Leaders: Zero growth forecast may be optimistic | Charge of hypocrisy on Tibet stands

THE Bank of England’s reduction of Britain’s growth prospects to zero was not unexpected. Private sector economists have been downgrading their own forecasts for some time.

But because this comes from the Governor of the Bank, Sir Mervyn King, it carries a weight that will bear down on the government, demanding that it responds.

Of course, that is not how Sir Mervyn phrased his thoughts yesterday. He laid the blame squarely on events out of the government’s control, principally continuing eurozone uncertainty. The future of the euro, as he said, is not even close to resolution and the uncertainty has pushed much of Europe into recession, reducing demand for British exports. The UK economic outlook remains flat for the foreseeable future.

For that reason, even the Bank’s forecast of zero growth in 2012 is arguably optimistic. The UK economy contracted by 1 per cent in the first six months of the year, so returning it to where it was at the start of the year requires 
1 per cent growth in the final six months.

That, given the euro outlook, looks to be a tough target, particularly as the economic effect of the three weeks of the Olympics, despite Sir Mervyn’s exhortation to all to be inspired by Team GB’s gold medal-winning performances, is expected to reduce overall output.

The jump in the value of sterling that followed Sir Mervyn’s remarks, caused by markets reacting to his comments – which appeared to rule out any near-term reduction in the UK base interest rate of 0.5 per cent and thus increased the attractiveness of sterling holdings – will make manufacturing exporters’ task all the more difficult. Even before that currency shift, indexes of manufacturing activity had begun to drift downwards and a possible rate cut by the European Central Bank suggests exporters will have to brace themselves for more adverse currency movements.

If Britain cannot look to external events to provide a lift, it behoves the UK government to do more to stimulate domestic activity and demand. Ministers cannot stand pat on existing policies and lament that they can do nothing in the face of European and global uncertainty.

The Treasury’s reaction to Sir Mervyn was to say the UK government was already doing everything it could to stimulate the economy. But the measures it has put in place were announced when forecasts were that this year would see growth of 2 per cent.

Clearly that is not the case. The prospect that the UK is now in a prolonged second leg of a double-dip recession cannot be ignored by the Chancellor. Stimuli from tax cuts or spending increases, aimed particularly at the struggling construction industry, now have to be on George Osborne’s agenda. Yes, that will blow his deficit-reduction plan off course, but continued recession has the same effect.

Charge of hypocrisy on Tibet stands

SNP politicians have always been quick to criticise the UK government when they believe it has failed to stand up to foreign governments over human rights issues. When such questions of political pusillanimity arise, it usually because there are competing interests of commercial gain – contracts for British firms to be won – which an assertive moral stance may endanger. Now that the SNP is in government, it has found itself facing the same dilemma. At the time of the recent visit to Scotland by the Dalai Lama, the spiritual leader of the Tibetan people and a winner of the Nobel Peace Prize, the failure by Alex Salmond or his ministers to meet him was interpreted as bowing to Chinese pressure. The Chinese government is anxious that the world should ignore its occupation of Tibet and the Tibetan people’s claim to self-determination.

The minutes of Mr Salmond’s meeting with the Chinese ambassador before the Dalai Lama’s visit tend to confirm rather than refute the charge of Scottish governmental hypocrisy. Mr Salmond told the ambassador the Dalai Lama’s visit was private and organised by non-governmental organisations, the line that he has taken publicly.

But tellingly, the minutes contain no reference to the First Minister raising concerns about human rights within China. Could this be because he and his government is anxious to promote Scottish exports to China?

After continual proclamations from the SNP on the rights of the Scottish people and parliament to determine their constitutional future free from Westminster interference, the Scottish Government’s failure to raise the Tibetan people’s same rights is all the more reprehensible.