ceedee's posterous

So it’s war. We knew it would be. 

Obviously, you don’t ask the Tories how they can do this. They, streetfighters of long-standing, the current vogue for simpering head-boy bonhomie notwithstanding, are clear about their aims, interests and concomitant attacks.

Nor is this message addressed to Vince Cable or the wolf-eyed replicant Clegg. Whatever theatrics of choicelessness and discomfort the former occasionally insinuates, he, good Orange Booker, knows just what he’s up to. And the latter dispenses even with the mummery.

But you - you’re one of those Liberal Democrats who takes seriously a commitment to some kind of progressive agenda. You’re another thing. One doesn’t have to share all your politics to believe you sincere. So it has to be asked of you: WTF?

We know that the cuts are massively regressive. We know this is a hecatomb of welfare. We know the arts are being savaged in a philistine rampage. We know that all the gorge-raising horseshit about being All In It Together™ is a meaningless tic. So you, like other left-wing LibDems (LWLDs), know - know - that you’re propping up an economic onslaught by those who think it their birthright to rule in wealth against the mass of working people.

When it’s obvious that there are other ways of saving money that don’t punish the poor, are you happy with what you’re doing?

When the entire agenda about the necessity of the cuts is not only an invention, but a not-very-convincing one, is it mere economic illiteracy that keeps you quiescent? 

When it’s not just radical, but eminently mainstream, even neoliberal economists who are stressing that if your aim is to reestablish the British economy this is economic gibberish, are you comfortable? 

Sure, some Tories are fucking idiots - but a lot aren’t. They know that these measures, far from salvaging it, might very well break the economy. And that is, for them, a risk worth taking, because either way, something is gained: a transfer of power, the finishing of the Thatcherite revolution, a recomposition of class strength. And if the cost of that is mass immiseration, and even the stagnation of the national economy, so be it. 

So the question for you is, just how comfortable are you being complicit with baying class thuggery? 

What are you getting out of this? How many pieces of silver? It profiteth a person nothing if they exchange their immortal soul for the world, but for - what? Minister of State for Children and Families? The same ones you’re taking money from? 

And even if you follow the Auton Lothario of Sheffield Hallam in thinking that morals are for mortals, that concern at the antidemocratic imposition of an agenda the vast majority of those who voted for you would be appalled at is quaint, there’s also the question of strategy. If kneecapping the welfare state does not, in fact, prod the sclerotic economy into anything approaching life (and why should it?), then the LibDems - you - are finished. You face annihilation. 

Even cynically, is it worth it? To be treated, for two terms, minimum, as the scum of British politics? The most craven power-licking integrity-less liars of Parliament? Not even Tories but Tory-enablers? Do you honestly think that the majority of the electorate who supported you (in deeply misguided protest) would be willing to give you their vote again? Unless it was to shit on it, put it in a paper bag, set fire to it and post it through your door? 

Really? 

Would you not feel better being able to sleep at night? Where’s your line in the sand? 

Walk. 

Italy's recession is likely to be longer and deeper than expected after its services sector shrank for the 11th month running in April and at its sharpest rate for almost three years.

A collapse in consumer spending following cuts in wages, benefits and pensions was behind the fall in output shown in Friday's data and follows the worst manufacturing numbers for three years earlier in the week.

The dire figures from Rome added to a picture of weakening demand across the eurozone's vast services sector, which shrivelled at a much faster rate in April than initially thought.

Economists suggested that the currency bloc's recession could extend beyond the summer after output contracted in core countries such as France and the Netherlands along with Italy and Spain.

Madrid will come under further pressure from unions and anti-poverty campaigners to relent on public spending cuts scheduled for this year after the services sector fell to 42.1 from 46.3 in March.

The final reading of April's Markit purchasing managers index (PMI) for the entire eurozone services sector came in at 46.9, a full point lower than the preliminary reading of 47.9 reported two weeks ago, which itself was far weaker than City analysts had expected.

It was the steepest downward revision to the PMI since October 2008 and the immediate aftermath of the Lehman Brothers collapse.

Anything below 50 signifies contraction.

Survey compiler Markit attributed the revision to business conditions worsening at a faster rate towards the end of the month, and said the figure was consistent with a 0.5% quarterly rate of economic contraction.

A dearth of new orders suggested the figures for May could be even worse.

"Little can be said to remain of any 'core' of strength in the region," said Chris Williamson, chief economist at Markit.

