U.K. economy shrinks by 0.5 % 4th quarter 2010

The latest GDP growth data for Britain shows that the economy actually contracted by 0.5 % in the final quarter of 2010. Despite this clear evidence of continuing weakness, the Chancellor obstinately proclaims the wisdom of his austerity policy which can only reinforce the contractionary trend now underway. With many more cuts in government spending and programme employment to come it is not possible for the British economy to grow in the way that George Osborne and the coalition government claim that it will. People in Britain will have to batten down the hatches for the economic storm that awaits them until the government sees the light and changes course. It is critical that the Bank of England keep interest rates as low as possible in order to offset some of the contractionary impulses coming from fiscal policy based on the false gods of deficit reduction through austerity as opposed to unemployment reduction through stimulus. Gavyn Davies in the F.T. argues that the data is based on skewed data from the last quarter affected by the heavy snowfall in Britain which interfered with people getting to work and therefore production. But even if this were totally true overall growth was still 0, hardly a basis for optimism for the coming months of cuts.