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NIESR forecast 0.5 per cent shrinkage in 2012

Return to growth in 2013, but stagnation continues.

The National Institute for Economic and Social Research has released its quarterly economic forecast for Britain. It predicts the economy will contract by 0.5 per cent over 2012, and then return to a low level of growth in 2013, with GDP increasing by just 1.3 per cent over the year.

The forecasts also predict unemployment taking a second upward swing, peaking next year at 8.6 per cent, 0.4 percentage points up from where it is currently. The structural deficit, orignally planned to be eliminated by 2015, will take until 2016-17 to be reduced to nothing.

Inflation should drop under its 2 percent target this year, which is a mixed blessing. On the one hand, high inflation coupled with stagnating wages has made life harder for many, but the inflation target is usually seen as a symettrical one. If it drops too low (below one per cent) that's just as bad as it being too high. In addition, of course, there are questions as to whether targeting inflation is even the right thing to be doing in the circumstances. The sort of looser monetary policy which many believe could bring us out of depression would almost certainly lead to increased inflation, and that surely isn't a bad thing given the consequences.

NIESR agrees that the second quarter was abnormally hurt by the "jubilee effect", but points out that even without that, the trend is negative. The overall conclusion on growth figures, however, mirrors a case we made in April: technical recession on its own doesn't matter, when whichever side of the barrier we fall, Britain is firmly in stagnation.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.