"Growth has practically ground to a halt even in Germany, and France has joined Italy and Spain in seeing a strong rate of economic decline."

On Thursday, European Central Bank president Mario Draghi said the eurozone economy would recover gradually over the year. But the latest PMIs, which have a good record of tracking economic growth, suggest he will have to wait a while yet.

"Stimulus measures implemented by the ECB have not had a lasting impact on the real economy. Confidence also fell back further in April," said Williamson.

Eurozone unemployment hit 10.9% in March, equalling a record high set 15 years ago, and the latest PMIs suggest that is unlikely to improve.

New business, backlogs of work and input and output prices all showed significant downward revisions compared with the initial flash readings.

Annalisa Piazza of analysts Newedge Strategy said Spain and Italy's figures present a worrying picture for activity in the sector.

"Both Italy and Spain are suffering from a marked cyclical slowdown and tight fiscal conditions add further pressure on domestic demand. Today's PMI figures clearly point to further deterioration in the second quarter, with risks of another sharp contraction in activity," she said.

UK GDP shrank 0.2% in the first three months of 2012, sending Britain into its first double-dip since the 1970s

Britain has sunk back into recession, its first double-dip downturn since the 1970s, piling pressure on the government to soften its austerity drive.

GDP unexpectedly shrank by 0.2% between January and March, following a 0.3% contraction in the fourth quarter of last year, according to the Office for National Statistics. A technical recession is defined as two or more consecutive quarters of economic decline. The figures wrongfooted City economists, who had expected a return to growth, albeit of a meagre 0.1%.

The shock downturn piles further pressure on the government to step up its efforts to boost the economy, and highlights the challenges it faces in reducing Britain's debt from record levels. The fall back into recession will also heighten calls for the chancellor to ease up on his deficit-cutting plans. However, George Osborne stuck to his guns on Wednesday morning.

"It's a very tough economic situation. It's taking longer than anyone hoped to recover from the biggest debt crisis of our lifetime. The one thing that would make the situation even worse would be to abandon our credible plan and deliberately add more borrowing and even more debt," said the chancellor.

David Cameron admitted at Prime Minister's Questions that the return to recession was "very, very disappointing". "There is no complacency at all in this government in dealing with what is a very tough situation, which frankly has just got tougher," he said. "It is very difficult recovering from the deepest recession in living memory, accompanied as it was by a debt crisis."

Hitting back, Ed Balls, the Labour shadow chancellor, said: "We consistently warned that their austerity plan was self-defeating and that cutting spending and raising taxes too far and too fast would badly backfire. David Cameron and George Osborne arrogantly and complacently dismissed people who warned of the risk of a double-dip recession and the country is now paying a very heavy price. Their economic credibility is now in tatters."

The UK economy contracted by 7.1% during the 2008-2009 recession, which lasted five quarters in a row. Since then recovery has been slow – the weakest in 100 years, weaker than after the Great Depression, the 1970s oil shock or the recessions of the 1980s and 1990s.

The latest decline was caused by falls in industrial and construction output while Britain's dominant service sector barely grew.

"The UK has sunk back into a recession, if the official first estimate of economic growth in the first quarter is to be believed," said Chris Williamson, chief economist at Markit. "However, the underlying strength of the economy is probably much more robust than this data suggests. The danger is that this gloomy data delivers a fatal blow to the fragile revival of consumer and business confidence seen so far this year, harming the recovery and even sending the country back into a real recession."

Britain's service industries, which make up more than three-quarters of the economy, grew by just 0.1% in the first quarter, after declining by 0.1% in the fourth quarter of last year. Growth was held back by a drop in output in the business services and finance sector.

Industrial output was 0.4% lower, while construction shrank by 3% – the biggest drop since the start of 2009.

The question is whether the Bank of England will respond by pumping more money into the economy under its quantitative easing (QE) programme, but it is hamstrung by high inflation.

"The biggest surprise – and perhaps the most worrying element of this report was the disappointment in services output," said Alan Clarke at Scotia bank. "Ironically construction, which had the most potential to determine whether or not the UK is in recession, proved much less negative than feared. The Bank [of England] recently highlighted that it cares most about underlying growth. Our gauge of underlying GDP showed zero growth – still very disappointing. The door is back open to more QE, but the elevated inflation outlook is the biggest obstruction."

