The latest GDP figures show the UK economy shrank by 0.3% at the end of last year. Our panellists discuss what this means
Ed Balls: Cameron and Osborne are asleep at the wheel
Today is the moment when David Cameron and George Osborne's complacency is completely exposed. These deeply disappointing figures expose just how dangerously complacent the prime minister was when he said last autumn that the "good news will keep coming".
Today's news confirms what business leaders, retailers and families have known for many months – that depressed confidence and a chronic shortage of demand mean our economy continues to flatline. This government's failing plan has now seen our economy stagnate for over two years and borrowing is now rising as a result.
David Cameron and George Osborne have been asleep at the wheel. They've spent the last six months obsessing about a referendum in five years time, not focusing on the problems in our economy today. And their decision in 2010 to raise taxes and cut spending further and faster choked off the recovery, as even Nick Clegg is now beginning to admit.
As the IMF has warned again this week, we need a change of course in the budget with policies to kick-start our flatling economy. A plan B now should include a compulsory jobs guarantee for the long-term unemployed and a temporary VAT cut to boost family incomes and our struggling high streets. We should also bring forward infrastructure investment including building thousands of affordable homes and establish a British investment bank to boost lending to small businesses.
The longer David Cameron and George Osborne cling on to their failing plan the more long-term damage will be done. They must finally listen and act to kick-start this economy.
• Ed Balls is the Labour shadow chancellor
Sheila Lawlor: Osborne should cut tax and spending further
The quarterly GDP figures tell us little we don't already know. December GDP is down by 0.3% on the previous (albeit Olympic-boosted) quarter. The UK economy is in the doldrums, more so than those of Germany and the US, though less than the eurozone's.
And, if further confirmation were needed, today's figures come hot on the heels of the December borrowing figures of £15.4bn, which mean UK borrowing may exceed the limit set for this year (£108bn) with December's borrowing up on the same month last year.
The figures matter only in one sense: politically. Critics will use them to demand a slowdown on deficit reduction and a more fiscally lax approach. Indeed, they have already done so. But they are wrong. More time is needed to reboot an economy which lost its way, by fuelling unsustainable sectors with unsustainable public and private spending, at a time of historically low interest rates and low inflation. The chancellor intends, as he told his Davos audience yesterday, to hold firm. It would be even better if he aimed at lower levels of public spending and tax along with making the structural reforms which have brought crisis economies rapidly back to growth.
• Sheila Lawlor is director of the thinktank Politeia
Michael Burke: The economy is stagnating due to austerity
GDP is now barely higher than at George Osborne's first comprehensive spending review in October 2010, an increase of just 0.5% in half a Parliament. Far from a "march of the makers" that he later promised manufacturing is nearly 2% lower. The economy is stagnating, unable to recover because of the austerity policies.
We know that a policy of increased government investment and protecting welfare entitlements works. This is what happened in the March 2009 budget. The economy expanded by 2.6% in a year and a half. Not a stellar performance coming out of a sharp recession but much better than the current policy.
This government is wedded to these policies. But these data hold a clear lesson for economic policy. Cutting government spending does not lead to growth. The public finances show that they don't even lead to a lower deficit.
An increase in government investment and not shifting the burden of the crisis on to workers and the poor does lead to economic recovery and with that to lower deficits. Nick Clegg's posturing as a champion of government investment this morning is no more convincing than Cable and Osborne before him. Their policy aim is to reduce the role of the state in the economy and boost private sector profits. This determines the extent of the current phase of the crisis.
• Michael Burke is an economic consultant and a former senior international economist with Citibank in London
Matthew Oakley: GDP figures should not guide policy
Today's release of GDP figures showing a contraction will doubtless cause much lamenting from commentators. There will be calls for more spending from the left and for tax cuts and deregulation from the right. The government shouldn't listen. Quarterly GDP releases should not be used as a guide for policy.
The key reason is that they are only provisional. Looking more broadly, a number of other indicators point in the other direction. Relatively strong labour market performance is still confusing the experts, yesterday the S&P 500 pipped above 1,500 for the first time since late 2007 and surveys of UK business leaders are showing a more confident corporate sector. Among other things these hint that large-scale revisions to these preliminary figures are likely in the near (and more distance) future. We will not know the final story for a long time.
This does not mean that GDP and growth are not important. They clearly are. It just means that we need to focus on having a more mature debate on driving UK competitiveness and economic growth in the medium term. Short-term point-scoring around provisional GDP stats is an unwelcome distraction from the serious matter of structural reform of the UK economy.
• Matthew Oakley is head of enterprise, growth and social policy at Policy Exchange
Mariana Mazzucato: We should stop blaming the eurozone
These disappointing figures should be a reason for a major rethink of economic policy. The government must act counter-cyclically, and do all it can to boost consumer expenditure (for example reversing the hike in the regressive VAT), and support rather than undermine public sector services that affect critical areas like the decision to go back to work. And most of all, the government must adopt a visionary growth strategy, to increase the "animal spirits" of business investment (the most unstable part of GDP), implementing an industrial strategy that includes both infrastructure and a plan for the green economy. Until it does so, even small boosts in one quarter – driven by temporary factors like the Olympics – will only be dampened in the next quarter. And when figures turn sour, as they have done today, it's also a reminder to stop blaming the eurozone crisis for the failure of UK economic policies, especially when the UK's stance on Europe – unless put into reverse gear – will only make that crisis worse.
• Mariana Mazzucato is an economist and professor of science and technology policy at Sussex University