The grim economic news yesterday that the economy shrank in the last three months of 2012 felt just as wintry as the weather. It has inevitably given rise to the fear of a triple-dip recession. The official definition of a recession is two consecutive quarters of contraction. That means that if there is negative growth in the current quarter the triple-dip will be official.
However, these statistical definitions are not really that important. Whether it is a double-dip or a triple-dip is not the issue. The reality is that the economy is simply stagnant and has shown absolutely no sign of sustained growth since the financial crash in 2008.
The current government's strategy has been to cut spending and reduce the budget deficit. This has been a painful but necessary process. The country currently spends more money on paying debt interest than the cost of the entire defence budget. This cannot go on.
However, it has failed so far to put together a substantial and coherent plan for growth. Deficit reduction and investment are not mutually exclusive. Ministers should have been bolder from the outset with a much more robust strategy for investment in capital projects.
This has been acknowledged by Deputy Prime Minister Nick Clegg, who has said the coalition made a mistake in cutting back capital spending when it came to office.
And yesterday, London mayor Boris Johnson called on the Government to "junk the rhetoric of austerity" and instead take steps to boost confidence and spending. "We need investment in housing and transport, things that make a big difference," he said.
Chancellor George Osborne has said that he agrees that capital investment is important, adding "which is why we have added £20 billion of capital investment to our plans over the last couple of years".
The trouble with capital investment, however, is that it takes a while to translate into economic benefits because of the long lead-in time to projects. The reality is that far more should have been done earlier and we remain unconvinced that enough is being done now.
This is a critical issue because without the kick-start of investment there is a serious danger that the country's economic stagnation will continue for many more years.
