THE good news in the UK government's financial statement this week was that Britain has avoided a return to recession.

The definition of recession is of successive quarters in which the economy contracts; in the last quarter of 2010 in Britain it shrank by 0.5 per cent and the danger was that the first quarter of 2011 would also be negative.

Instead there was growth of 0.5 percent which just cancelled out the earlier figure.
But the newly-created Independent Office for Budget Responsibility had forecast growth of 0.8 per cent so Chancellor of the Exchequer George Osborne's prediction that “recovery is on track” was not borne out.

However, the bad news from these self-same figures and predictions is that they refer to the last period before Mr Osborne's austerity measures begin to bite, except for the higher VAT rate.

The impact of all the other spending cuts, especially on employment in the public sector, will be felt increasingly through the rest of this year.
It is difficult, therefore, to see how the economic growth on which Mr Osborne's drive on the deficit depends can be expected in this period.
In such circumstances the Chancellor's refusal to contemplate a Plan B is worrying; some influential voices are calling for a scaling back of the most severe of the impending cuts but they are not being heard in Whitehall.

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