Stop focusing on triple dips. Anaemic growth is just as bad

Welcome to stagnation. It's not a nice place to be.

Tomorrow, the ONS will release its second estimate of GDP growth for the fourth quarter of 2012. The revisions may be up or down, and you'd be a fool to bet on which direction it will be. But barring a miracle, it's still going to be terrible growth.

That's true even if the revisions push the estimated contraction into positive territory. Such is the focus on whether or not Britain will enter a "technical recession" for the second time running that we have started to act as if anaemic growth is acceptable. It isn't.

If nothing else, it's important to remember that GDP staying flat is the equivalent of every individual in Britain getting poorer. That's because the British population is growing, usually by somewhere between 0.5 and 1 per cent a year (0.7 per cent according to the most recent figures from the World Bank). As a result, GDP per capita, the share of the national income that each of us receives, is correspondingly lower than GDP. Unless annual GDP growth is higher than population growth, it's not even really fair to say we're "stagnating". We are getting poorer.

But even discounting that possibility, stagnation above the rate of population growth remains an extremely concerning phenomenon. 2013 overall will probably experience real growth in GDP per capita. NIESR's economic forecasts put it at 0.4 per cent growth per capita, and 1.1 per cent GDP growth:

But 1.1 per cent growth is far, far below anything that Britain would need to either keep deficit reduction on track (the main worry if you're George Osborne) or to prevent further erosion of crucial public services (the main worry if you're anyone else). The Bank of England, which made similar projections to NIESR, is so shocked that it is prepared to overlook its entire raison d'être and allow a period of above-target inflation to get us out of those doldrums.

The OBR, kings of the downward revision, have spent the last three years forecasting that 2 per cent growth was just around the corner. That remains their forecast, and currently that growth rate is projected for 2014. The OBR has previously forecast two per cent growth for 2011, 2012 and 2013. Whether that continued optimism is justified or not, when future economic plans are based on it, every miss hits even harder.

(To be clear, the problem isn't that the OBR is frequently wrong. All economic forecasts are hugely variable, and the agency makes clear in its outlooks that the rage of probable outcomes is large. The problem is that the OBR is frequently wrong in the same direction. For over two years now, it has predicted growth above the actual outcome. If someone misses the bullseye nine times in a row, they're just unlucky — but if every one of those shots hits above the centre, it's pretty likely that they need to start aiming lower.)

The worst thing about accepting stagnation as a natural, even positive, outcome is that it will lead to a huge amount of unnecessary pain. It's not just that we won't grow fast enough. It's also that we'll be trapped in a dead zone of investment, too poor for the government to finally decide it has "enough money" to start dealing with our broken housing market and crumbling infrastructure, but growing just enough that it won't be forced to abandon austerity and enact pro-growth measures which actually work.

But if the right is wrongly promoting the acceptability of stagnation, there's a parallel criticism for the left. A "technical recession" isn't that much worse than minuscule growth. The difference between 0.1 per cent contraction and 0.1 per cent growth is 0.2 percentage points. A truism, certainly, but if the Chancellor's forecast was for 2.0 per cent and the outcome was 1.8 per cent, there would be little commentary.

As our economy floats along at the zero line, sometimes slightly over, sometimes slightly under, the temptation may be to crow every time the latter occurs. But that runs the risk of implying that the former is acceptable, when it really isn't. Our corrugated economy is the problem, and that's not going away any time soon.

This puppy is sad at British economic stagnation. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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PMQs review: Jeremy Corbyn prompts Tory outrage as he blames Grenfell Tower fire on austerity

To Conservative cries of "shame on you!", the Labour leader warned that "we all pay a price in public safety" for spending cuts.

A fortnight after the Grenfell Tower fire erupted, the tragedy continues to cast a shadow over British politics. Rather than probing Theresa May on the DUP deal, Jeremy Corbyn asked a series of forensic questions on the incident, in which at least 79 people are confirmed to have died.

In the first PMQs of the new parliament, May revealed that the number of buildings that had failed fire safety tests had risen to 120 (a 100 per cent failure rate) and that the cladding used on Grenfell Tower was "non-compliant" with building regulations (Corbyn had asked whether it was "legal").

After several factual questions, the Labour leader rose to his political argument. To cries of "shame on you!" from Tory MPs, he warned that local authority cuts of 40 per cent meant "we all pay a price in public safety". Corbyn added: “What the tragedy of Grenfell Tower has exposed is the disastrous effects of austerity. The disregard for working-class communities, the terrible consequences of deregulation and cutting corners." Corbyn noted that 11,000 firefighters had been cut and that the public sector pay cap (which Labour has tabled a Queen's Speech amendment against) was hindering recruitment. "This disaster must be a wake-up call," he concluded.

But May, who fared better than many expected, had a ready retort. "The cladding of tower blocks did not start under this government, it did not start under the previous coalition governments, the cladding of tower blocks began under the Blair government," she said. “In 2005 it was a Labour government that introduced the regulatory reform fire safety order which changed the requirements to inspect a building on fire safety from the local fire authority to a 'responsible person'." In this regard, however, Corbyn's lack of frontbench experience is a virtue – no action by the last Labour government can be pinned on him. 

Whether or not the Conservatives accept the link between Grenfell and austerity, their reluctance to defend continued cuts shows an awareness of how politically vulnerable they have become (No10 has announced that the public sector pay cap is under review).

Though Tory MP Philip Davies accused May of having an "aversion" to policies "that might be popular with the public" (he demanded the abolition of the 0.7 per cent foreign aid target), there was little dissent from the backbenches – reflecting the new consensus that the Prime Minister is safe (in the absence of an attractive alternative).

And May, whose jokes sometimes fall painfully flat, was able to accuse Corbyn of saying "one thing to the many and another thing to the few" in reference to his alleged Trident comments to Glastonbury festival founder Michael Eavis. But the Labour leader, no longer looking fearfully over his shoulder, displayed his increased authority today. Though the Conservatives may jeer him, the lingering fear in Tory minds is that they and the country are on divergent paths. 

George Eaton is political editor of the New Statesman.

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