The GDP figures conflict with other recent data from business surveys, which have painted a steadily improving economic picture.

Economists also question the reliability of the official construction numbers.

The statistics office's chief economist Joe Grice said the bigger picture in Wednesday's GDP data is that the UK economy, in volume terms, was flat between January and March compared with the same period last year. Looking at the UK since last summer, he added that the picture is of "a flattish economy".

Britain is the first major economy to report GDP data for the first quarter of 2012.

 

The storm clouds continue to gather over the British economy. Last week, two ONS data releases gave us insight into where the economy is and, importantly, further indication of what the first estimate of the GDP first-quarter growth rate is likely to be when it is published on April 25.

 

 

 

With awful industrial production figures, rising unemployment and poor retail sales, the numbers – on construction output and net trade – suggest to me there is a better than 50-50 chance that number will be negative. This would imply the UK is already in a technical double-dip recession, which occurs when there are two successive negative quarters of growth. That, rightly, would generate a political storm.

The data on construction showed the sector is likely to be a net drag on growth. Construction output in February was 17 per cent lower than in November and 4.6 per cent less than a year earlier, which was considerably worse than economists had expected. Even though construction accounts for only 8 per cent of the economy, if these numbers are repeated in March they would represent a significant downward pull on GDP growth.

The trade figures were especially shocking. The UK's deficit on seasonally adjusted trade in goods and services rose to £3.4bn in February from £2.5bn in January. Negative net trade also lowers GDP growth. The numbers are presented in the table above.

The deficit on seasonally adjusted trade in goods was £8.8bn in February, compared with £7.9bn in January. Excluding oil and erratic items, the seasonally adjusted volume of exports was 5.3 per cent down and the volume of imports 0.9 per cent lower in February, compared with January.

The deficit increased further in February to £3.4bn. This was driven by a 2 per cent monthly drop in export values while import values edged up by 0.2 per cent. January's deficit was revised down from £1.8bn to £2.5bn, extending the pattern of downward revisions we have seen to almost all recent economic data releases.

Of particular note is that the worsening balance of trade in goods is not principally due to the weakness of the Eurozone, although it almost certainly will be soon. It worsened sharply because of a decline in exports to non-EU countries, from £12.8bn in January to £11.7bn in February. Indeed, the balance of trade in goods to the EU in February was less than a year earlier (-£3.8bn compared with -£4bn). To this point, the government can't really blame its problems on the slowing Eurozone, which is the UK's major export market. It isn't as if it didn't know about the problems in the Eurozone when it launched its reckless austerity programme.

That situation is set to worsen because GDP growth in the Eurozone was -0.3 per cent in Q4 2011 with 12 of the 17 euro area countries having negative growth. Greece is likely to be heading back into recession, and there is little sign of improvement in any of these countries. The OECD forecasts negative growth for the weighted average of the three largest euro countries, France, Italy and Germany, for the last quarter of 2011 and the first one of 2012 – as it is for the UK, which would mean all would be in double-dip recession. As my friend Nouriel Roubini has said: "The trouble is that the Eurozone has an austerity strategy but no growth strategy." Sound familiar? Developments in Spain last week, where bond yields rose to 6 per cent, and in Italy where they also rose, suggest the euro crisis is back and more bailouts are on the way. It is hard to see how net trade is about to make a positive contribution to UK growth.

The table of the latest forecasts from the Office for Budget Responsibility shows the expenditure contributions to growth from the six major components – private consumption, business investment, dwelling investment, government, inventories and net trade. What is clear is that net trade is supposed to contribute half the growth of 0.8 per cent in 2012, which is not going to happen. Plus the OBR believes net trade will make a major contribution in 2013 and to a lesser degree in 2014 and 2015, which seems fanciful. The 10 per cent appreciation of sterling against the euro over the last nine months certainly won't help.

The OBR's past forecasts have been overly optimistic, embarrassingly being revised downwards in every subsequent forecast, and the latest is inevitably going to follow in that tradition. For example, in its June 2010 Budget forecast, the OBR predicted that in 2011 business investment would grow by 8.1 per cent whereas the actual outcome was 0.2 per cent.

The OBR forecasts growth in investment of 6.4 per cent in 2013, 8.9 per cent in 2014 and double digits after that, and consumption growth of 1.3 per cent in 2013 rising to 2.3 per cent in 2014 and 3 per cent after that. Same forecast pushed out a year or so. Wrong then, wrong now. Dream on.

