Why the Tories shouldn't get excited about "good" economic news

The economy might appear to be improving but forecasters predict a "triple-dip recession" and rising unemployment.

This week's economic news has prompted hope among the Tories that the tide is finally turning in their favour. Employment is at a record high, inflation is down to 2.2 per cent, its lowest level since November 2009, and borrowing has fallen to its lowest level for four years. The positive trend will continue next week when the Office for National Statistics (ONS) announces that the economy finally returned to growth in the third quarter (the National Institute of Economic and Social Research, for instance, has predicted growth of 0.8 per cent). Team Osborne hope that all of this will allow them to tell a plausible story of recovery.

However, it's worth pointing out several inconvenient truths. First, the next set of growth figures will be artificially inflated by the bounce back from the extra bank holiday in the previous quarter (which reduced growth by an estimated 0.5 per cent) and by the inclusion of the Olympic ticket sales (which are expected to add around 0.2 per cent to GDP). So, if the ONS announces that the economy grew by 0.8 per cent in the third quarter, the underlying rate of growth will be just 0.1 per cent.

Worse, many expect the economy to contract in the fourth quarter (what our economics editor David Blanchflower has termed a "triple-dip recession"). Bank of England MPC member Martin Weale has warned: "The Jubilee depressed output in the second quarter so you get an automatic bounce back. But if we talk about underlying growth then I think the economy is flat. I certainly would not say there is no risk of [a triple-dip recession] happening." Martin Beck, UK economist at Capital Economics, told the Today programme last week: "we expect the economy to start contracting again in the fourth quarter."

On employment, the picture is similarly mixed. As I noted when the most recent figures were published on Wednesday, 59 per cent of the 212,000 jobs created in the last quarter are part-time and nearly half (101,000) are in London, suggesting that the labour market benefited from a temporary Olympics effect. Adequately paid, full-time employment is still remarkably hard to come by. Of the new jobs created over the last three months, one in three offer fewer than 15 hours week a work, while 54 per cent offer fewer than 30 hours. A near-record 1.4 million people are working part-time because they can't find full-time jobs. It's also worth noting that most forecasters expect unemployment to rise significantly next year as further spending cuts, a lack of growth and rising productivity restrict job creation. The CBI, for instance, predicts that unemployment will increase by nearly 200,000 to 2.7m.

Finally, the deficit. While September's figures were better-than-expected, borrowing so far this year remains £2.7bn (4.2 per cent) higher than in the same period last year and George Osborne is still expected to miss his annual target by £5-10bn. The Chancellor aims to borrow no more than £121bn this year, but in the first six months of 2012 he's borrowed £65.1bn. As a result, when he delivers his autumn statement on 5 December, Osborne will likely be forced to postpone his goal of eliminating the structural deficit (originally scheduled for 2015) for a third year - to 2018. Having once hoped to offer significant cuts in taxation at the next election, the Tories will only be able to promise yet more austerity.

Chancellor George Osborne speaks at the Conservative conference in Manchester earlier this month. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Show Hide image

A progressive alliance in the Richmond by-election can scupper hard Brexit

Labour and the Greens should step aside. 

There are moments to seize and moments to let go. The Richmond by-election, triggered by Zac Goldsmith's decision to quit over a third runway at Heathrow, could be a famous turning point in the politics of our nation. Or it could be another forgettable romp home for a reactionary incumbent.

This isn’t a decision for the Tories and their conscientious objector, Goldsmith, who is pretending he isn’t the Tory candidate when he really is. Nor is it a decision for the only challenger in the seat – the Liberal Democrats.

No, the history making decision lies with Labour and the Greens. They can’t get anywhere near Zac. But they can stop him. All they need to do is get out of the way. 

If the Lib Dems get a clear run, they could defeat Zac. He is Theresa May's preferred candidate and she wants the third runway at Heathrow. He is the candidate who was strongly Leave when his voters where overwhelming Remain. And while the Tories might be hypocrites, they aren’t stupid – they won't stand an official candidate and split their vote. But will Labour and the Greens?

The case to stand is that it offers an opportunity to talk nationally and build locally. I get that – but sometimes there are bigger prizes at stake. Much bigger. This is the moment to halt "hard" Brexit in its tracks, reduce the Tories' already slim majority and reject a politician who ran a racially divisive campaign for London mayor. It’s also the moment to show the power of a progressive alliance. 

Some on the left feel that any deal that gives the Lib Dems a free run just means a Tory-lite candidate. It doesn’t. The Lib Dems under Tim Farron are not the Lib Dems under Nick Clegg. On most issues in the House of Commons, they vote with Labour.

And this isn’t about what shade of centrism you might want. It is about triggering a radical, democratic earthquake, that ensures the Tories can never win again on 24 per cent of the potential vote and that our country, its politics and institutions are democratised for good.

A progressive alliance that starts in Richmond could roll like thunder across the whole country. The foundation is the call for proportional representation. The left have to get this, or face irrelevance. We can’t fix Britain on a broken and undemocratic state. We cant impose a 21st century socialism through a left Labour vanguard or a right Labour bureaucracy. The society we want has to be built with the people – the vast majority of them. Anyway, the days of left-wing majority governments have come and gone. We live in the complexity of multi-party politics. We must adapt to it or die. 

If the Labour leadership insists on standing a candidate, then the claims to a new kind of politics turn to dust. Its just the same old politics – which isn’t working for anyone but the Tories. 

It is not against party rules to not stand a candidate – it is to promote a candidate from another party. So the way is clear. And while such an arrangement can't just be imposed on local parties, our national leaders, in all the progressive parties, have a duty to lead and be brave. Some in Labour, like Lisa Nandy, Clive Lewis and Jonathan Reynolds, are already being brave.

We can wake up the Friday after the Richmond Park by-election to Goldsmith's beaming smile. Or we can wake up smiling ourselves – knowing we did what it took to beat the Tories, and kickstart the democratic and political revolution this country so desperately needs.


Neal Lawson is chair of the pressure group Compass, which brings together progressives from all parties and none. His views on internal Labour matters are personal ones.