Cameron's credit crunch as UK growth drops

Ruh-roh, as Scooby Doo might have put it. The chances of the UK coming out of the downturn with any immediacy are looking less and less, after figures from the Office for National Statistics showed the economy grew by just 0.1% between April and June – considerably less than the 0.2% previously expected. The service sector was particularly disappointing, growing by just 0.2%, compared with the 0.5% the ONS had originally expected, while household consumption fell by 0.8%. Which is more than a little disappointing – and on top of that, David Cameron wants us all to do away with our credit cards…

What is marginally more encouraging is that activity in the service sector (the biggest chunk of the economy) has improved slightly in September, according to figures from Markit/PMI, which recorded a figure of 52.9 for the month, up from 51.1 in August. Any figure above 50 suggests growth – so that’s a relief. The ONS figures also showed surprise growth in the manufacturing sector, which indicates that the Government’s dastardly plan to turn us all into manufacturing types may be beginning to work.

Given the rumbles echoing across the channel from the eurozone debt crisis, critics have been quick to point out that this is all because the Government has placed too much emphasis on reducing the budget deficit, and not enough on giving a kick up the backside to growth. The Treasury, however, is adamant that it’ll be sticking to its guns for the foreseeable future. ‘The economy is still growing and this week’s survey data for the manufacturing and service sectors are consistent with continued expansion,’ said a spokesperson. Technically, that’s correct, we suppose…

Now our esteemed leader purportedly wants us all to pitch in by paying off our credit cards. In his keynote speech on the last day of the Conservative Party Conference, the PM will apparently say that ‘the only way out of a debt crisis is to deal with your debts. That means households – all of us – paying off the credit card and store card bills. It means banks getting their books in order.’

Quite apart from the fact that the majority of us barely have enough cash to keep a roof over our heads, let alone pay off our debts; economists are decidedly unimpressed. As Keynes pointed out, if everyone saves during a downturn, no-one will spend – which means others won’t be earning, which means they won’t be able to save. Or, as BBC economics editor Stephanie Flanders put it, ‘If the PM really wants us to repay our debts he should have a word with Mervyn King. It is central to the Bank’s policies that we do not.’

Oh dear. After what has been a pretty good conference for the Tories (at least as far as their economic policy is concerned - don’t mention the cat) wouldn’t it be ironic if Dave went and spoiled it all at the last minute?