The table makes clear that government cuts are set to become an even bigger drag on growth as we move towards an election, with the deepest in 2015. But never fear, apparently private consumption and investment will pick up in 2013 along with dwellings investment, and growth will accelerate. Even though they didn't in 2011 and don't look like they are going to in 2012. Pigs might fly.

The evidence from the report is that consumer demand is growing "only at a gradual pace" while investment intentions "point to only modest growth in capital spending over the coming year". The EU's Economic Sentiment Index for the UK dipped again in March, driven by a big drop in confidence of retailers, and at 91.4 is well below its level of 102.4 when the coalition took office in May 2010 . So it doesn't look like things are going to get better any time soon. Slasher Osborne's austerity plan is in deep political and economic trouble.

David Blanchflower is professor of economics at Dartmouth College, New Hampshire, and a former member of the Bank of England's Monetary Policy Committee

 

The British economy is set to stall for the rest of the year as nervous businesses remain reluctant to invest in recovery, an influential economic forecaster warned today.

The Ernst & Young ITEM Club reckons the economy will edge ahead by an anaemic 0.4 per cent in 2012, growing at just half the pace predicted by the Office for Budget Responsibility, according to its latest forecasts.

ITEM predicts stronger growth of 1.5 per cent next year although this again falls short of the OBR's 2 per cent prediction. The forecaster blamed sluggish growth in business investment for the shortfall as UK firms stockpile cash balances worth a staggering £754 billion. Despite their cash-rich position, business investment grew by just 1.2 per cent last year.

Chief economic adviser Peter Spencer warned that the recovery would struggle until the funds are put back into the economy. "Business investment has picked up nicely in the US but UK companies remain extremely risk averse, which is sapping strength from the economy," he said. "Until these companies stop stashing the cash and start increasing levels of investment and dividends, the economy will remain on the critical list."

ITEM also warned that household budgets would remain under heavy pressure while investment-shy firms struggle to create the jobs to offset losses in the public sector as Chancellor George Osborne's austerity programme takes hold in earnest. Unemployment is expected to approach 9.3 per cent by mid 2013 with nearly three million out of work, although wage growth should finally catch up with falling inflation.

Mr Spencer added: "For the first time in years, the gap between wage growth and inflation should start to close, before reversing in 2013. This will feed through to the tills on the high street and will be given an additional boost by the Olympics. But make no mistake: consumers can't lead this recovery."

Governments should step in to help struggling households write off part of their mortgages in the wake of a financial crisis to avoid the risk of a prolonged economic slump, according to new research by the International Monetary Fund.

In a chapter of the spring edition of its World Economic Outlook, the rest of which will be published next week, the IMF's economists find that a rapid buildup of household debt during a boom leads to a deeper downturn when the bubble bursts.

"Housing busts preceded by larger run-ups in gross household debt are associated with deeper slumps, weaker recoveries, and more pronounced household deleveraging," they find.

From Iceland to the US, Spain to the UK, a rapid increase in debt was a common characteristic across many economies in the years before 2007, as homeowners took advantage of low interest rates to borrow against the rocketing value of their properties.

When house prices crashed, many borrowers inevitably found themselves in trouble and were forced to cut back sharply, contributing to the deep recessions that followed the financial crisis.

But when they examined scores of historical property crashes, the IMF found that where consumers were battling with a heavy debt burden spending fell on average four times as fast as could be explained by the decline in house prices alone.

"The decline in economic activity is too large to be simply a reflection of a greater fall in house prices. And it is not driven by the occurrence of banking crises alone," they say. "Rather, it is the combination of the house price decline and the pre-bust leverage that seems to explain the severity of the contraction."

Because of this strong relationship between the debt burden before a crisis and consumer behaviour in the years afterwards, the IMF says governments should consider intervening to help households write off or restructure their mortgages.

It details the case of the Home Owners' Loan Corporation, which was introduced by the Roosevelt government during the Great Depression. The HOLC bought 1m distressed mortgages from troubled banks and used the government's firepower to bring down the costs for homeowners – for example by extending the term of the loan. Just a fifth of the mortgages eventually ended in default – 800,000 were paid back.

The IMF suggests recent efforts by the White House to reduce foreclosures have been disappointing by comparison.

