Mission impossible? Coalition bids for economic recovery
Monday, 31 October 2011 11:05 AM
By Alex Stevenson Follow @alex__stevenson
Looming GDP figures are overshadowing the coalition's latest bid to get Britain's faltering economy moving again.
David Cameron and Nick Clegg are promising an "all-out mission" to drive economic growth as they unveil a package of investment which will create thousands of new jobs.
Labour is on the offensive over the coalition's taxation of small- and medium-sized businesses, however.
This Tuesday will see growth figures for the third quarter, which analysts are predicting will see GDP grow by 0.3% - barely up from the 0.1% registered in the second quarter of this year.
"We are trying to rewire the British economy so we are less reliant on the city of London and financial services and we're giving more backing to manufacturing and to parts of the country which for too long were basically reliant on handouts from Whitehall," deputy prime minister Mr Clegg told the Today programme.
Among the regional growth fund announcements are the creation of an extra 1,000 jobs at two new power plants in the north of England and BT's superfast broadband rollout, which will create 500 jobs for engineers as they rush to complete the project by 2014.
Labour labelled the announcements as cuts, as the regional growth fund's £1.4 billion investment over three years is just a third of what the opposition claimed they would have spent.
"Power stations already in the pipeline are finally being given the green light, but no investment is actually being brought forward," shadow business secretary Chuka Umunna said.
"This does not amount to the significant plan for jobs and growth Britain's economy desperately needs right now.
"Labour's five-point plan for jobs includes genuinely bringing forward a substantial number of long-term investment projects, but also action to get young people into work, tax breaks to help small businesses expand and a VAT cut to help struggling families."
Today's announcements are the start of a week-long battle over the economy in which both the coalition and opposition will try to make headway in the battle for public opinion.
According to pollsters Ipsos Mori economic optimism has reached its lowest for two years, with 37% now worried about whether they can pay their bills.
"The danger for the government is that without many green shoots on the horizon, many more years of this hardly gives them an inspiring story to tell," head of political research Gideon Skinner wrote in an analysis piece for politics.co.uk.
"Already, for example, 77% say the government has done a bad job on keeping unemployment down. The danger for Labour is that despite that, few think they would do any better.
"It's worth repeating why this is so important: the economy was the number one issue determining how people voted in 2010 (and is unlikely to have got any less relevant since then), and played a large part in its outcome, precisely because on this issue no party was able to conclusively win the public's trust."
Downing Street's thinking on the economy is currently dominated by the eurozone crisis, which saw Mr Cameron attend a fraught Brussels summit last week that eventually managed to agree a rescue package.
Despite the investment unveiled today, Mr Cameron used an article in the Financial Times newspaper to highlight the difficulties caused by the situation on the continent.
"The eurozone crisis has had a chilling effect on major economies around the world, and has added to the unprecedented pressures facing the global economy," he wrote.
"But, in spite of the difficulties, I am confident that we can both resolve the crises at hand and come through them with an economy that is stronger and fundamentally fairer."
Ed Miliband will criticise the coalition for concentrating on short-term GDP improvements in a speech later.
He will focus on the Treasury's decision to pay for a cut in corporation tax, boosting the economy in the short-term, by reducing companies' ability to offset their corporation tax payments through capital allowances - investment in infrastructure, buildings and plants.
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