GDP almost returns to the level it was before Osborne's double-dip

The effects of the second recession have been reversed by 1 per cent growth this quarter.

Cameron's claim yesterday that "the good news will keep coming", while (probably) a mild abuse of his privilege in having seen the GDP figures early, was proved true today. Sort of.

The good news is that we are out of recession; the economy grew by 1.0 per cent over the last quarter. Indeed, given the revisions to previous quarters, that's enough to cancel out the contraction from the quarter before. That is good news, at least insofar as not leaving recession would be very bad indeed.

The bad news is that we are emphatically not out of the doldrums yet. The economy may have recovered from the second, austerity-led recession, but it leaves over-all growth for the last four quarters almost exactly flat (in fact, the economy is still 0.1 per cent smaller than it was at the end of Q3 2011).

As for the economy finally regrowing back to the size it was in 2008, well, there's a long way to go. The classic NIESR graph details just how big the output gap is:

Interestingly, the ONS refused to quantify the effect of the Olympics over all on the GDP figures, but did say that the effect of ticket sales particularly was likely to be a significant part of the growth. Owing to the way the statistics are counted, those sales are not counted for the quarter in which they are made, but the quarter in which they are used. There was, in effect, a transfer of consumption from mid-2011 to mid-2012, and that can't have failed to have an effect. The statistical bulletin reads:

Tickets for the Olympics were sold in tranches through 2011 and 2012 but, in accordance with national accounts principles, these have been allocated to the third quarter, when the output actually occurred. The impact of the ticket sales on GDP can be clearly seen in the lower level data for sports activities, which is part of the Government and other services aggregate in Table B1. Ticket sales were estimated to have increased GDP in the quarter by about 0.2 percentage points. (Emphasis mine)

The agency also urged commentators to look at the growth figures for a longer period than the quarter-on-quarter releases. Coming so soon after Cameron's no-quite-leak, it's hard not to read that response as putting the Prime Minister in his place.

"This may be a good quarter, Mr Cameron, but don't celebrate just yet."

 

George Osborne. 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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Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.