You’re not up to the job, under-fire Osborne told as recession worsens
George Osborne was under intense pressure to change course last night after worse-than-expected official figures showed the economy shrank by 0.7% between April and June.
Liberal Democrats called for a “Plan A plus” to stimulate growth and one Liberal Democrat peer called for the Chancellor (below) to be sacked.
There was little attempt to disguise the Conservatives' gloom over statistics showing that gross domestic product fell for a third consecutive quarter, plunging Britain into the longest double-dip recession for more than 50 years.
Vince Cable, the Business Secretary, said: “Budget discipline is a necessary but not a sufficient condition for recovery and for rebalancing the economy.
“We also need policies to stimulate long-term growth.”
He said the Government had produced plans to inject some life into the banking system, supporting major infrastructure projects, but added: “No doubt there will have to be more.”
Mr Cable declined to endorse the call by his close ally Lord Oakeshott for Mr Osborne to be ousted from the Treasury.
The peer told BBC Radio 4: “George Osborne has got no business experience. He has never worked outside politics. He is doing surprisingly well for a Chancellor on work experience. But really, in a torrid time like this, I think we do need absolutely the best people available.”
David Cameron, whose aides dismissed speculation that Mr Osborne might be moved, admitted the figures were disappointing. “They show the extent of the economic difficulties that we're grappling with, not least the situation right across the eurozone,” the Prime Minister said.
Mr Osborne denied that his role as a Downing Street strategist distracted him from his main aim, insisting he had only “one job”.
Ministers hope that yesterday's statistics may be revised upwards later and take some comfort from more upbeat industry surveys and employment figures.
John Cridland, the CBI's director-general, called the figures “very disappointing” but said official number-crunchers could be overstating economic woes.
But the figures will increase the pressure on the Bank of England to pump billions more into the economy through quantitative easing.
It could also cut interest rates below the current 0.5% record low.
The alternative — the Chancellor easing austerity — could lead to the UK losing its gold-plated sovereign credit rating.
\[Shane Donaghey\]There is a silver lining. “The experience of the 2002 Golden Jubilee would suggest that the vast bulk of these losses will have been made up in July and, when you also factor in the Olympics effect, we should see a bumper third quarter,” said Andrew Goodwin, senior economic adviser to the Ernst & Young Item Club.
The surprise 0.7% decline in the UK economy marked the biggest quarterly fall since early 2009. Even allowing for the impact of the extra day's holiday for the Diamond Jubilee celebrations — which experts said would knock 0.5% off GDP — the economy is still shrinking. Britain's manufacturers and builders saw their deepest slump for more than three years, with even the dominant services sector slipping into decline.