The double dip recession was driven by cuts in public spending on housing. That’s the conclusion of Ben Chu in the ‘Eagle Eye’ Econoblog in the Independent.
Commenting on the ONS revised construction figures for the first quarter of 2012, he points out that the construction sector shrank by nearly 5% over the three months. While private housing construction rose by 1.3%, new public housing construction fell by 10.9%. General infrastructure investment fell 15.9%: the statistics do not split public/private but the majority of big projects are commissioned by Government.
He concludes: ‘Construction was what dragged GDP into negative territory in the first quarter……if the Chancellor had cut less on infrastructure and public housing…… Britain would not now be in a double dip recession.’
What goes down could go up. There has been plenty of evidence that the best way to boost the economy and get growth going would be to invest in housing. By getting people back into work building homes, paying tax and claiming fewer benefits, and taking into account the multiplier effect (supply chain, other businesses benefiting from people in employment spending more) the Treasury would get its money back as well.
It makes sense. So that’s probably why George Osborne won’t do it.