The recession is a crisis that cannot afford muddled policy

Updated: 19:38 EST, 23 January 2009

Yesterday came the official confirmation: Britain is in recession for the first time since 1991. This was a surprise to no one, not least those who have suffered the devastation of losing their home or job in recent months.

But the scale of the contraction in the economy – it shrunk by 1.5 per cent in the last three months of 2008, the biggest quarter-on-quarter decline since 1980 – was still a shock, particularly, it seems, to Chancellor Alistair Darling, who was forced to admit the recession may be ‘sharper’ than he had optimistically predicted.

Meanwhile, Gordon Brown (while stubbornly refusing to admit that he had, as we all know to be the case, presided over ‘boom and bust’) was honest enough to confess he ‘didn’t see’ the crisis coming.

Prime Minister Gordon Brown and Chancellor Alastair Darling appear not to have a strategy

Increasingly, despite the frenzy of announcements, press conferences and initiatives, the impression is taking hold that Mr Brown and his Chancellor simply do not have a strategy to get us out of the current mess.

Nearly a trillion pounds has been promised to the nation’s banks in a so far fruitless effort to start them lending again. But with every day which passes, bank shares slump ever lower, homes are being repossessed at the rate of one every ten minutes and more firms close their doors.

There has been too much panic decision making and there is no sense that Downing Street, the Treasury, the Bank of England and the Financial Services Authority are pulling in the same direction.

Why was Northern Rock told to stop lending and this week ordered to begin again? Why was Lloyds, one of our best and most cautious banks, whose shares are now on the floor, encouraged to merge with bankrupt HBOS?

Instead of coherent policy, the Government is constantly in pursuit of headlines to show it is doing something, which in reality means borrowing more and more from the public purse to little effect.

The speed of the retreat from sterling, which fell to its lowest point in a quarter of a century in latest trading, suggests a deep disquiet among foreign investors about Britain’s swelling borrowing and its ability to pay it back.

Now we learn that the Government handed out a record 151,000 work permits to non-EU citizens last year, as the country slid into recession, and unemployment increased by 290,000 to 1.92m.

It is a direct and utterly bewildering contradiction to Mr Brown’s 2007 promise to deliver ‘British jobs for British workers’.

But then, of course, it was a good headline on the day.

Immoral and reckless

Can there be anything more sickening, as countless people lose their homes and jobs, than the spectre of a hedge fund run by two Tory party donors making a fortune driving down the share price (or ‘shorting’) of Barclays bank?

It’s bad enough that the greed and arrogance of the City has plunged this country into such a terrible mess – a mess that is going to cause years of human misery – without fat cats still making so much obscenely dubious money.

Let’s not forget that this driving down of bank shares means the Government having to spend more taxpayers’ money – the same taxpayers now losing their homes – to prop up our financial institutions.

That is why it beggars belief that the Financial Services Authority should have lifted the ban on ‘short-selling’ last Friday. In a healthy market, shorting may (arguably) have its place, speeding along the process of a company finding its real value.

But with the British economy in such dire straits, shorting is not only wrong. It is immoral. The City will have only itself to blame if draconian ‘socialist’ measures are imposed on it, backed by an electorate fed up to the back teeth with its greed and amorality.