The Staggers

The New Statesman’s rolling politics blog

The Osborne effect

Growth is now expected to be just 1.2 per cent in 2011.

By George Eaton Published 21 September 2011 13:20

Raise VAT to a record high of 20 per cent, spread the myth that Britain is on the "brink of bankruptcy", cut spending before the economy is out of the recovery phase (240,000 public sector jobs have been lost in the past year - three times as many as forecast) and don't be surprised if growth falls away.

The Treasury has just published its round-up of independent growth forecasts and the economy is now expected to grow by just 1.2 per cent this year. The graph below shows how forecasts have been continually revised downwards as growth has plummeted (the economy has grown by just 0.2 per cent in the last nine months).

Average of independent forecasts for 2011 growth

Source: Treasury.

Almost every developed country has had to slash its growth forecasts as the global economy has deteriorated but few more so than Britain. Of the G7 countries, only disaster-ravaged Japan has grown more slowly than the UK in the last 12 months. The conclusion is clear: plan A isn't working. The longer George Osborne remains in denial, the harder the eventual U-turn will be.

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Tags: Spending Cuts George Osborne

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4 comments

Wed, 2011-09-21 15:55 — elrob

The Tories are hoping that the story they have told: Labour bankrupted the country, we cleaned up the mess, whatever problems we are facing including a possible double dip was all down to that. The next part of the story will be that the recovery (it will come, the question is when and how fast) is down to the action the Tories/coalition has taken.

given five years, it would be bordering on complete incompetence not to get growth going at some point. If that does not come until 2013, the Tories are hoping the overall story will cover them. And they will be rewarded in 2015 with a majority.

Labour needs to create story, and the election of Ed Miliband allows for a good one. The free market embrace of New Labour was a fatal mistake. The common belief in neoliberal economics has been fundamentally - perhaps irreversibly - smashed. Deregulated banking - including retail banking and the approval of liar loan mortgages that has crippled the people with debts and left behind enormous house prices that FTBs cannot afford. What a mess!

Balls has apologised as many thought he would not for "Labour's part in the international financial crash". But the Tories actually wanted further deregulation, and they have not changed and are not to be trusted. That should be the story. But it also needs to come up with answers. It is time to tax the rich - not income, but wealth, land.
The Spanish, Greeks, and Americans are finally and realistically taking on this taboo. We need to stop fighting the ghosts of the 80s and understand that everything has fundamentally changed.

Wed, 2011-09-21 16:55 — Abelard Potter-Purbright (not verified)

The trouble is that Labour, while being broadly right about the nature of the crisis and what to do about it (post 2007), has badly lost the political argument. It needs to be repeatedly said that the crisis is at heart a crisis borne of Thatcherism and economic liberalism. It’s incredibly irritating to repeatedly hear the BBC imply without contradiction that the crisis could have been avoided with less prior public spending and a leader with a smoother (read: posher) management style.

Most of all Labour need to sell the message that a middle of the road approach to deficit reduction is entirely pragmatic if your aim is actually to protect people’s living standards compared to the very political/ideological/lash-yourself-to–the-mast/get-it-done-before-people-notice Osbourne & Co.

Wed, 2011-09-21 20:27 — Anton Jury (not verified)

David Cameron agreed with Gordon Brown's handling of the worldwide financial crisis throughout and openly agreed with him in Parliament. Cameron even applauded Gordon Brown for thinking of and holding a meeting in Scotland with world leaders to try and solve the problem.

It was not until a couple of months before the general election in 2010 that David Camerron started to rubbish Gordon Brown's handling of the worldwide financial crisis, how hypocritical and two faced was that. Cameron is such a deceitful liar it is astonishing. To try and gain votes and win the election Cameron completey changed his tune.

As pointed out above the Tories, Cameron included wanted more deregulation of the banks giving them more power.

What Labour needs to do is expose the Tories for what a bunch of lying, two-faced, hypocritical liars they are.

Personally I believe that David Cameron will choke on his own lies, the sooner the better.

Thu, 2011-09-22 01:23 — PoliticalTrannie

Which is why it is so disappointing that there is no alternative coming from Balls and Miliband, a missed opportunity for the public can clearly see that Osborne's plan is not working and is desperate for an alternative vision now. This is the time for Labour to show it's mettle and give the chancellor a kicking while he is down with a boot that has 'a credible alternative' written on it.