Double-dip recession warnings grow

Will the coalition now stop dismissing its economic critics as “Labour scaremongers”?

The coalition* has so far dismissed those who warn of the danger of a double-dip recession as "Labour scaremongers". But with an increasing number of figures arguing, as our economics columnist, David Blanchflower, has done for months, that the risk is real, one wonders whether this line of attack is sustainable.

In an interview in today's Times (£), Dr Martin Weale, the newest member of the Bank of England's Monetary Policy Committee, warns of the "real risk" of a second downturn, adding: "People would be foolish to say that it can't happen or that it is definitely not going to happen." He concludes that the Bank's growth forecast of 2.8 per cent for 2011 is over-optimistic.

Weale's warning follows an important intervention by Policy Exchange's Andrew Lilico, not known as a left-wing radical, who says he has "always expected" the UK to suffer a double dip. He points out that double-dip recessions are far more common than many assume:

[T]here were double-dip recessions in 1992 (output contracted in 1992Q2 after two quarters of growth), 1976 (output contracted in 1976Q2 after two quarters of growth), 1974 (output contracted in 1974Q4 after two quarters of growth), 1962 (output contracted in 1962Q4 after three quarters of growth), 1958 (output contracted in 1958Q2 after two quarters of growth) and 1957 (output contracted in 1957Q2 after two quarters of growth).

Indeed, the only recession that did not involve a double dip was that of the early 1980s. Yet, despite this warning from history, George Osborne is said to believe that talk of a double dip is part of an "operation run by the left and its chums and driven by the likes of Ed Balls". Can we now expect Osborne to dismiss the likes of Weale and Lilico as Labour stooges?

Rather than traducing his critics, Osborne would be well advised to draw up a plan B -- and fast. Having argued that the government should cut its way out of the recession (advice thankfully rejected), he may soon learn that you can't cut your way out of a double dip.

* With the honourable exceptions of Ken Clarke and Vince Cable.

George Eaton is political editor of the New Statesman.

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PMQs review: Jeremy Corbyn turns "the nasty party" back on Theresa May

The Labour leader exploited Conservative splits over disability benefits.

It didn't take long for Theresa May to herald the Conservatives' Copeland by-election victory at PMQs (and one couldn't blame her). But Jeremy Corbyn swiftly brought her down to earth. The Labour leader denounced the government for "sneaking out" its decision to overrule a court judgement calling for Personal Independence Payments (PIPs) to be extended to those with severe mental health problems.

Rather than merely expressing his own outrage, Corbyn drew on that of others. He smartly quoted Tory backbencher Heidi Allen, one of the tax credit rebels, who has called on May to "think agan" and "honour" the court's rulings. The Prime Minister protested that the government was merely returning PIPs to their "original intention" and was already spending more than ever on those with mental health conditions. But Corbyn had more ammunition, denouncing Conservative policy chair George Freeman for his suggestion that those "taking pills" for anxiety aren't "really disabled". After May branded Labour "the nasty party" in her conference speech, Corbyn suggested that the Tories were once again worthy of her epithet.

May emphasised that Freeman had apologised and, as so often, warned that the "extra support" promised by Labour would be impossible without the "strong economy" guaranteed by the Conservatives. "The one thing we know about Labour is that they would bankrupt Britain," she declared. Unlike on previous occasions, Corbyn had a ready riposte, reminding the Tories that they had increased the national debt by more than every previous Labour government.

But May saved her jibe of choice for the end, recalling shadow cabinet minister Cat Smith's assertion that the Copeland result was an "incredible achivement" for her party. "I think that word actually sums up the Right Honourable Gentleman's leadership. In-cred-ible," May concluded, with a rather surreal Thatcher-esque flourish.

Yet many economists and EU experts say the same of her Brexit plan. Having repeatedly hailed the UK's "strong economy" (which has so far proved resilient), May had better hope that single market withdrawal does not wreck it. But on Brexit, as on disability benefits, it is Conservative rebels, not Corbyn, who will determine her fate.

George Eaton is political editor of the New Statesman.