The UK is on double dip recession.

Osborne offered us his vision two year ago.  It was of “expansionary fiscal contraction”.

His argument was that the more he cut government spending the more  people would spend, liberated by knowing that if he succeeded in his aim of balancing the budget tax cuts would follow, letting them repay debt they’d take on now to spend.   It hasn’t happened.  People who face the prospect of unemployment, increased cost for things that were previously provided by the state, lower pensions, higher cost of childcare  and the uncertainty of recession have simply stop spending.

And Osborne argued that  as government cutback business would rush to fill the space that he would create in the economy because they would be liberated from the yoke of government interference in their activity.  It hasn’t happened.  Businesses have seen that their biggest customer is not spending and have cut their investment, reduced their employment plans, closed their premise, withdrawn from the High Street and battened down their hatches in the hope of survival: the  last thing that they have done is expand.

Of course, all of this was completely predictable, and was predicted.  I was one of those who did so.  With the Green New Deal group I suggested an alternative approach to fending off recession as long ago as the summer of 2008, before the banking crisis developed.  Osborne ignored  us then, and I have little doubt that he will ignore us now but the price that we will pay for that will be an enormous one.

I suspect that during the course of this year we will come out of recession, but only just.

Much more importantly, I think unemployment will continue to rise as this year progresses, with there being no prospect of any real reversal in  site at any time in the foreseeable future as the government continues its programme of reckless cuts that guarantee a continuing downward spiral in confidence that will reduce investment for years to come, and at the same time will destroy any hope of creating a balance in our economy, or, just as importantly, a balance in our budget.

There is only one way to restore that balance in our economy and that is for the government to spend now on the creation of new infrastructure projects, new green energy projects, on the backlog of repairs that need to be undertaken in our public sector properties, in providing services that people need, and in investing with business in our future in sectors such as non-carbon energy.

This spending will, of course, require additional funding, but there is over £2 trillion invested in pensions at present in this country with more than £900 million (or thereabouts) in the larger pension funds. In that case money seeking a proactive home on which a positive return can be paid does exist. In addition, business itself has £750 billion of cash on its balance sheets right now, none of which is being spent. It is this combined cash that has to be brought into use in our economy if we are to get out of recession and nothing George Osborne is doing  will achieve that goal.

We don’t, as a result, need corporation tax cuts for big business right now: we need them to pay more tax now so that investment can take place to fund demand for their products.  That gets the business cycle going again.

And we need a condition to be placed on pension tax relief saying that 25% of all money going into tax funded pension arrangements has to be invested in projects that can create jobs in the UK right now.

Simple measures like that could get us out of recession. Nothing Osborne is doing can.

It is time for change.

Larry Elliott is in good form in the Guardian this morning. As he pints out the IMF has just issued their latest forecasts, and for the UK the message is clear, and is that Osborne’s economic policy is not working. The deficit forecasts have got persistently worse, not better, and there’s no sign of them clearing by 2017, whatever Osborne would like to represent. In fact, all the movement is in the wrong direction now.

As Larry notes:

A number of conclusions can be drawn. First, it is not true that the deficit reduction plan set out by the coalition is working. Progress has been much slower than forecast.

Second, unless the government’s supply-side reforms can boost the economy’s potential growth rate, knocking the public finances back into shape will require yet more austerity.

Third, it is something of a miracle that the markets have yet to latch on to the UK’s combination of weak growth and unmet deficit-reduction targets. The fact that Britain is not part of the single currency, and can thus allow its currency rather than its bond market to take the strain of adjustment, probably has something to do with it.

Fourth, ministers would be unwise to imagine that the UK will remain a safe haven for ever. Should the economy continue to flatline for a further six months, the markets might start to look at Britain with a more critical eye.

I am in broad agreement.

There is only one way to clear our deficit now – and that is for the government to boost demand by spending. That is the only hope we have of getting people back to work, off beenfits and into paying tax. Nothing else can do that. Nothing else will solve this problem. Nothing else will address the crisis of unemployment.

Labour has to say so, now.

If it doesn’t it too has no way to solve this issue.

From Heather Stewart in the Observer this morning (a gift that just keeps on giving today):

In the heady days before the credit crunch, the logic was that business leaders must be allowed to become filthy rich, so they would go on sprinkling their fairy dust on the rest of us.

But that won’t wash any more. … [T]he myth of the “wealth creator” has been well and truly shattered. Many of Britain’s top earners are not entrepreneurs in any meaningful sense: they’re financial engineers, speculators or smash-and-grab venture capitalists, whose winnings are earnings, pure and simple, and should be taxed as such.

Precisely so.

Now all we need to do is get at least Labour to understand that.  It may be a step too far for the so-called business friendly Tories who are anything but.