Trouble ahead for Osborne as economy is forecast to have shrunk again

Danger of a triple-dip recession as NIESR forecasts that the economy contracted by 0.3 per cent in the final quarter of 2012.

"The only function of economic forecasting is to make astrology look respectable", John Kenneth Galbraith once remarked and recent events have done nothing to prove him wrong. But the National Institute of Economic and Social Research (NIESR) has a better record than most and its latest forecast suggests that the economy shrank by 0.3 per cent in the final quarter of 2012.

"The only function of economic forecasting is to make astrology look respectable", John Kenneth Galbraith once remarked and recent events have done nothing to prove him wrong.

In the last quarter, as you'll recall, David Cameron and George Osborne boasted that we're "on the right track" after the economy grew by 1 per cent (later revised down to 0.9 per cent). But that figure was artificially inflated by the Olympic ticket sales, which added 0.2 per cent to growth, and by the bounce-back from the extra bank holiday in June, which added 0.5 per cent. To borrow Cameron's phrase, the government should never have assumed that "the good news will keep coming".

While a contraction in quarter four wouldn't represent an unprecedented "triple-dip recession" (that would require two successive quarters of negative growth), it would make it significantly harder for Osborne to claim that the economy is "healing". If the economy is shown to have shrunk in Q4, four of the last five quarters will have been negative. We'll know for sure when the Office for National Statistics publishes its first estimate of GDP on 25 January.

The longer-term outlook for the economy remains unremittingly grim. After a growth rate of 0.0 per cent in 2012, NIESR expects the economy to grow by little more than 1 per cent in 2013 and doesn't expect output to return to its pre-recession peak until 2014 at the earliest.

George Osborne said that the economy was "on the right track" after growth of 0.9 per cent in the third quarter of 2012. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Scottish Parliament votes in favour of a second independence referendum

The UK government was quick to respond. 

The Scottish Parliament has voted for a second independence referendum by a margin of 10 votes on the eve of Westminster triggering Article 50. 

After hours of debate - postponed after last week's terrorism attack at Westminster - the MSPs voted 69 to 59 to back the First Minister's call to trigger Section 30 of the Scotland Act.

MSPs voted for a Green amendment which demands votes for 16 and 17-year-olds, but amendments by Labour, the Conservatives and the Lib Dems were defeated. 

Nicola Sturgeon took Westminster by surprise in early March when she announced she would be seeking a second independence referendum for Scotland to decide before it was "too late to choose a different path". 

The Scottish Parliament can vote to demand a second referendum, it still needs permission from Westminster to hold one. So far, the Prime Minister has refused to countenance one before Brexit. After the vote, Scottish secretary David Mundell reinforced this message, suggesting a vote could not take place until the 2020s. 

However, some unionists quietly fear that a tussle between Westminster and Holyrood over powers will only play in the nationalists' favour. 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.