Confidence

Twelve months ago the UK economy was growing at 1.2% in the second quater of the year, this week we will receive the 2011 second quarter growth rates.

It would be unsurprising to see stalled economic growth in this last quarter, the current government has cut hundreds of thousands of public sector jobs, expecting like Lazarus the private sector jobs to replace them. We have seen the cost of living rocket; food, fuel and increased taxes on VAT and National Insurance have shrunk the average families spending power.

The other side of demand in the economy is confidence, everyone I to talk to is frightened about the coming year, the governments dangerous largely unfounded talk of a sovereign debt crisis, comparing the UK to Greece, Portugal, Ireland, this is wrong when Labour left power only Canada had a smaller % GDP sovereign debt in the G7. Yet this dangerous talk has frightened people, reducing the confidence of consumers.

We are in a classic monetary squeeze.

The Labour Party has been calling for the VAT increase to be temporarily lifted to give a boost to spending, under the previous Labour government Alistair Darling did so and reduced the tax to 15 per cent during the financial crisis, consumers spent £9bn more than they otherwise would have done. A VAT cut today would be a similarly effective fiscal stimulus.

The Labour Party are calling for further taxation on Bankers with this money invested in Affordable housing giving a stimulus to the construction industry, increasing employment and taxes and spending.

We are seeing the Americans playing a desperate game with setting their deficit budget and the Europeans failing to get a grip in the euro zone crisis, the markets will remain jittery.

We need substantial political leaders to stand up, yet Merkel, Sarkozy, Cameron and Osbourne are utterly failing in the economic diplomacy needed to restore confidence in the Euro zone.

The right wing republicans in the US clearly desperate to damage Obama and to hell with the world economy simply need to get a grip, history shows us Ronald Regan raised the deficit eighteen times in his presidency, so this is nothing new and is sensible handling of the economy.

There are challenges a plenty, yet the politicans are coming up short.