Osborne's run of luck continues as he dodges a triple-dip

The return of the economy to growth, however anaemic, allows the Chancellor to maintain the narrative that the UK is "healing".

George Osborne is currently enjoying that most precious of political commodities: luck. Having narrowly avoided an increase in the deficit earlier this week, the Chancellor has now dodged a triple-dip recession. The ONS's first estimate of GDP for Q1 of this year suggests that output rose by 0.3 per cent, three times greater than the 0.1 per cent forecast by most economists. 

Economically speaking, it makes little difference whether output is found to have marginally grown or marginally shrunk. The figures are revised by an average of 0.4 per cent and the economy is now merely the same size as it was six months ago. But the politics are all important. For Osborne, growth, however anaemic, allows him to maintain the narrative that the economy is "healing". Expectations have been so downgraded that any rise in output is now welcome. 

The return of the economy to growth will help the Tories to maintain the political momentum that they have enjoyed in recent weeks. At the same time, it will add to the pressure on Labour to outline a clearer alternative to the coalition's programme. Even after a double-dip recession, the loss of the UK's AAA credit rating and countless missed borrowing targets, polls show that Osborne and Cameron are still preferred as an economic team to Ed Miliband and Ed Balls. By two-to-one (59-29 per cent), the public still believe the cuts are necessary and by 36-24 per cent, they still blame the last Labour government more than the coalition for them. In the three years since the government came to power, these ratings have failed to shift in Labour's favour. This fact, combined with the prospect of a sustained period of growth, is one reason why, for the first time in months, Tory MPs are starting to believe that they can win in 2015. 

Chancellor George Osborne leaves Downing Street on April 10, 2013 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
Show Hide image

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.