepared to make a public commitment that they will be together for the rest of their lives in marriage or partnership why should we avoid talking about it?
 
Labour needs to shift its language on this a bit. Then we can concentrate on what matters most in terms of government policy and that is promoting family stability within communities and providing support to poorer families, with a focus on ensuring that we get nearer to providing equal opportunities to all children and young people.
 
It was clear this week that Cameron’s plan for a marriage tax allowance is has not been thought through. It’s designed to give the impression the Conservatives support marriage. One thing of course that does help family stability, including marriages, is an economic policy focused on the whole nation with an emphasis on fighting unemployment. Yet the Conservative’s economic policy is in a worse state than their family policy.
 

Stephen Beer, 06/01/2010


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