Osborne’s plan isn’t working

Today’s GDP figure of 0.5 per cent means the economy hasn’t grown for six months.

George Osborne told the cabinet yesterday that the economy is "on the right track". But today's GDP figures suggest that he has no right to be so sanguine.

The preliminary estimate from the Office for National Statistics suggests that the economy grew by just 0.5 per cent in the first quarter of this year, significantly lower than the forecast of 0.8 per cent from the Office for Budget Responsibility.

A stagnant economy


If you take into account that the economy shrank by 0.5 per cent in the final quarter of 2010, today's figures indicate that it hasn't grown for six months. A terrible performance, given that we experienced growth of 1.8 per cent over the previous six months. There is now a real possibility that the OBR will have to downgrade its 2011 growth forecasts for the fourth time.

Osborne may have avoided a double-dip recession (not much of an achievement), but the recovery remains stagnant. His economic strategy is to use loose monetary policy (interest rates and the exchange rate) to offset the effects of a tighter fiscal policy (spending cuts and tax rises).

But this approach works only if interest rates are high to begin with. For instance, following the savage cuts of the 1981 budget, Geoffrey Howe cut interest rates by 2 percentage points and the economy surged as a result. But when the coalition took office, interest rates were already at an emergency low of 0.5 per cent and have stayed there ever since.

There could be even worse to come. Today's figures cover the VAT rise, which came into effect in January, but not the spending cuts, which began in April. For now, there is little evidence that the coalition's austerity economics will deliver the robust growth that Britain so desperately needs.

George Eaton is political editor of the New Statesman.

Show Hide image

Michael Gove definitely didn't betray anyone, says Michael Gove

What's a disagreement among friends?

Michael Gove is certainly not a traitor and he thinks Theresa May is absolutely the best leader of the Conservative party.

That's according to the cast out Brexiteer, who told the BBC's World At One life on the back benches has given him the opportunity to reflect on his mistakes. 

He described Boris Johnson, his one-time Leave ally before he decided to run against him for leader, as "phenomenally talented". 

Asked whether he had betrayed Johnson with his surprise leadership bid, Gove protested: "I wouldn't say I stabbed him in the back."

Instead, "while I intially thought Boris was the right person to be Prime Minister", he later came to the conclusion "he wasn't the right person to be Prime Minister at that point".

As for campaigning against the then-PM David Cameron, he declared: "I absolutely reject the idea of betrayal." Instead, it was a "disagreement" among friends: "Disagreement among friends is always painful."

Gove, who up to July had been a government minister since 2010, also found time to praise the person in charge of hiring government ministers, Theresa May. 

He said: "With the benefit of hindsight and the opportunity to spend some time on the backbenches reflecting on some of the mistakes I've made and some of the judgements I've made, I actually think that Theresa is the right leader at the right time. 

"I think that someone who took the position she did during the referendum is very well placed both to unite the party and lead these negotiations effectively."

Gove, who told The Times he was shocked when Cameron resigned after the Brexit vote, had backed Johnson for leader.

However, at the last minute he announced his candidacy, and caused an infuriated Johnson to pull his own campaign. Gove received just 14 per cent of the vote in the final contest, compared to 60.5 per cent for May. 


Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.