DOUBLE Dipping? I consider the risks of a second recession – and the implications the cuts may have on making that a reality.
The economists are all talking about something which, if it happens, will be the Chancellor’s nightmare scenario – a second recession.
If that happens, it will be easy for opponents of the coalition Government to condemn their cuts agenda as a failed strategy.
That’s the last thing that David Cameron and George Osborne want to see. Their primary election promise was to fix the economy, and they said they could do it and Labour could not. That means that, through their own words, they have upped the stakes enormously.
A faltering economy might be survivable for the Tories if that was a global problem.
But it looks like America is doing quite well, while the UK is lagging behind.
Ministers have blamed the weather, but that’s a bit of a long shot – note that the USA has also had extreme weather conditions over the same period, but didn’t suffer a shrinking economy.
The issue now comes down to consideration of whether the Osborne ‘cuts agenda’ is a good one – or if he will cut too deep.
There’s little doubt that the scale down of public spending would be even more severe without the Lib Dems there, putting a brake on the Conservative instinct to cut back public services.
Even so, there’s a risk that it may all be too much.
This leaves the Tories in a bit of a bind in the run-up to the May elections.
If it all goes well and we see growth in line with other European countries and America, then good for them and good for Britain.
If, on the other hand, Britain ends up mired in job losses, industrial unrest and a miss-firing recovery, voters will have the chance to cast their judgement a year on from the General Election.
As politicians all know, economic trends tend to be stronger and more long term than individual Government actions.
So there’s only a certain amount they can do to control those trends once they have begun.
As such, the decisions already made will make a difference to what comes next.
It’s like throwing a javelin and then having to watch to see where it lands.
Before the election, Lib Dem economics guru Vince Cable rightly warned that going too far too fast was an error.
He has, no doubt, been largely responsible for taming the zeal of Osborne to do just that.
Has Osborne listened enough to prevent the Double Dip?
I hope so – because a new ‘Government-sponsored’ economic contraction isn’t just bad for the Conservative Party – it’s bad for everyone.