25 Jul UK economic crisis deepens
Alex Salmond proposes an economic strategy which is at odds with David Cameron’s Tories
Scottish news: UK economic crisis deepens
The UK economy has contracted by a shock 0.7 percent in the second quarter and much worse than forecast as low interest rates, debt saturation and the Libor scandal add to pressure caused by the Coalition government’s’ austerity cuts.
The figures released by the Office for National Statistics (ONS) show a much deeper contraction than the 0.2 percent which had been forecast, heaping pressure on George Osborne to heed First Minister Alex Salmond’s call for a £5bn UK-wide stimulus programme. Scotland’s share of the total would be £400m and would be targetted at “shovel ready” projects specified by the Scottish Government.
Britain is now in its third successive quarter of economic contraction as measured by gross domestic product (GDP) meaning Britain is technically in recession. Although GDP is more accurately a reflection of financial transactions in the economy, it is used as an indicator of economic growth. However, as the Bank of England and private banks have been increasing the money supply, GDP has risen whilst the real economy has been shrinking.
GDP shrank by 0.3pc in the first quarter of the year, following a 0.4 percent contraction in the final quarter of 2011.
Alex Salmond’s stimulus has been echoed by the IMF and this week by the Institute for Public Policy Research (IPPR) which recommends that Chancellor Osborne scrap his austerity measures, increase spending in infrastructure and temporarily cut taxes to boost private sector investment.
Mr Salmond argues that the stimulus funds should come from UK borrowing. The problem with this strategy is that the UK Government debt is heading towards being £1.5tn in the next few years and so if interest rates rise, as they inevitably must, the debt repayments will rocket and so become impossible to honour.
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