Unlike the UK, France and Germany aren't in recession

Osborne was wrong to blame the eurozone for our double-dip recession.

George Osborne is fond of blaming the eurozone crisis  for Britain's economic woes (he recently claimed that the crisis had "killed off" growth in the UK) , so it's worth noting that, unlike the UK, the euro's two largest members - Germany and France - aren't in recession. While the British economy contracted by 0.7 per cent in the second quarter of this year, Eurostat figures out today showed that the French economy remained flat, while Germany grew by 0.3 per cent. In the previous quarter, Britain shrunk by 0.5 per cent, while Germany grew by 0.5 per cent and France stagnated.

Of course, since much of our trade is with the eurozone, its lack of growth (it collectively shrank by 0.2 per cent in Q2), doesn't help. But as even Tory MPs concede, it is some exaggeration to claim it "killed off" our recovery. The Chancellor accomplished that all by himself. It was his absurd claim that the UK was on "the brink of bankruptcy" and his premature austerity measures, most notably the 2.5 point rise in VAT, that destroyed confidence and strangled growth. With the exception of Italy, Britain is the only G20 country to have suffered a double-dip recession.

At this moment, contrary to Osborne, Britain should actually be profiting from the eurozone crisis. With investors ever more reluctant to lend to eurozone countries, the UK can afford to borrow at the lowest interest rates for 300 years. We are, as Osborne has said many times, a "safe haven". Yet the Chancellor appears determined not to take advantage of this fact. He has continually refused to borrow for growth (in the form of tax cuts and higher infrastructure spending), despite little evidence that this would lead to a rise in British gilt yields. It is only Osborne's political pride that is preventing a change of direction. Borrowing for growth would be a tacit admission that his nemesis, Ed Balls, was right and that he was wrong. Until the Chancellor backs down, we will all collectively pay for his stubbornness.

George Osborne claimed that the eurozone had "killed off" the UK's economic recovery. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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The big problem for the NHS? Local government cuts

Even a U-Turn on planned cuts to the service itself will still leave the NHS under heavy pressure. 

38Degrees has uncovered a series of grisly plans for the NHS over the coming years. Among the highlights: severe cuts to frontline services at the Midland Metropolitan Hospital, including but limited to the closure of its Accident and Emergency department. Elsewhere, one of three hospitals in Leicester, Leicestershire and Rutland are to be shuttered, while there will be cuts to acute services in Suffolk and North East Essex.

These cuts come despite an additional £8bn annual cash injection into the NHS, characterised as the bare minimum needed by Simon Stevens, the head of NHS England.

The cuts are outlined in draft sustainability and transformation plans (STP) that will be approved in October before kicking off a period of wider consultation.

The problem for the NHS is twofold: although its funding remains ringfenced, healthcare inflation means that in reality, the health service requires above-inflation increases to stand still. But the second, bigger problem aren’t cuts to the NHS but to the rest of government spending, particularly local government cuts.

That has seen more pressure on hospital beds as outpatients who require further non-emergency care have nowhere to go, increasing lifestyle problems as cash-strapped councils either close or increase prices at subsidised local authority gyms, build on green space to make the best out of Britain’s booming property market, and cut other corners to manage the growing backlog of devolved cuts.

All of which means even a bigger supply of cash for the NHS than the £8bn promised at the last election – even the bonanza pledged by Vote Leave in the referendum, in fact – will still find itself disappearing down the cracks left by cuts elsewhere. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.