Unions call for US-style investment as economy hits double-dip recession

Analysts say the double-dip recession feels like economic decline for ordinary households, because of stagnant incomes for those in work and growing unemployment among young people.
by - 25th April 2012, 11.00 GMT

Unions have called on the Coalition to implement an Obama-style investment plan to create jobs, after news that the UK economy is back in recession, with the construction sector the hardest hit.

(Pictured: construction of the Crossrail Canary Wharf terminal, east London)

The construction industry, which has traditionally accounted for around 7% of the country’s economic output, shrank by 3% and has lost more than £10bn in value since the 2008 recession began, according to official figures.

The latest statistics show the biggest fall in construction output for three years, while manufacturing failed to return to growth.

TUC General Secretary Brendan Barber said: ”This is worse than expected. There has been no growth over the last year, and the economy is 0.5 per cent smaller than six months ago.

“Austerity isn’t working.

“The government should look across the Atlantic and follow President Obama’s alternative that has reduced unemployment and brought growth back to the USA.”

Last week, the International Monetary Fund recommended governments consider implementing a tax-funded stimulus to reduce deficit and boost growth. Unions have now echoed calls for US-style investment in an effort to boost growth and job creation.

Analysts agree that a lack of public sector investment has encouraged major construction companies to hoard funds – and severely limit workers’ pay increases – in the hope of riding out the crisis.

Earlier this week, one industry forecast made gloomy predictions that public sector construction work would fall by 18% between 2011 and 2014 and that work on school building and maintenance would contract nearly a third by 2014 from a peak in 2010.

Unite says investing £6bn to build 100,00 extra social and affordable homes would start to tackle the housing crisis and create new jobs in construction and the supply chain.

General secretary, Len McCluskey said: “Britain’s return to recession and the government’s disastrous budget is proof that George Osborne is not up to the job.

“The government’s economic credibility is now in tatters because we have a chancellor who is anti-growth and fixated on austerity.  If this discredited coalition had a growth strategy, it’s obvious the figures would be better than they are.

“Britain needs an economic heavyweight fighting for Britain in these bleak times, not a dilettante playing at being chancellor.”

Paul Kenny GMB General Secretary said: “The Tory/Lib Dem government ignored warnings that austerity would drag the UK economy back into unnecessary double dip recession.

“Tory MP Nadine Dorries is right to accuse Mr Cameron and Chancellor George Osborne of being ‘arrogant posh boys’ with no understanding of ordinary voters.

“She missed Nick Clegg, another arrogant posh boy, who joined them to recklessly abort the economic recovery underway in the UK in 2010.”

Separate figures released this morning by the Office of National Statistics confirm the impact of the recession on families, with those areas of highest unemployment – Northern Ireland and north-east England – showing the smallest rise in disposable household incomes.

The north east has now slipped to 15.2% below the UK average of £15,709.

Unison’s general secretary Dave Prentis said:“A bad month has got even worse for this government but it is hardworking families that are paying the real price.

“The coalition government is driving our country into recession. Cuts have a stranglehold on our economic recovery.

“Hundreds of thousands of public sector job losses with more pain to come. As public sector contracts dry up and spending shrinks, the private sector is hurting too.”

Kevin Rowan, regional secretary of the Northern TUC said: “One thing is crystal clear – George Osborne’s ideological experiment in slashing public spending and investment to try and boost growth has been proven to have failed.

“He needs to halt his dangerous regional pay plans that would cut wages in the North.

“Instead it’s time for a ‘Plan B’ that involves significant investment in growth industries as well as utilising a hard-pressed construction sector that can employ so many out of work young people.”

The IMF’s World Economic Outlook last week said: ‘a balanced budget fiscal expansion could support activity and employment while keeping fiscal consolidation plans on track.

‘For example, temporary tax hikes matched by increases in government purchases — for much-needed infrastructure — could lead to an almost equal rise in output.’

It went on: ‘Government spending targeted to distressed households that spend all their disposable income will yield a similar increase in output.’

According to TUC policy officer Duncan Weldon, the UK needs economic growth of about 0.2 per cent a quarter just to keep up with population growth.

“The last year and a half looks like stagnation,” he writes. “But it feels like decline.”

The OFS figures come as a survey of political engagement indicates only 42% of voters say they are interested in politics – down 16% on last year and the lowest since the survey was first carried out nine years ago.

The Hansard Society says it found the percentage of people saying they would definitely vote if a general election was called tomorrow was down by 10%, mirroring a rise in those saying they were either unlikely or absolutely certain not to vote.

PCS general secretary Mark Serwotka said: “We did not need to wait for the statisticians to tell us what the cuts are doing to our economy and our communities, but this news should be a wake-up call to the millionaire chancellor and his government.

“With our economy on its knees, it is also a damning indictment of this government and our democracy that people are growing increasingly despondent with Westminster politics.

“We need alternatives that will work. Instead of more cuts, we need jobs for the millions out of work, new council houses for the two million people on waiting lists, and a banking system that works for people not profit.”

The NASUWT has highlighted the effect of the recession on schoolchildren and criticising what it calls ‘ideologically driven destruction’ of public services.

General secretary, Chris Keates, said: “In the last two years, 40,000 more children have been plunged into poverty, millions of public sector workers have had their pay frozen and their pensions plundered, thousands of workers in public and private sectors have been thrown out of work and essential services have disappeared.

“The Government’s economic policy has been carefully and deliberately designed to cut costs and make vital public services ripe for takeover by privateers who want to turn a fast buck and increase their profit margin at the expense of ordinary families and working people.”