The Labour machine is in overdrive to get out the message that things are getting better, and can only get better with more of the same. In practise, things are being arranged for May.
Interest rates have been kept artificially low by printing money. That has to stop for good sometime after the election. Interest rates will rise.
Tax revenues have been artificially boosted by the threat of higher taxes on incomes, leading to a surge of bonus and other payments whilst the rate remains at 40%. The banker bonus tax has also brought in extra revenue which is unlikely to be repeated. Companies and individuals are hurrying to book things to pay tax before the rates soar. Then tax revenue will fall again.
Unemployment has not risen as far and as fast as many forecast, thanks to continuing strong recruitment of extra people into the public sector. This will come to an abrupt halt after the election, whoever wins.
The growth rate was boosted by depressing the output for the third quarter of 2009 in the revisions, not by increasing the output for the fourth quarter. January was a difficult month given the snow and transport problems. The government has been bringing forward various spending commitments to try to boost output for the rest of the first quarter. The cuts come later.
Today Labour launches its latest five point pledge card. I still enjoy reading the 1997 version, which promised to “set tough rules for government spending and borrowing: ensure low inflaiton; strengthen the economy” and wonder when they might get round to doing those?
This year’s version apparently repeats the 2005 promise to raise living standards. This used to be automatic in any 4-5 year Parliament, given the usual growth of the economy. Over the last 5 years the economy has not grown. This morning on the radio Labour’s spokesman avoided offering confirmaiton that they had raised living standards as conventionally measured, knowing how thin the ice was around this pledge. The Bank of England recently warned that we should expect a further fall in living standards on current policies, which I fear is all too likely. What price this pledge? Can the government tell us how much living standards have fallen by since 2007, and by how much more they expect them to fall?