More bad news for the ideologue George Osborne

The overnight forecast of "lacklustre" growth is at odds with overly optimistic OBR figures.

Over the weekend, our out-of-touch Chancellor, George Osborne, said that he sympathised with those facing hard times -- but warned of "financial turmoil" if he scrapped his plans. The issue is not so much whether Osborne should scrap his plans but that he should slow the pace of deficit reduction so as not to compromise growth. Claiming it's "my way or the highway" is unlikely to give the markets confidence that he is anything other than an incompetent ideologue.

Ed Balls is quite right: Osborne is in denial but the facts are speaking and our bungling Chancellor can only keep his head in the sand for so long. I think the shadow chancellor had it about right in his op-ed in the Independent in the weekend, when he wrote:

He appears complacent, even carefree, and in denial about the risk to jobs and growth, with no apparent concern over the impact of his tax rises and spending cuts. There is no historical precedent to support his projections and he has no Plan B if the scale and pace of his deficit-cutting prove to go too far and too fast. This is not a wise approach to running the economy.

It certainly looks that way.

The big news overnight is the release of the National Institute for Economic and Social Research's (NIESR) latest quarterly forecast for the UK economy. The main headline is that growth in 2011 will be "lacklustre", which is not exactly what Slasher wanted to hear. NIESR is forecasting that the economy will grow by only 1.5 per cent in 2011 and 1.8 per cent in 2012. This contrasts with the Office for Budget Responsibility's overly optimistic forecasts of 2.1 per cent and 2.6 per cent and the MPC's utterly unlikely forecast of 2.4 per cent and 2.8 per cent.

Only some of the output lost to the exceptionally poor weather in late 2010 -- when GDP fell by 0.5 per cent -- will be regained in early 2011, says the NIESR: the average rate of growth across the two quarters they forecast will be just 0.1 per cent. Such a low growth rate would mean that unemployment will rise, perhaps even through the three million mark by 2012. It makes Osborne's claim that unemployment will fall each year of this parliament look as if it is from cloud cuckoo land.

With the recovery so subdued, NIESR says that this year's surge in inflation will "peter out" and CPI inflation will fall to 1.8 per cent in 2012. It argues that there is a "case for delaying some of the austerity programme". Of course there is.

My choice is the highway for Slasher.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

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An Irish Sea border – and 3 other tricky options for Northern Ireland after Brexit

There is no easy option for Northern Ireland after Brexit. 

Deciding on post-Brexit border arrangements between Northern Ireland and the Irish Republic is becoming an issue for which the phrase "the devil is in the detail" could have been coined. Finding a satisfactory solution that delivers a border flexible enough not to damage international trade and commerce and doesn’t undermine the spirit, or the letter, of the Good Friday Agreement settlement is foxing Whitehall’s brightest.

The dial seemed to have settled on David Davis’s suggestion that there could be a "digital border" with security cameras and pre-registered cargo as a preferred alternative to a "hard border" replete with checkpoints and watchtowers.

However the Brexit secretary’s suggestion has been scotched by the new Irish foreign minister, Simon Coveney, who says electronic solutions are "not going to work". Today’s Times quotes him saying that "any barrier or border on the island of Ireland in my view risks undermining a very hard-won peace process" and that there is a need to ensure the "free movement of people and goods and services and livelihoods".

The EU’s chief Brexit negotiator, Michel Barnier, has made dealing with the Irish border question one of his top three priorities before discussions on trade deals can begin. British ministers are going to have to make-up their minds which one of four unpalatable options they are going to choose:

1. Hard border

The first is to ignore Dublin (and just about everybody in Northern Ireland for that matter) and institute a hard border along the 310-mile demarcation between Northern Ireland and the Irish Republic. Given it takes in fields, rivers and forests it’s pretty unenforceable without a Trump-style wall. More practically, it would devastate trade and free movement. Metaphorically, it would be a powerful symbol of division and entirely contrary to the spirit of the Good Friday Agreement. The Police Federation in Northern Ireland has also warned it would make police officers "sitting ducks for terrorists". Moreover, the Irish government will never agree to this course. With the EU in their corner, there is effectively zero chance of this happening.

2. Northern EU-land

The second option is to actually keep Northern Ireland inside the EU: offering it so-called "special status". This would avoid the difficulty of enforcing the border and even accord with the wishes of 56 per cent of the Northern Irish electorate who voted to Remain in the EU. Crucially, it would see Northern Ireland able to retain the £600m a year it currently receives from the EU. This is pushed by Sinn Fein and does have a powerful logic, but it would be a massive embarrassment for the British Government and lead to Scotland (and possibly London?) demanding similar treatment.

3. Natural assets

The third option is that suggested by the Irish government in the Times story today, namely a soft border with customs and passport controls at embarkation points on the island of Ireland, using the Irish Sea as a hard border (or certainly a wet one). This option is in play, if for no other reason than the Irish government is suggesting it. Again, unionists will be unhappy as it requires Britain to treat the island of Ireland as a single entity with border and possibly customs checks at ports and airports. There is a neat administrate logic to it, but it means people travelling from Northern Ireland to "mainland" Britain would need to show their passports, which will enrage unionists as it effectively makes them foreigners.

4. Irish reunification

Unpalatable as that would be for unionists, the fourth option is simply to recognise that Northern Ireland is now utterly anomalous and start a proper conversation about Irish reunification as a means to address the border issue once and for all. This would see both governments acting as persuaders to try and build consent and accelerate trends to reunify the island constitutionally. This would involve twin referendums in both Northern Ireland and the Republic (a measure allowed for in the Good Friday Agreement). Given Philip Hammond is warning that transitional arrangements could last three years, this might occur after Brexit in 2019, perhaps as late as the early 2020s, with interim arrangements in the meantime. Demographic trends pointing to a Catholic-nationalist majority in Northern Ireland would, in all likelihood require a referendum by then anyway. The opportunity here is to make necessity the mother of invention, using Brexit to bring Northern Ireland’s constitutional status to a head and deal decisively with the matter once and for all.

In short, ministers have no easy options, however time is now a factor and they will soon have to draw the line on, well, drawing the line.

Kevin Meagher is a former special adviser at the Northern Ireland Office and author of "A United Ireland: Why unification is inevitable and how it will come about"

Kevin Meagher is associate editor of Labour Uncut and a former special adviser at the Northern Ireland office.