The report also praises Iceland's recent efforts to deal with the impossible household debts run up during the housing boom, which included a temporary moratorium on repossessions and a government-backed scheme to allow struggling borrowers to reschedule their payments.

"Bold and well-designed household debt restructuring programmes, such as those implemented in the United States in the 1930s and in Iceland today, can significantly reduce the number of household defaults and disclosures. In so doing, these programmes help prevent self-reinforcing cycles of declining house prices and lower aggregate demand."

The IMF's findings offer fresh support to a warning issued recently by consultancy McKinsey, which suggested that the UK faces a tough struggle to restore growth, because the total debt burden has barely budged since before the crisis.

McKinsey said total debt, including borrowing by companies and the government, as well as households, now exceeds 500% of GDP, barely below the level in Japan, and suggested it would take until 2020 for these legacy debts to be dealt with.

However, other analysts, including Ben Broadbent of the Bank of England's monetary policy committee, have argued that the legacy of debt left over from the boom years should not hold back economic recovery, because it was largely backed by increases in the value of assets such as property. House prices have so far fallen less sharply in the UK than in many other countries.

The budget was a disgrace. The government has washed its hands of any attempt to relieve the worst recession since the 19th century. Indeed, there's a resolute refusal to use government, in a creative fashion, to do anything direct to address the raft of inter-related problems which plague the economy – unprecedently strained bank balances, companies hoarding record amounts of cash and squeezed public and private investment. Instead, Mr Osborne clings to the belief that the elimination of Britain's structural public deficit is the key to growth and prosperity – and that once realised, the private sector will take off. It is absurd. He might just as well as sacrifice virgins.

Worse, the budget speech was littered with dissimulation and sometimes near-lies that are a black mark on British public life. The withdrawal of additional tax relief for over-65s is not a tax simplification. It is a tax increase – perhaps amply justifiable because lucky baby boomers should take their share of the burden – but a tax increase nonetheless.

Nor is it true that Britain has record public debts. It did have a record annual public deficit in 2009/10 as the budget papers say. But that is not debt. Debt is an aggregate figure, the consequence of cumulative deficits over decades. Expressed as a proportion of GDP, debt has been higher than current levels for most of the last 250 years. Indeed, with the cost of servicing public debt at the lowest since the 1890s there have been very few decades since the 1760s when the cost of servicing public debt has been so low. Britain, despite the Orwellian attempt to misuse language, does not have a debt crisis.

Nor is this just nitpicking: recognising this distinction opens up wholly different strategic options. A country with such modest debts and astonishingly low interest rates, but with large annual deficits, has a much wider range of choices about how to respond than the government lets on. It can use the public balance sheet to launch a range of initiatives which address seriously acute malfunctions rather than fiddle at the edges.

For example, it does not have to set up complex vehicles for pension funds and foreign investors to fund much-needed British infrastructure projects, which will, in any case, almost certainly fail unless the government has the courage to create income flows, such as allowing road pricing or motorway tolls that service the investments. The government can deliver such projects itself either directly or via a public Infrastructure Bank. Options are talk to replace action. It smells of economic cowardice.

In fact cowardice saturates this budget. To lift stamp duty to 7% on homes valued above £2m, accompanied by measures to stop stamp duty being evaded by the rich, is to play to the gallery. Nobody can disagree politically. But the brave action would have been to recognise that Britain's tax take from property is, in the round, absurdly low. We all, the rich included, pay council tax on house values that are more than 20 years old, because there has been no revaluation since 1991.

The chancellor should have announced such a revaluation, scrapped council tax and replaced it with a graduated system of property tax, similar to the old rates. Instead of getting a little extra from the 200-300 £2m-plus homes that are sold every year, he could have raised the annual tax take on rich property owners by billions. That requires imagination and courage – beyond Mr Osborne just as it was beyond Mr Brown.

Lowering the top rate of income tax to 45% also smacked of cowardice – giving way to a mob of self-interested higher tax payers who argued that it was a tax on "enterprise", and was justified by yet more dissimulation. The chancellor said the cut would only cost £100m, a figure he must know is a brave guestimate, based on the view that Britain is locked in an epidemic of tax evasion that makes the Mafia look like a bunch of Church of England vicars.

As the Institute for Fiscal Studies commented, we simply do not know enough after one year of the higher 50% rate to make any secure statement about how much it is evaded or avoided. The government has simply run up the white flag. And anyone who believes that a 45% top rate of income tax will suddenly unleash a wave of dynamic entrepreneurialism needs to lie down quietly in a darkened room.

