Will this be Osborne's worst week yet?

A higher deficit and a triple-dip recession could make this week even worse for the Chancellor than the last one.

Even by recent standards, last week was not a good one for George Osborne. Unemployment was found to have increased by 70,000, the IMF's chief economist warned that he was "playing with fire" by persisting with austerity, Carman Reinhart and Kenneth Rogoff, two of the economists that the Chancellor leant heavily on to justify his economic approach, had their research on debt and growth discredited, and Fitch became the second credit rating agency to strip the UK of its AAA rating

But worse could be to come this week. Tomorrow, borrowing figures for March will be released, the final set for the 2012-13 financial year, and, for the first time since Osborne entered office, they could show that the deficit has risen in annual terms. At the Budget, the OBR forecast that borrowing would be £120.9bn in 2012-13, £100m less than in 2011-12, after the Treasury forced government departments to underspend by an extraordinary £10.9bn in the final months of this year and delayed payments to some international institutions such as the UN and the World Bank. But that £100m difference leaves the Chancellor with little room for error if tax revenues fall short or spending is higher than expected. Whether the deficit marginally rose or fell in 2012-13 is of little economic significance, but it is of immense political significance. Until now, even as growth has disappeared, the Chancellor has been able to boast that borrowing "is falling" and "will continue to fall each and every year". A higher deficit would make it far harder for him to claim that Britain is "on the right track".

Then, two days later, we will learn whether the UK has suffered its first-ever triple-dip recession when the ONS releases its estimate for GDP in Q1 of this year. Again, the Chancellor is expected to have a lucky escape, with most forecasters, in common with the OBR, predicting output of around 0.1 per cent. But that also leaves Osborne with little room for comfort if growth undershoots expectations (as it done so often has in recent history). IPPR's senior economist Tony Dolphin comments: "It is touch and go whether we triple dip, I would say 50/50. Retail sales were up a fraction in March, but manufacturing is expected to be flat and ­construction down. Services will be positive, but the question is whether it will be positive enough to offset construction." Again, whether output slightly grew or slightly shrank in the first quarter is of little economic signifinance. The broad picture is one of prolonged stagnation, with periods of growth alternating with periods of contraction. But as Osborne will know, it's the politics that matter. An unprecedented triple-dip would intensify the calls from all sides - Tory backbenchers, Vince Cable, Labour - for a change of approach, be it Keynesian stimulus or a supply-side revolution. 

There is one way that Osborne could avoid a triple-dip even if the economy is found to have shrunk in Q1: the preceding double-dip could be revised away. After previously estimating that output fell by 0.3 per cent in the final quarter of 2011, the ONS now says it fell by just 0.1 per cent. The number could be further upgraded this week. But such technicalities will count for little if the economy is reported to have shrunk again. 

Tory MPs previously suggested that they would demand the removal of Osborne if the economy failed to show signs of recovery by this time, with one telling the Daily Mail: "You wouldn’t get 80 people supporting Adam Afriyie for leader but you might get 80 or 100 people saying get rid of George." There is little prospect of Cameron acquiescing to such demands. The Prime Minister and his closest political ally continue to rise and fall together. But with the local elections just over a week away and Labour showing signs of strain, a renewed bout of Tory infighting would be unwelcome for Cameron. 

Chancellor of the Exchequer George Osborne attends a press conference at the Treasury in Whitehall on February 6, 2013. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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What Labour MPs who want to elect the shadow cabinet are forgetting

The idea is to push Jeremy Corbyn to build an ideologically broad team, but it distracts from the real hurdle – management.

Labour MPs who have been critical of Jeremy Corbyn are pushing to vote for shadow cabinet members – rather than having all the posts appointed by the leader.

Most of the parliamentary Labour party who are not Corbyn loyalists believe this should be the “olive branch” he offers them, in order to put his recent words about “unity” and “wiping the slate clean” into action.

Corbyn and his allies have refused to consider such an idea outside of a “wider” democratisation of the party – saying that Labour members should also get a say in who’s on the frontbench. It’s also thought Corbyn is reluctant due to the shadow cabinet having three representatives on the National Executive Committee. He wouldn’t want his opponents voting for those, tipping the balance of the Committee back towards centrists.

Shadow cabinet elections were a longstanding convention for Labour in opposition until Ed Miliband urged the party to vote against them in 2011. Labour MPs on different wings of the party believe a return to the system would avoid Labour’s frontbench being populated solely by Corbyn’s ideological wing.

But there is a complication here (aside from the idea of a party leader having to run an effective opposition with their opponents in key shadow cabinet positions).

Proponents of shadow cabinet elections say they would help to make Labour a broad church. But really they could put those in the “make-it-work” camp who initially helped form Corbyn’s team in a difficult position. Initially conciliatory MPs like Thangam Debonnaire and Heidi Alexander have since left their posts, revealing frustration more at Corbyn’s management style than policy direction. Chi Onwurah MP, who remains a shadow minister, has also expressed such concerns.

One senior Labour MP points out that the problem with shadow cabinet elections lies in those who left Corbyn’s shadow cabinet but had wanted to cooperate – not in bringing ideological opponents into the fold.

“There were lots of people on his team who actually liked Jeremy, and wanted to make policy with him,” they tell me. “And many of them eventually felt they had to leave because of how difficult it was to work with him. They wanted to stay but couldn’t. If people like that couldn’t stay, will they go back? It will be much harder for him to show them he can work differently.”

One of the “make-it-work” faction voices their concern about returning to the shadow cabinet via elections for this reason. “A lot of us [who left] are still really interested in our policy areas and would be happy to help if they asked,” they say. “But it was too difficult to be taken seriously when you were actually in those shadow cabinet meetings.”

My source describes a non-collegiate approach in meetings around the shadow cabinet table, where Corbyn would read out pre-written opening statements and responses when they delivered their ideas. “It was like he wasn’t really listening.”

The plan to reintroduce shadow cabinet elections barely left the ground in a meeting of Labour’s National Executive Committee on Saturday night, on the eve of Labour conference.

This is in spite of Labour MPs urging the NEC to make a decision on the matter soon. Jon Ashworth, an NEC member and shadow minister, told me shortly after Corbyn’s victory speech that this would be “a good way of bringing people back” in to the team, and was determined to “get some resolution on the issue” soon.

It doesn’t look like we’ll get that yet. But for some who have already tried serving on the frontbench, it’s a distraction from what is for them a management – rather than an ideological – problem.

Anoosh Chakelian is deputy web editor at the New Statesman.