Double-dip recession: don't say we didn't warn you
The New Statesman warned in 2009 that Osborne had no plan for growth.
Even by the standards of recent economic data, today's OECD report makes for particularly grim reading. The body's soothsayers predict that the UK will suffer a double-dip recession, with growth contracting in the fourth quarter of this year and in the first quarter of 2012. In total, the British economy will grow by just 0.5 per cent next year. To put that figure into context, recall that as recently as May the OECD expected growth of 1.8 per cent, while in March the Office for Budget Responsibility predicted growth of 2.5 per cent. The outlook for jobs is little better. Unemployment is forecast to rise from 8.3 per cent at present to 9.1 per cent in 2013 as the private sector fails to compensate for public sector job losses.
These are, of course, just forecasts but recent history suggests that the most pessimistic growth forecasts are invariably the most accurate. In any case, George Osborne's 2010 promise of "a steady and sustained economic recovery, with low inflation and falling unemployment" is already a distant dream.
While many are wise after the event, the New Statesman was warning of the danger of a double-dip as long ago as March 2009 (see cover above). Our economics editor David Blanchflower predicted that premature withdrawal of fiscal stimulus would strangle growth and raise unemployment, particularly among the young.
He wrote in October 2009:
Lesson number one in a deep recession is you don't cut public spending until you are into the boom phase. John Maynard Keynes taught us that. The euro area appears to be heading back into recession and the austerity measures being introduced in certain eurozone countries, especially those in Germany, will inevitably lower UK growth, too. It is extremely unlikely, therefore, that net trade will leap to our rescue. taught us that. The consequence of cutting too soon is that you drive the economy into a depression, with the attendant threats of rapidly rising unemployment, social disorder, rising poverty, falling living standards and even soup kitchens.
In the wake of Osborne's emergency Budget, he warned:
The euro area appears to be heading back into recession and the austerity measures being introduced in certain eurozone countries, especially those in Germany, will inevitably lower UK growth, too. It is extremely unlikely, therefore, that net trade will leap to our rescue.
At a time when Osborne was being hailed by much of the British press as the country's economic saviour, we warned that he had no plan for growth. In October 2009, an NS leader argued:
Mr Osborne is a skilful politician, with a flair for rhetoric and the easy headline - the latest example being his opportunistic statements on curtailing bankers' bonuses, something that could be achieved only through concerted international co-operation. The only economic plan he seems to have is for attempting to balance the books. He does not have a plan for growth. He has a plan for a lack of growth.
In August 2010, we warned that "in spite of Mr Osborne's doctrinaire "emergency" Budget, all the economic data suggests that the UK is facing a deadly combination of rising unemployment, falling house prices, diminished consumer confidence and low - if not negative - growth for the rest of the year and beyond."
But not everyone was so doubtful about Osborne's ability to stimulate growth. Here are some influential figures and institutions who may now regret their early optimism (including the OECD itself).
My personal favourite is Nick Bosanquet, professor of health policy at Imperial College London and consultant director for Reform, who predicted in January that the UK economy would be "the surprise success of Europe in 2011". Since then, Britain has grown at a slower rate than every EU country expect Cyprus, Greece and Portugal.
And ... some who got it wrong
"The UK economy is on the mend. Economic recovery is underway, unemployment has stabilized, and financial sector health has improved. The government's strong and credible multi-year fiscal deficit reduction plan is essential to ensure debt sustainability."
"The Chancellor has achieved his twin objectives of setting out a credible plan for the public finances and producing a convincing growth strategy for the longer-term ... This Budget is the UK's first important step on the long journey back to economic health."
"George Osborne has faced up to the challenge. The economy needed faster and deeper deficit reduction and that's exactly what the Chancellor has delivered ... We do not believe the Budget will threaten economic recovery. Quite the contrary, it is likely to improve the economic outlook by showing the public finances are finally being brought under control."
"The Budget announced today by the U.K. Chancellor of the Exchequer is a courageous move ... It provides the necessary degree of fiscal consolidation over the coming years to restore public finances to a sustainable path, while still supporting the recovery."
"We are relatively sanguine about the UK's ability to grow through the fiscal tightening. In an open economy, robust global growth - and that's what it's looking like at the moment - does quite a bit of the work."
"Now for one prediction: consumer spending will be squeezed by the regrettable (and avoidable) hike in Vat and from the (necessary) cuts in spending. But reduced debt-financed spending will go hand in hand with growth in private investment and exports, partly thanks to strong global demand, thus cushioning most of the impact. The years ahead will be very tough - but there will be no double dip recession made in Downing Street."
"The UK economy will be the surprise success of Europe in 2011 ... The enterprise culture of SMEs, exports and the strong corporate sector will all help recovery, which will be in the Midlands as well as in the south-east."