There is no getting away from the fact that today’s GDP figures are intensely disappointing, especially since employment and inflation statistics have been pointing to steady progress. However, the subsequent chorus of the Left demanding a change of course in economic policy is all too predictable and completely misguided.
The most striking statistic to emerge from the Office for National Statistics is the contraction in construction by 5.2 per cent on the previous quarter. On this point, there is certainly no need to change course. The Government is already committed to investment in infrastructure, providing public guarantees of up to £50bn of private investment in infrastructure and exports and allocating a massive £9.4bn programme in rail improvements.
It is also essential that the Government does not change course on the deficit reduction programme, which has reduced the UK’s deficit by 25 per cent since May 2010. An increase in Government spending will not solve the UK’s economic woes — it is supply side reform that will give the UK economic growth in the medium to long term. The Government’s commitment to reducing the regulatory burden on business, particularly smaller businesses, will boost growth over the course of the next few years, but we should go further. Many voices have been calling for complete deregulation of the smallest businesses and the Government should listen to them and act. The reforms contained within the Beecroft report should be accelerated for small businesses.
My message to George Osborne is stay on course, accelerate planned infrastructure spending and aggressively deregulate smaller businesses. Despite this GDP news the UK continues to be viewed as a safe haven, meaning the Government continues to borrow from the markets at record lows. It is the long term health of the UK economy that is important, not the short term political interests of the Labour party.