It's not just the eurozone that could push the UK back into recession

The NIESR predicts a 70% chance of recession if the eurozone crisis is not solved -- and a 50% chanc

Most of this morning's papers reported on the latest study from the National Institute of Economic and Social Research (NIESR). The figure they've chosen to lead on is that the UK has a 70 per cent chance of recession if policymakers fail to resolve the eurozone crisis. What gained less attention was the prediction that there is around a 50 per cent chance of a recession even if the crisis is successfully resolved.

Interestingly, the focus on the eurozone plays into the government's new emphasis on global factors in the UK's sluggish growth. When confronted with growth of just 0.5 per cent in the last 12 months at PMQs yesterday, Cameron responded that any growth was good amid the "global storm in the world economy". This is an important shift, given that in opposition Cameron slammed Gordon Brown for making the same argument, and that the coalition has repeatedly refused to acknowledge the role of the banking crash in creating the deficit, instead blaming Labour's spending.

The NIESR warned that the economy was in for the slowest recovery in 100 years, and that UK fiscal policy was "too tight" in the short-term. While the eurozone crisis is a concern, the fact that there is a 50 per cent chance of falling back into recession regardless shows that the problem is not just global, but that our leaders are not dealing with it in the right way. If global factors created the crisis, George Osborne's aggressive deficit reduction strategy has ensured we will not be the first out of it.


Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.