Five things George Osborne doesn't want you to know about the economy

Including, this is still the slowest recovery for 100 years, the economy is 3.3% smaller and unemployment hasn't fallen for six months.

So downgraded have our economic expectations become that unremarkable growth of 0.6% is now viewed as cause for celebration. Those who opposed George Osborne's decision to pursue austerity in 2010 are now urged to recant. But here are five reasons why it's still the Chancellor and his supporters who have all the explaining to do. 

1. This is still the slowest recovery for more than a century

Growth has returned - it was always bound to at some point - but this remains the slowest recovery for more than 100 years. Had Osborne achieved the OBR's original June 2010 forecasts, the economy would now be 8.1% larger. Instead, after a collapse in private and public investment, it's only 4% larger. To make up the lost ground since 2010, the economy would need to grow at 1.3% a quarter for the next two years. Output of 0.6% is the least we should expect. 

2. The economy is 3.3% smaller than before the crash (the US is 3% larger)

Owing to three years of anaemic growth, the economy is still 3.3% below its pre-recession peak. In the US, by contrast, where the Obama administration maintained fiscal stimulus, the economy is 3.2% larger than in 2007 (even before the Q2 figures) after growth three times greater than that of the UK since autumn 2010. And it's not just the Americans who have outpaced us. The UK recovery has been slower that of any other G7 country bar Italy. 

3. Unemployment hasn't fallen for six months and underemployment is at a record high

Before the economy returned to growth, the Tories were hailing the employment figures as this government's success story (as they did when the most recent were published). But the data, as so often, tells a different story. After falling from 8.4% to 7.7% between November 2011 and November 2012, the headline rate of unemployment has been stuck at around 7.8% for the last six months (read Alex's superb myth-busting post), 0.1% higher than its previous low.

That total joblessness has not risen to the heights experienced in the 1980s owes more to the willingness of workers to price themselves into employment (real wages have fallen by a remarkable 9%) than the success of the government's strategy.  

Alongside this, underemployment is surging, with a record 1.45m in part-time jobs because they can't find full-time work. Worst of all, long-term unemployment (those out of work for more than a year) has reached a 17-year high of 915,000 and youth unemployment is at 959,000 (20.9%).

4.  His deficit reduction plan failed and he's forecast to borrow £245bn more

For a man whose raison d'etre is deficit reduction ("The deficit reduction programme takes precedence over any of the other measures in this agreement," states the Coalition Agreement), Osborne isn't very good at it. Having originally pledged to eliminate the structural deficit by 2014-15 and ensure that debt is falling as a proportion of GDP by 2015-16, he's been forced to push both targets back to 2017-18.

Contrary to what some on the right claim, this isn't due to any lack of austerity. Infrastructure spending has been slashed by 42%, VAT has been increased to 20% and 356,000 public sector jobs have been cut, so that the state workforce is now at its lowest level since 1999. Despite all this, Osborne is still forecast to borrow £245bn more than planned across this parliament and more in five years than Labour did in 13. 

5. Most people are still getting poorer - and that won't change soon

While the media and the political class fixate over GDP, it's a poor measure of the nation's economic health. As we saw even before the crash, a growing economy can disguise stagnating or falling wages for the majority. In the year to May 2013, total pay rose by just 1.7%, more than two percentage points below the rate of inflation (2.9%). Since the election, average pay has fallen by £1,350 a year in real terms, with most now earning no more than they were in 2003. And the situation is unlikely to improve anytime soon. Wages aren't expected to outstrip inflation until 2015 at the earliest and earnings for low and middle income families won't reach pre-recession levels until 2023

George Osborne attends a press conference on July 19, 2013 during the G20 Finance Ministers and Central Bank Governors' meeting in Moscow. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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What's to be done about racial inequality?

David Cameron's words on equal opportunities are to be welcomed - now for some action, says Sunder Katwala.

David Cameron made the strongest, clearest and most high profile statement about ethnic inequalities and the need to tackle discrimination ever yet offered by a British Prime Minister in his leader’s speech to the Conservative Party conference in Manchester.
“Picture this. You’ve graduated with a good degree. You send out your CV far and wide. But you get rejection after rejection. What’s wrong? It’s not the qualifications or the previous experience. It’s just two words at the top: first name, surname. Do you know that in our country today: even if they have exactly the same qualifications, people with white-sounding names are nearly twice as likely to get call backs for jobs than people with ethnic-sounding names? … That, in 21st century Britain, is disgraceful. We can talk all we want about opportunity, but it’s meaningless unless people are really judged equally”, said Cameron.
While the proof of the pudding will be in the eating, this was a powerfully argued Prime Ministerial intervention – and a particularly well-timed one, for three reasons.

