The Guardian reports:
The threat of a double-dip recession intensified today after it emerged that Britain's powerhouse services sector saw its growth stall last month, jeopardising hopes of a sustained recovery.
As the Bank of England prepared to announce its latest decision on interest rates tomorrow, a survey of the sector that makes up the bulk of Britain's economic output showed that its growth slipped to its slowest since it emerged from recession a year ago.
Many of the companies surveyed said cancelled public-sector contracts were beginning to hurt their businesses, forcing them to cut jobs and dealing a blow to chancellor George Osborne's hopes of reviving the private sector by reducing public spending.
There are good reasons:
a) Broadly speaking for every job cut in the public sector there must be more than a job loss in the private sector if cuts in government spending are to be achieved, since so much of government spending is in the private sector;
b) The impact of benefit cuts on the private sector will be dramatic – people will have less to spend;
c) Increasing unemployment impacts heavily on consumer spending – not just from those directly affected but from those who fear they might be. As Lloyds bank said yesterday 0 there is nothing they can do to stop people saving at present – and they are. This is the paradox of thrifty that Keynes so lucidly described;
d) There is no sign of any technical innovation, new market development, or wave of creativity that gives any indication of he market having reason to fill the economic vacuum that the government is creating. The market has not been crowded out by government – the market is unable to find new services or products to sell which people want which is why its only approach to expansion is to capture the public sector.
e) What people want is what the state can supply, and the state alone can supply equitably and efficiently:
- social housing
- new public infrastructure
- green energy
- a social safety net
- good pensions
In this case there is no chance at all that the market will fill the void the government is creating and recession leading to depression is the only prospect on the horizon whilst this government stays in power.