Darling: GDP rise due to Labour’s approach to “supporting the recovery”

The shadow Chancellor says the rise in GDP "show the results of the Labour Government’s approach to supporting the recovery" - and that the Coalition "will have to accept responsibility for the risks they are taking with the economy".

The shadow Chancellor says the rise in GDP “show the results of the Labour Government’s approach to supporting the recovery” – and that the Coalition “will have to accept responsibility for the risks they are taking with the economy”. UK Gross Domestic Product rose 1.1 per cent in the second quarter of 2010, with the increase in output “due mainly to increases in business services and finance and construction”, the Office for National Statistics revealed today.

The increase in output “was due mainly to increases in business services and finance and construction”, the ONS said. Output of the service industries increased 0.9 per cent, output of manufacturing rose 1.6 per cent, and output in construction rose 6.6 per cent. GDP increased 1.6 per cent in Q2 2010 compared with Q2 2009.

Alistair Darling said:

“This is the fastest growth we have seen for over four years. It shows that confidence was returning. And you can see the success of maintaining support for important sectors like construction.

And this is the final nail in the coffin of the Coalition’s argument that things are worse than they believed before the election. Today’s figures show that growth was twice as fast as expected. The Coalition’s economic policy is not inevitable – it’s the choice they’ve made.

And shadow Chief Secretary Liam Byrne, writing on his blog, points out that, compared to previous recessions, “Labour managed the recovery in a way that kept unemployment down”. Two weeks ago, Left Foot Forward reported the OECD’s questioning of the Coalition’s decision to scrap the Future Jobs Fund.

The OECD employment outlook had said:

“Effective re-employment assistance has prevented an even sharper increase in UK joblessness and should be reinforced even in the current context of fiscal consolidation…

“The introduction [by Labour] of the Flexible New Deal (FND) in October 2009 has been useful in the context of the recession because it puts an increased focus on screening skills at an early stage of the unemployment spell, targeting the low-skilled unemployed who are likely to face greater challenges in finding employment.”

Adding:

“While the large fiscal deficit makes it essential to focus on cost-effective programmes and target the most disadvantaged groups, labour market policies should remain adequately funded. In this context, it may also be of concern that the new Budget ends funding for two crisis measures, namely, the Future Jobs Fund and the Six Month Offer.”

10 Responses to “Darling: GDP rise due to Labour’s approach to “supporting the recovery””

  1. Evidence based? Really?

    But doesn’t this show that we can cut public sector fat? Out of 1.1% growth only 0.1% came from the public sector with the Private sector driving growth.

    Lessons to be learnt;
    1) Companies aren’t spooked by the prospect of cuts- in fact they seem to share the Bank of England analysis that cuts are what is needed.
    2) The private sector is driving growth, tax receipts are up as is employment.

    None of these seem to demand a delay in cutting the fat.

  2. Mr. Sensible

    I’m afraid that’s a rather selective reading of the figures.

    I think it is worth remembering that the large majority of this came about before the June budget, and so before these cuts took effect.

    You also forget that:

    1. Parts of the private sector are dependent on public contracts. an example of this is construction, and I fear for the consequences of the scrapping of BSF. As we’re talking about the impact on the private sector, the government’s talked a lot about getting Britain making things again. So, where’s the sense in cutting capital allowances, including for the Computer Games Industry, which means we could lose jobs to Canada?

    2. The fact is, a lot of what’s being cut isn’t so called fat; a lot of these cuts are going to have an impact on not just the services people use, but as I mentioned above the private sector.

    3. if these cuts were about cutting the deficit, where’s the money for the tax cuts the coalition’s also proposed? Like the freeze in Council Tax, the cut in Corporation Tax, and the increase in personal allowances?

  3. Evidence based? Really?

    1) The only reason the construction sector posted higher figures was that they had toploaded projects from the previous quarter (largely beleived to be due to the weather). School building has not ended, just the system under which it was previously dealt. This is not even without going into the fact that we have zero money to prop up an industry with public money; this stops the sector which is driving growth from coming through- we are more likely to have to put cost burderns on successful businesses if we are propping up others.

    2) I think thats besides the point, i am talking about how job gains/ losses between the private/public sector would pan out. The debate you want to raise is clearly valid but slightly tangential and dealt with in point one.

    3) Evidence is clear; cut tax rates and you boost revenue, more revenue less defict. If you want the private sector to take up jobs you have to encourage it. The money is coming from various sources that have been frequently debated on this site- you commented on them so i’d expect you to know.

  4. Michael Burke

    The data show that stimulus works. There was a fiscal expansion in the 2009 Budget, which induced the private sector to increase its own activity.

    But what Alistair Darling misses entirely is that this increase in activity is actually leading to a narrowing of the deficit (stimulus measures included). His December Pre-Budget Report forecast a deficit in this FY of £178bn. But the June public finances data shows the latest 12-month deficit has fallen to £143bn. That includes the increased govt. spending.

    Therefore, the idea that his own 2010 Budget was obliged to be an austerity one, now eagerly seized on now by the Coalition, is entirely false. Further investment by government would have produced a bigger rebound in activity and a more pronounced narrowing of the deficit.

    Declairing that you would be ‘even tougher than Thatcher’ was econmically as well as politiclly disastrous.

  5. Mr. Sensible

    ‘ Evidence based? Really?’ that doesn’t really add up.

    Seasonal factors may have played a part, but even excluding that I think those figures would still have been respectable.

    And on the question of supporting construction, it’s clear from these figures that through supporting growth we can help cut deficits.

  6. Mr. Sensible

    I mean, I think it is very telling that since this budget Business Confidence in both manufacturing and services has crashed, and even the Treasury Select Committee admitted that a double-dip was more likely.

  7. Look Left – The Week in Fast Forward | Left Foot Forward

    […] second quarter of 2010 – vindicating Labour’s approach to supporting the recovery, as reported by Left Foot Forward earlier. Shadow Chancellor Alistair Darling said the figures showed that […]

  8. evidence based really?

    Mr sensible; its clearly not only seasonal factors, buts thats what the industry itself (listen to the pm programme) has attributed as the main cause.

    MBurke, how does this validated the 2009 stimulus?? Either you are talking about the VAT cut which is widely percieved to have had little impact or you are talking about Quantative easing. I’m not saying QE didn’t have an impact- although doing it again given the current situation would risk serious inflation (an extremely regressive state of affairs)- but this is not the point i’m trying to make. The point is not why this happened, but what economic vision this endorses. I’ve seen writers bang on for weeks on here about how the private sector can lead to the required growth. This is evidence that it can and that we shouldn’t be concerned about state redunancies etc and the effect that this would have on the economy.

  9. evidence based really?

    Sorry that should read “I’ve seen writers bang on for weeks on here about how the private sector can’t lead to the required growth”.

  10. Chris

    @evidence based really?

    These figures in *no* way endorse the idea of a massive private sector lead recovery, the rise was mainly on the back of construction which was entirely down to government spending on capital projects. The economic vision which is firmly endorsed by these figures is Labour’s vision of the government needing to carry on supporting the economy. Whatever happens it won’t pan out like Osborne is suggesting, if there is private sector growth it’ll be off the back of a slight of hand like public sector outsourcing.

    But we’ll see…

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