Why Britain's recession is lasting longer than others

George Osborne
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YESTERDAY&rsquo;S US GDP figures were very good news for the world economy. The US has followed France, Germany, Japan and most other major economies out of recession. Britain now stands out as the laggard. <br /><br />The Prime Minister&rsquo;s claim that we were &ldquo;best placed&rdquo; now lies in tatters, and his recession plan has patently failed.<br /><br />Why are we faring worse than our competitors? Partly because we had a bigger housing boom, larger credit bubble and a more unbalanced economy than any other major country. But another clue can be found in the M4 lending data that was also published yesterday. <br /><br />Core M4 fell at an annualised rate of 1.7 per cent in the third quarter, the sharpest drop since records began.<br /><br />As the Conservatives have argued throughout this recession, the continuing shortage of credit is still the single biggest barrier to recovery. <br /><br />That&rsquo;s why we need to accelerate the recapitalisation of the banking sector and provide more guarantees for new lending. <br /><br /><strong>BANKERS&rsquo; BONUSES</strong><br />It&rsquo;s also why lending banks should be paying out bonuses this year in new equity &ndash; which adds to tier one capital and therefore increases lending capacity &ndash; and not in cash.<br /><br />The other reason we are lagging our competitors is a lack of confidence in the future. Confidence is an essential ingredient for growth, and yet with &ldquo;little real reform&rdquo; in our banking system as Mervyn King put it, no credible plan for getting to grips with the largest budget deficit in the G20, and no plan for growth, businesses and consumers are understandably worried about what the future might bring.<br /><br /><strong>TIME FOR ACTION</strong><br />We need action on all three of these fronts to restore confidence. Our arguments for putting the Bank of England in charge of bank supervision are gaining international support, from Jacques DeLarosiere in Europe to the Obama administration in the US. <br /><br />We are the only party that has started spelling out the difficult choices on spending. <br /><br />And we have set out a radical plan to get Britain working, with tax breaks for job creation and lower rates of corporation tax.<br /><br />It&rsquo;s increasingly clear that we need credit and confidence to get the British economy moving again. We won&rsquo;t get either without new economic leadership.<br /><br />George Osborne is shadow chancellor.