Instead of irrelevant wheezes and this hotchpotch of tax measures as the IFS described it, the chancellor should have confronted head on the causes of our ongoing slump. (Output is still below peak 2008 levels and is projected to recover only in 2014.) Bank assets are five times our national output and need to be reduced; and banks want to contract their balance sheets rather than grow them. As a result, British small and medium-sized businesses are facing a potential funding gap of £190bn by the middle of the decade, according to the government-commissioned Breedon report.

The response, to establish the £20bn national loan guarantee scheme, is besides the point. It does not guarantee new lending, but rather old deposits – and is so irrelevant that the banks had to be arm-twisted into joining. One finance director told me that it might even raise funding costs because of administration expense – all for an exercise his bank did not need. What he, and other banks, need is the capacity to bundle up new loans into new aggregated investment vehicles that the Treasury can indemnify, and which can then be bought by investors or by the Bank of England's quantitative easing programme.

I have argued for this. So has the Breedon report. It is the only secure way to ensure bank lending rises over the years ahead. But it means using the public balance sheet creatively, innovatively merging fiscal, financial and monetary policy. Not a runner from today's complacent chancellor betting all on deficit reduction.

And the pain is all to come. According to the IFS, 88% of the planned spending cuts lie ahead over the next four years – a scale of continual spending reduction never contemplated nor delivered in our history. Public provision of everything is to be emasculated, with welfare in the front line. We now also learn that public sector pay in the regions, a last prop for many local economies, is also in the frame. Despite all this, and despite a darkening international economic situation as oil prices rise, the Office for Budget Responsibility blithely forecasts that business investment is to climb by 40%, the largest increase since the war. It is a ship of fools with the deluded at the helm.

In January 2012, Cait Reilly, a brave young woman from Birmingham, started a legal challenge on behalf of a quarter of a million unemployed people. Her judicial review case challenges this government's approach to getting unemployed people to work for nothing, or else risk losing their benefits. However, the government's Get Britain Working drive is about to come under intense judicial scrutiny. A high court judge recently ordered what amounts to a full hearing of the case which is to be heard over one and a half days in June.

Cait was forced out of her voluntary work in a local museum – she studied geology and aspired to a career in museums – into a one size fits all programme that required her to stack shelves at Poundland for free. She was told that if she refused, her £53-per-week jobseeker's allowance could be suspended. She was "guaranteed" training, a qualification in retail and a job interview; none of which materialised.

Cait soon came under sustained attack from the right-wing press as well as past and present conservative ministers, who coordinated a ruthless attack upon Britain's so-called "job snobs". Cait – their standard-bearer – bore the brunt. It turned out though, that Cait had identified an injustice that was to force high street shops nationwide to look closely and urgently at what they had signed up to. Activists took over stores, decrying what they saw as "slave labour".

Big businesses soon realised that these people were not upset about the type of work they were being told to undertake, but rather the mandatory and unpaid nature of that work. Many businesses pulled out of the schemes altogether, and the government was forced to remove the sanctions attached to a refusal to participate in their flagship sector-based work academy and work experience schemes.

However, huge numbers of unemployed people continue to face sanctions because the government's U-turn applies to those two schemes only. Cait's case has been linked to another in which our client was told to work unpaid for six months ("to begin with") or face losing his benefits. The government may have softened its approach when it comes to the young unemployed and where high street chains have withdrawn support, but older people are still being forced to work for free for months at a time in schemes similar to those being challenged in Cait's judicial review proceedings.

Britain is in the midst of its worst unemployment crisis in almost two decades. The government needed to respond robustly, but did so by choosing to import workfare; an idea attempted previously in the United States, Canada and Australia. Before it set up its own workfare programme, the Department for Work and Pensions commissioned expert independent research examining how the idea had worked in those countries.

The report concluded: "There is little evidence that workfare increases the likelihood of finding work. It can even reduce employment chances by limiting the time available for job search and by failing to provide the skills and experience valued by employers"; and "Workfare is least effective in getting people into jobs in weak labour markets where unemployment is high."

Yet the coalition forged on, steaming headlong into the adoption of measures that now appear to have lost the support of the general public, not to mention the big businesses it had relied upon to implement the measures. What Cait and her co-claimant object to is the creation of the UK's own workfare model without official parliamentary approval of what these schemes should involve and to whom they should apply.

