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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Metro mayors can help Labour return to government

Labour champions in the new city regions can help their party at the national level too.

2017 will mark the inaugural elections of directly-elected metro mayors across England. In all cases, these mayor and cabinet combined authorities are situated in Labour heartlands, and as such Labour should look confidently at winning the whole slate.

Beyond the good press winning again will generate, these offices provide an avenue for Labour to showcase good governance, and imperatively, provide vocal opposition to the constraints of local government by Tory cuts.

The introduction of the Mayor of London in 2000 has provided a blueprint for how the media can provide a platform for media-friendly leadership. It has also demonstrated the ease that the office allows for attribution of successes to that individual and party – or misappropriated in context of Boris Bikes and to a lesser extent the London Olympics.

While without the same extent of the powers of the sui generis mayor of the capital, the prospect of additional metro-mayors provide an opportunity for replicating these successes while providing experience for Labour big-hitters to develop themselves in government. This opportunity hasn’t gone unnoticed, and after Sadiq Khan’s victory in London has shown that the role can grow beyond the limitations – perceived or otherwise - of the Corbyn shadow cabinet while strengthening team Labour’s credibility by actually being in power.

Shadow Health Secretary and former leadership candidate Andy Burnham’s announcement last week for Greater Manchester was the first big hitter to make his intention known. The rising star of Luciana Berger, another member of Labour’s health team, is known to be considering a run in the Liverpool City Region. Could we also see them joined by the juggernaut of Liam Byrne in the West Midlands, or next-generation Catherine McKinnell in the North East?

If we can get a pantheon of champions elected across these city regions, to what extent can this have an influence on national elections? These new metro areas represent around 11.5 million people, rising to over 20 million if you include Sadiq’s Greater London. While no doubt that is an impressive audience that our Labour pantheon are able to demonstrate leadership to, there are limitations. 80 of the 94 existing Westminster seats who are covered under the jurisdiction of the new metro-mayors are already Labour seats. While imperative to solidify our current base for any potential further electoral decline, in order to maximise the impact that this team can have on Labour’s resurgence there needs to be visibility beyond residents.

The impact of business is one example where such influence can be extended. Andy Burnham for example has outlined his case to make Greater Manchester the creative capital of the UK. According to the ONS about 150,000 people commute into Greater Manchester, which is two constituency’s worth of people that can be directly influenced by the Mayor of Greater Manchester.

Despite these calculations and similar ones that can be made in other city-regions, the real opportunity with selecting the right Labour candidates is the media impact these champion mayors can make on the national debate. This projects the influence from the relatively-safe Labour regions across the country. This is particularly important to press the blame of any tightening of belts in local fiscal policy on the national Tory government’s cuts. We need individuals who have characteristics of cabinet-level experience, inspiring leadership, high profile campaigning experience and tough talking opposition credentials to support the national party leadership put the Tory’s on the narrative back foot.

That is not to say there are not fine local council leaders and technocrats who’s experience and governance experience at vital to Labour producing local successes. But the media don’t really care who number two is, and these individuals are best serving the national agenda for the party if they support A-listers who can shine a bright spotlight on our successes and Tory mismanagement.

If Jeremy Corbyn and the party are able to topple the Conservatives come next election, then all the better that we have a diverse team playing their part both on the front bench and in the pantheon of metro-mayors. If despite our best efforts Jeremy’s leadership falls short, then we will have experienced leaders in waiting who have been able to afford some distance from the front-bench, untainted and able to take the party’s plan B forward.