I'm a bit late commenting on this (and apologies to those who left pending comments for moderation on other posts, I haven't time to log in much, I usually publish comments just before I write a new post) and I expect everyone and their dog has had an opinion on why Labour sunk in the polls caried out over the weekend.
The budget last Wednesday was generally received well by the public - even in the YouGov poll which gave the worst headline results people broadly agreed with the measures Alistair Darling announced - they agreed by 68% to 28% that tax should be increased on environmentally unfriendly cars, agreed by 63% to 30% that supermarkets should charge for plastic bags, agreed by 45% to 44% that tax on flights should increase, agreed by 78% to 20% with the tax rise on cigarettes and agreed by 77% to 16% that those claiming incapacity benefit should attend an interview to check whether they should continue to claim the benefit. The only thing opposed was the tax on beer and spirits and that was narrow (48% opposed, 46% in favour).
So why the slump in voting intention figures? The US investment bank Bear Stearns required help from the Fed on Friday the 14th, while the polls were carried out, and the news was reported in the most lurid terms possible with phrases like "financial meltdown" being bandied about. The public is properly scared that there will be a recession, particularly because of the way some commentators are claiming that it is "bound" to be worse here than in the US. Robert Peston of the BBC for instance continues to use emotive language - he likes to use the word "scary" in his blog - see here. The folk in the city are scared - which makes them vunerable to malicious and false rumours like the one about HBOS yesterday, which caused their shares to drop 20%.
All this scaremongering has an effect on the public. The YouGov poll showed that 18% were worried about losing their job. 18% unemployment is Great Depression stuff. Only a moment's rational thought will tell you that we are miles from that. Commentators in the media like to talk to talking heads in the City, and because the City is scared they assume that the whole UK is in trouble. But if the City can get it so wrong about the state of HBOS who is to say they are right about anything else? And there is more to the UK than the City. Other commentators like to look at drops in the FTSE 100 as evidence that the UK economy is in trouble - but the FTSE 100 no longer reflects UK PLC. Components of the Index like HSBC, Vodafone and Glaxo get most of their earnings outside the UK, and the mining firms like BHP Billiton and Rio Tinto make their money mining in Australia and South Africa and selling to China - so much of the FTSE100 now reflects international business that movements of the index are useless in telling us what is going on in the UK.
So what is going on in the real UK economy? Retail sales grew strongly in February and January's figures had to be revised up. Food stores did well, as did "non-store retailing" aka online stores. The only retail sector struggling is household goods. Earlier in the month we got news that service sector activity was up.
I wonder if all the doom-mongers in the press will do stories headlined "we were being muppets" when the supposed "worse than the US" recession doesn't materialize. And will they admit they were deliberately trying to talk up a recession to hammer the government? I'm not holding my breath. When we get through this and can point to solid evidence that the recession didn't happen after all, the government should excoriate those who predicted one and they should certainly laugh at those who panicked. Government is no place for panicky people (aka Tories).
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4 comments:
THe more I see the doomsayers talk of global financial meltdown, the more it just seems we are talking ourselves into a recession. What possible good does that serve anyone?
I know I'm stating the blindingly obvious as per usual....
A budget that produces public spending cuts and still ends up with £ 43 billion in unfunded public spending pledges for 2009 is worrying, however,you try to spin it.
Jim
Jim - the forecast for borrowing in 2009 is just that - a forecast. the borrowing requirement for 2009 depends entirely on how the economy does in 2008. If we continue to grow, tax revenues will continue to come in, reducing the need to borrow. Tax receipts this Jan were well up on last year for instance.
Your "worry" depends entirely on the doomsday scenario coming to pass. But why should it? the UK economy is resilient and is also more open than the US one regarding trade, which means exporters should respond very quickly to the favourable exchange rates vis-a-vis the euro. you underestimate the sheer ingenuity of Brits and their abilty to adapt and cope with any problems in the world economy.
jams o'donnell - yes, there is an element of the press talking up a recession. They badly want one as it is the only way to get a change in government.
However, if we don't have one, there is tremendous scope for kudos for the govt. We can point to the fact that yet again the Labour government has protected the UK from world problems. We can point to Tories' panicky predictions of doom which prove that a) they don't have cool heads and b) they can't read the data correctly enough to say what is actually going on in the economy i.e. they are dunces.
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