These figures are worse political than economic news. The Labour opposition will seize upon them as showing that the government’s austerity programme is too strict and is killing off growth. They will renew their calls for a fiscal loosening through a cut in VAT and a slowing of welfare reform. The governing coalition may also suffer new strains as the Liberal Democrats seek to position themselves as more caring and in touch with ordinary voters than their Conservative colleagues. While Britain is unlikely to face the political ruptures that have been provoked by austerity budgets in Spain, France and most recently the Netherlands, a weakening of coalition support and cohesion is likely over the next few months. Continue reading »
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