Double dip recession caused by housing cuts

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.

construction How spending cuts delivered the double dip

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.

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5 Responses to Double dip recession caused by housing cuts

  1. Pingback: Collapse in housebuilding pulls economy into recession – again | Red Brick

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  3. Pingback: How the LIbDems could show they have real influence in Government | Red Brick

  4. Roz says:

    Neither France nor Germany include investment in public housing in their public sector borrowing calculation, – it’s investment, not spending. Why wouldn’t the Chancellor want to seize the opportunity to do the same – his only chance of showing he’s reduced the deficit. Oh I geddit, because it makes sense.

  5. Pingback: Double dip recession caused by housing cuts | Red Brick | THINKING: Middle of the road Libertarian? Maybe…

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