Firstly, the Prime Minister was able to root his case in an all-but-universally accepted appeal for equal opportunities. It will always prove more difficult in practice to put political energy and resources behind efforts to remedy discrimination against a minority of the population unless a convincing fairness case is made that values cherished across our whole society are at stake. Cameron’s argument, that any party which tells itself that it is the party of the ‘fair chance’ and ‘the equal shot’ must have a response when there is such clear evidence of discrimination, should prove persuasive to a Conservative Party that has not seen race inequalities as its natural territory. Cameron argued that the same principles should animate responses to discrimination when it comes to race, gender and social class. Put like that, wanting job interviews to be fair – by eradicating conscious and unconscious patterns of bias wherever possible – would strike most Britons as offering as clear a case of the values of fair play as wanting the best baker to win the Great British Bake-Off on television.
Secondly, Cameron’s intervention comes at a potential "tipping point" moment for fair opportunities across ethnic groups. Traditionally, ethnic discrimination has been discussed primarily through the lens of its impact on the most marginalised. Certainly, persistent gaps in the criminal justice system, mental health provision and unemployment rates remain stark for some minority groups. What has been less noticed is the emergence of a much more complex pattern of opportunity and disadvantage – not least as a consequence of significant ethnic minority progress.

Most strikingly of all, in educational outcomes, historic attainment gaps between ethnic minorities and their white British peers have disappeared over the last decade. In the aggregate, ethnic minorities get better GCSE results on average. Ethnic minority Britons are more likely, not less likely, to be university graduates than their fellow citizens. 

As a result of that progress, Cameron’s intervention comes at a moment of significant potential – but significant risk too. Britain’s ethnic minorities are the youngest and fastest-growing sections of British society. If that educational progress translates into economic success, it will make a significant contribution to the "Great British Take-Off" that the Prime Minister envisions. But if that does not happen, with educational convergence combined with current ‘ethnic penalties’ in employment and income persisting, then that potential could well curdle into frustration that the British promise of equal opportunities is not being kept.  Cameron also mirrored his own language in committing himself to both a ‘fight against extremism’ and a ‘fight against discrimination’: while those are distinct challenges and causes, actively pursuing both tracks simultaneously has the potential, at least, depolarise some debates about responses to extremism  - and so to help deepen the broad social coalitions we need for a more cohesive society too.

Thirdly, Cameron’s challenge could mark an important deepening in the political competition between the major parties on race issues. Many have been struck by the increase in political attention on the centre-right to race issues over the last five to ten years. The focus has been on the politics of representation. By increasing the number of non-white Conservative MPs from two to seventeen since 2005, Cameron has sent a powerful signal that Labour’s traditional claim to be ‘the party of ethnic minorities’ would now be contested. Cameron was again able to celebrate in Manchester several ways in which his Cabinet and Parliamentary benches demonstrate many successful journeys of migrant and minority integration in British society. That might perhaps help to ease the fears, about integration being impossible in an era of higher immigration, which the Home Secretary had articulated the previous day.

So symbolism can matter. But facial diversity is not enough. The politics of ethnic minority opportunity needs to be about more than visits to gurdwaras, diversity nights at the party conference fringes and unveiling statues of Mahatma Gandhi in Parliament Square. Jeremy Corbyn’s first speech as Labour leader did include one brief celebratory reference to Britain’s ethnic diversity – “as I travelled the country during the leadership campaign it was wonderful to see the diversity of all the people in our country” – and to Labour bringing in more black, Asian and ethnic minority members - but it did not include any substantial content on discrimination. Tim Farron acknowledged during his leadership campaign that the Liberal Democrats have struggled to get to the starting-line on race and diversity at all. The opposition parties too will no doubt now be challenged to match not just the Prime Minister’s rhetorical commitment to challenging inequalities but also to propose how it could be done in practice.

Non-white Britons expect substance, not just symbolism from all of the parties on race inequalites.  Survation’s large survey of ethnic minority voters for British Future showed the Conservatives winning more ethnic minority support than ever before – but just 29 per cent of non-white respondents were confident that the Conservatives are committed to treating people of every ethnic background equally, while 54 per cent said this of Labour. Respondents were twice as likely to say that the Conservatives needto do more to reach out – and the Prime Minister would seem to be committed to showing that he has got that message.  Moreover, there is evidence that ethnic inclusion could be important in broadening a party’s appeal to other younger, urban and more liberal white voters too – which is why it made sense for this issue to form part of a broader attempt by David Cameron to colonise the broad centre of British politics in his Manchester speech.

But the case for caution is that there has been limited policy attention to ethnic inequalities under the last two governments. Restaurateur Iqbal Wahhab decided to give up his role chairing an ethnic minority taskforce for successive governments, unconvinced there was a political commitment to do much more than convene a talking shop. Lib Dem equalities minister Lynne Featherstone did push the CV discrimination issue – but many Conservatives were sceptical. Cameron’s new commitment may face similar challenges from those whose instinct is to worry that more attention to discrimination or bias in the jobs market will mean more red tape for business.

Labour had a separate race inequalities manifesto in 2015, outside of its main election manifesto, while the Conservative manifesto did not contain significant commitments to racial inequality. The mid-campaign launch in Croydon of a series of race equality pledges showed an increasing awareness of the growing importance of ethnic minority votes - though the fact that they all involved aiming for increases of 20 per cent by 2020 gave them a slightly back-of-the-envelope feel. 

Prime Ministerial commitments have an important agenda-setting function. A generation ago the Stephen Lawrence case opened the eyes of middle England to racist violence and police failures, particularly through the Daily Mail’s persistent challenging of those injustices. A Conservative Prime Minister’s words could similarly make a big difference in the mainstreaming of the issue of inequalities of opportunity. What action should follow words? Between now and next year’s party conference season, that must will now be the test for this Conservative government – and for their political opponents too. 

Sunder Katwala is director of British Future and former general secretary of the Fabian Society.