“Choppy recovery” or double dip?

There are too many warning signs for the coalition to dismiss fears of another downturn.

As expected, the Bank of England has cut its growth forecast for next year from 3.4 per cent to a more realistic 2.5 per cent. The Bank didn't comment on the increasing possibility of a double-dip recession, but its quarterly inflation report this morning makes it clear that the remarkable growth of the past quarter (1.1 per cent) won't be sustained.

Here's the key passage, on what Mervyn King said would be a "choppy recovery":

GDP growth is likely to slow in Q3. In part, that is because Q2 growth was erratically strong. But there are also signs that underlying growth may be weakening. Business confidence has fallen across a range of surveys and the CIPS/Markit business activity indices fell back across all sectors in July.

But, if we're to believe the Telegraph's Ben Brogan, George Osborne is relaxed about the state of the economy. Brogan writes:

The prospect of a double dip -- specifically a return to recession -- is dismissed as unlikely. The Chancellor, who returns next week to take the reins while the Prime Minister is on holiday, sees signs of recovery building in the UK and in Europe. He reckons attempts to create a new narrative of an economy once again on the slide is a operation run by the left and its chums and driven by the likes of Ed Balls (the Tories pray that whichever of the Milibands ends up as leader will make him shadow chancellor).

But lower consumer spending, falling house prices and weaker-than-expected recovery in the US are all good reasons for him to avoid being so sanguine.

This morning's employment figures are encouraging, but the real test will come once the VAT rise and those 25 per cent cuts kick in. Is the private sector strong enough to sustain the recovery through the cuts? The reputation of the coalition depends on it.

George Eaton is political editor of the New Statesman.

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Who will win in Stoke-on-Trent?

Labour are the favourites, but they could fall victim to a shock in the Midlands constituency.  

The resignation of Tristram Hunt as MP for Stoke-on-Central has triggered a by-election in the safe Labour seat of Stoke on Trent Central. That had Westminster speculating about the possibility of a victory for Ukip, which only intensified once Paul Nuttall, the party’s leader, was installed as the candidate.

If Nuttall’s message that the Labour Party has lost touch with its small-town and post-industrial heartlands is going to pay dividends at the ballot box, there can hardly be a better set of circumstances than this: the sitting MP has quit to take up a well-paid job in London, and although  the overwhelming majority of Labour MPs voted to block Brexit, the well-advertised divisions in that party over the vote should help Ukip.

But Labour started with a solid lead – it is always more useful to talk about percentages, not raw vote totals – of 16 points in 2015, with the two parties of the right effectively tied in second and third place. Just 33 votes separated Ukip in second from the third-placed Conservatives.

There was a possible – but narrow – path to victory for Ukip that involved swallowing up the Conservative vote, while Labour shed votes in three directions: to the Liberal Democrats, to Ukip, and to abstention.

But as I wrote at the start of the contest, Ukip were, in my view, overwritten in their chances of winning the seat. We talk a lot about Labour’s problem appealing to “aspirational” voters in Westminster, but less covered, and equally important, is Ukip’s aspiration problem.

For some people, a vote for Ukip is effectively a declaration that you live in a dump. You can have an interesting debate about whether it was particularly sympathetic of Ken Clarke to brand that party’s voters as “elderly male people who have had disappointing lives”, but that view is not just confined to pro-European Conservatives. A great number of people, in Stoke and elsewhere, who are sympathetic to Ukip’s positions on immigration, international development and the European Union also think that voting Ukip is for losers.

That always made making inroads into the Conservative vote harder than it looks. At the risk of looking very, very foolish in six days time, I found it difficult to imagine why Tory voters in Hanley would take the risk of voting Ukip. As I wrote when Nuttall announced his candidacy, the Conservatives were, in my view, a bigger threat to Labour than Ukip.

Under Theresa May, almost every move the party has made has been designed around making inroads into the Ukip vote and that part of the Labour vote that is sympathetic to Ukip. If the polls are to be believed, she’s succeeding nationally, though even on current polling, the Conservatives wouldn’t have enough to take Stoke on Trent Central.

Now Theresa May has made a visit to the constituency. Well, seeing as the government has a comfortable majority in the House of Commons, it’s not as if the Prime Minister needs to find time to visit the seat, particularly when there is another, easier battle down the road in the shape of the West Midlands mayoral election.

But one thing is certain: the Conservatives wouldn’t be sending May down if they thought that they were going to do worse than they did in 2015.

Parties can be wrong of course. The Conservatives knew that they had found a vulnerable spot in the last election as far as a Labour deal with the SNP was concerned. They thought that vulnerable spot was worth 15 to 20 seats. They gained 27 from the Liberal Democrats and a further eight from Labour.  Labour knew they would underperform public expectations and thought they’d end up with around 260 to 280 seats. They ended up with 232.

Nevertheless, Theresa May wouldn’t be coming down to Stoke if CCHQ thought that four days later, her party was going to finish fourth. And if the Conservatives don’t collapse, anyone betting on Ukip is liable to lose their shirt. 

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