The growth-deniers' game is up. Just look at the numbers.

Contrary to the coalition government's spin, the economy was recovering nicely under the last Labour

Contrary to the coalition government's spin, the economy was recovering nicely under the last Labour government.{C}

Today is the day to report back on the battle between the coalition and the opposition over who has been right on the economy. Keynes versus Hayek; growth-deniers versus deficit-deniers (supposedly like me). The jury has now reached its verdict and the coalition is guilty as charged -- they have destroyed growth and pushed the UK into a recession worse than we saw in the 1930s. Contrary to the coalition government's spin, the economy was recovering nicely under the last Labour government.

Yesterday, the European Commission said Britain's economy will grow by just 0.7 per cent this year, 0.6 per cent in 2012 and 1.5 per cent in 2013. The figures are miles below the 1.7 per cent, 2.5 per cent and 2.9 per cent growth forecast by the Office for Budget Responsibility (OBR) in March. It is broadly consistent with the forecasts of the CBI and NIESR. Given that we have already had growth of 1 per cent in the first three quarters of the year, this suggests that the Commission is expecting negative growth of 0.3 per cent in Q4 and/or the earlier quarters to be revised down. The OECD, the IMF and the EU have now given up on George.

The recession can be split into four parts. First, the "down" part which started in the second quarter of 2008 and went on for a total of five consecutive quarters of negative growth, during which output fell by an enormous 7.4 per cent. Second, the "up" part, which also lasted five quarters (from Q3 2009 to Q3 2010) when under Alistar Darling and Gordon Brown, growth increased by 2.8 per cent. Then, the "flatline" phase under George Osborne, which is also fifteen months long (from Q4 2010 to Q4 2011) with growth of 0.2 per cent, assuming we use the EU's estimates. Osborne destroyed Darling's recovery. Then, finally, the "stagnation" phase, lasting 24 months (from Q1 2012 to Q4 2013) with growth of 2.1 per cent over two years, or an average of just over 1 per cent.

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So by the end of 2013, only 5.6 per cent of the 7.4 per cent drop in output will have been restored. This is worse than the 1930-1934 double-dip recession, which had only a slightly bigger output drop but was over in 48 months. By the end of 2013, this will number 69 months and counting. It is no good blaming the eurozone, old chap. This means that Osborne will have caused the longest-lasting downturn for at least a century, which because of his incompetence has now turned into a depression of epic proportions. Acording to the EU Commission's forecasts, it will take Slasher Osborne 39 months to achieve the same growth of 2.8 per cent as Alistair Darling's policies achieved in fifteen months. Spin your way out of that one, Mr Fallon. If the problems were all inherited from Labour, how come they were able to grow the economy twice as fast as the coalition has? Blaming the eurozone won't wash.

Judging by Vince Cable's comments yesterday, it looks increasingly unlikely that the coalition has much of a plan B. The Autumn Statement is due at the end of the month, but he appeared to rule out tax cuts or a new burst in spending. Infrastructure projects are fine, but will take a long time to have an effect, as will credit easing. That old Tory chestnut of removing regulation and red-tape, as ever, is likely to do diddly squat. The growth-deniers' game is up. Just look at the numbers.

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

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Labour's trajectory points to landslide defeat, but don't bet on a change at the top any time soon

The settled will among Jeremy Corbyn's critics that they need to keep quiet is unlikely to be disrupted by the result. 

Labour were able to tread water against Ukip in Stoke but sank beneath the waves in Copeland, where the Conservatives’ Trudy Harrison won the seat.

In Stoke, a two-point swing away from Labour to the Tories and to Ukip, which if replicated across the country at a general election would mean 15 Conservative gains and would give Theresa May a parliamentary majority of 40.

And in Copeland, a 6.7 per cent swing for Labour to Tory that would see the Conservatives pick up 52 seats from Labour if replicated across the country, giving them a majority of 114.
As the usual trend is for the opposition to decline from its midterm position at a general election, these are not results that indicate Labour will be back in power after the next election.. That holds for Stoke as much as for Copeland.

The last time a governing party won a by-election was 1982 – the overture to a landslide victory. It’s the biggest by-election increase in the vote share of a governing party since 1966 – the prelude to an election in which Harold Wilson increased his majority from 4 to 96.

To put the length of Labour’s dominance in Copeland into perspective: the new Conservative MP was born in 1976. The last Conservative to sit for Copeland, William Nunn, was born in 1879.

It’s a chastening set of results for Ukip, too. The question for them: if they can’t win when Labour is in such difficulties, when will they?

It’s worth noting, too, that whereas in the last parliament, Labour consistently underperformed its poll rating in local elections and by-elections, indicating that the polls were wrong, so far, the results have been in keeping with what the polls suggest. They are understating the Liberal Democrats a little, which is what you’d expect at this stage in the parliament. So anyone looking for comfort in the idea that the polls will be wrong again is going to look a long time. 

Instead, every election and every poll – including the two council elections last night – point in the same direction: the Conservatives have fixed their Ukip problem but acquired a Liberal Democrat one. Labour haven’t fixed their Ukip problem but they’ve acquired a Liberal Democrat one to match.

But that’s just the electoral reality. What about the struggle for political control inside the Labour party?

As I note in my column this week, the settled view of the bulk of Corbyn’s internal critics is that they need to keep quiet and carry on, to let Corbyn fail on its his own terms. That Labour won Stoke but lost Copeland means that consensus is likely to hold.

The group to watch are Labour MPs in what you might call “the 5000 club” – that is, MPs with majorities around the 5000 mark. An outbreak of panic in that group would mean that we were once again on course for a possible leadership bid.

But they will reassure themselves that this result suggests that their interests are better served by keeping quiet at Westminster and pointing at potholes in their constituencies.  After all, Corbyn doesn’t have a long history of opposition to the major employer in their seats.

The other thing to watch from last night: the well-advertised difficulties of the local hospital in West Cumberland were an inadequate defence for Labour in Copeland. Distrust with Labour in the nuclear industry may mean a bigger turnout than we expect from workers in the nuclear industries in the battle to lead Unite, with all the consequences that has for Labour’s future direction.

If you are marking a date in your diary for another eruption of public in-fighting, don’t forget the suggestion from John McDonnell and Diane Abbott that the polls will have turned by the end of the year – because you can be certain that Corbyn’s critics haven’t. But if you are betting on any party leader to lose his job anytime soon, put it on Nuttall, not Corbyn.

 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.