Instead, a plethora of confusing schemes have been dreamt up and implemented within Whitehall, granting a rare omnipotence to the Jobcentre Plus advisor, who faced with the nation's unemployed can sign droves of jobseekers into unpaid work with no account given to their needs, skills or skills gaps.

Our clients do not claim that they were subjected to "slave" labour, but they have posed a serious question as to whether the work they have undertaken can be described as "forced or compulsory labour" under the Human Rights Act. If they succeed, the high court has the power to quash the Jobseeker's Allowance (Employment, Skills and Enterprise Scheme) Regulations 2011. That would leave this closely guarded government programme in tatters.

The high court now has an opportunity to apply basic administrative standards to this government initiative that we say has been created by disregarding basic principles of legality. We all want to see Britain working again, but no one is so worthless that they should be forced to work for nothing in return.

 

Phil Shiner is a solicitor at Public Interest Lawyers. He, alongside Jim Duffy, is acting in the cases referred to in this article

The OECD, which produces quarterly figures showing year-on-year growth, said that UK output declined by 1.2% in the final quarter of 2011

The UK is deep in recession and will be among the slowest of the world's largest economies to recover in the first half of this year, according to a study by the Paris-based thinktank, the OECD.

Only Italy will struggle over a longer period to return to growth, highlighting the difficult situation contronting the British government as it battles to boost confidence and get the economy back on track.

In recent weeks surveys have shown the business and consumer sentiment falling back after an initial boost earlier this year.

The Office for National Statistics added to the gloomy prognosis for the economy on Wednesday when it reported a bigger fall in output in the final three months of 2011 than first estimated. It said a previous 0.2% drop in output had underestimated the the size of the fall, which further analysis found to be 0.3%.

The OECD, which produces quarterly figures showing year-on-year growth, said that UK output declined by 1.2% in the final quarter of 2011 and will decline by 0.4% in the first three months of 2012.

The OECD also warned the recovery for the world's biggest economies would be fragile, with the outlook for Europe "very weak".

Europe is crashing back into recession as storm clouds gather over the region's twin economic powerhouses, Germany and France, experts have warned.

The latest evidence of the eurozone's woes comes less than 24 hours after the Office for Budget Responsibility slashed its forecasts for the region, predicting a 0.3 per cent decline this year for the UK's biggest export market. The Government's independent watchdog says an intensifying debt crisis in Europe and soaring oil prices are the biggest threats to the UK's recovery.

Yesterday's downbeat surveys of Europe's manufacturing and services sectors by the financial information company Markit showed that France was sucked back into a slump this month as manufacturing output fell and the services sector trod water. Germany meanwhile is suffering its weakest private sector growth in four months amid a worrying slide in export orders and the first fall in manufacturing jobs for two years.

Gloomy news from China also dampened the mood as its manufacturing sector shrank in March, fuelling fears of a hard landing for the world's second biggest economy.

The FTSE 100 shed almost 1 per cent as investors pulled money out of shares and into safe-haven gilts.

Markit warned that the eurozone's peripheral strugglers such as Spain, Italy, Greece and Portugal were faring even worse than its bigger players, putting the 17-member single currency bloc on course for a 0.2 per cent contraction in the first quarter on top of a 0.3 per cent slide in the final three months of 2011. The worsening economic news comes despite the European Central Bank pumping in more than €1 trillion (£835m) to prop up the financial system.

Markit's chief economist, Chris Williamson, said: "The eurozone is heading into a double-dip recession, China's manufacturers have had their worst quarter for three years and the Chancellor is talking about boosting exports. Where to?

"The risk is now geared towards a steeper downturn than any sort of recovery. The German and French numbers came in below even the lowest expectations."

Manuel Maleki, an analyst at ING, warned that France's economy would remain in the doldrums as tax rises kicked in and Nicolas Sarkozy fought against rival Francois Hollande for the French presidency. "This is likely to push firms and households to be cautious as long as there is no strong view on the result," he said.

The OBR reckons the UK will avoid a double-dip recession, but its fortunes are closely tied to the fate of the eurozone. The watchdog's detailed Budget analysis said a chaotic default by a European struggler would tip the economy back into a renewed slump, with the UK potentially shrinking 1.9 per cent under its downside scenario.