Zombie economy warning

Nov 17 2009 by Iain Laing, The Journal

THE UK could have a zombie economy with a jobless recovery from the recession if public spending is cut to tackle the huge deficit, a union leader has warned.

TUC general secretary Brendan Barber said taking the axe to public spending would have a devastating impact, increasing the risk of this country suffering a Japanese-style lost decade.

Mr Barber said recovery from the recession should be based on the construction of a low-carbon economy and a fairer society that requires the super-rich to pay fair levels of tax.

He also called for a high-pay commission to be set up to study “unacceptable” rewards for executives as well as bonus schemes.

Mr Barber added: “In the long term, Britain’s public debt is unsustainable and will have to come down before the gilt markets go on strike. But in the here and now, it is a distraction from critical economic challenges we face.

“Public spending is the only motor of growth currently available to us. Swingeing cuts would increase the risk of Britain suffering a Japanese-style lost decade, would mean the unwelcome prospect of a jobless recovery, and would lead to the emergence of a so-called zombie economy.

“Not quite dead but not exactly alive and kicking either, and the consequences would be devastating.

“Not just the inevitable increase in long-term unemployment, nor just the loss to the private sector of so much government business, but the huge long-term costs – a lost generation of young people, a rise in social disorder and a sapping of confidence.”