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

Including, this is still the slowest recovery for 100 years, the economy is 2.9% smaller and most people are still getting poorer.

After the economy grew for two consecutive quarters and growth forecasts were revised from the terrible to the merely mediocre, George Osborne has decided it's time to declare victory. In his speech earlier today in east London, the Chancellor claimed that "those in favour of a Plan B have lost the argument" and that Britain was "turning the corner". The media, most of which endorsed austerity in 2010, has every interest in echoing his words. 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 (and no Keynesian ever suggested otherwise) - 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 0.7% is the least we should expect (not least when the population is growing). 

2. The economy is 2.9% smaller than before the crash (the US is 4.5% larger)

Owing to three years of anaemic growth, the economy is still 2.9% below its pre-recession peak. In the US, by contrast, where the Obama administration maintained fiscal stimulus, the economy is 4.5% larger than in 2007 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 near-record high

Before the economy returned to growth, the Tories were hailing employment 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, 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 near-unprecedented 9%) than the success of the government's strategy.  

Alongside this, underemployment is surging, with a record 1.43m 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) is at a near-record high and youth unemployment is at 973,000 (21.4%).

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. Between April and June, average weekly earnings (excluding bonuses) rose by just 1.1% compared with a year earlier, 1.7 percentage points below the rate of inflation (2.8%). 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, a worse performance than every EU country except Portugal, the Netherlands and Greece.

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 takes part in a panel session on the main stage at the Campus Party computer coding event at the 02 on September 4, 2013 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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An unmatched font of knowledge

Edinburgh’s global reputation as a knowledge economy is rooted in the performance and international outlook of its four universities.

As sociologist-turned US Senator Daniel Patrick Moynihan recognised when asked how to create a world-class city, a strong academic offering is pivotal to any forward-looking, ambitious city. “Build a university,” he said, “and wait 200 years.” He recognised the long-term return such an investment can deliver; how a renowned academic institution can help attract the world. However, in today’s increasingly globalised higher education sector, world-class universities no longer rely on the world coming to come to them – their outlook is increasingly international.

Boasting four world-class universities, Edinburgh not only attracts and retains students from around the world, but also increasingly exports its own distinctively Scottish brand of academic excellence. In fact, 53.9% of the city’s working age population is educated to degree level.

In the most recent QS World University Rankings, the University of Edinburgh was named as the 21st best university in the world, reflecting its reputation for research and teaching. It’s a fact reflected in the latest UK Research Exercise Framework (REF), conducted in 2014, which judged 96% of its academic departments to be producing world-leading research.

Innovation engine

Measured across the UK, annual Gross Value Added (GVA) by University of Edinburgh start-ups contributes more than £164m to the UK economy. In fact, of 262 companies to emerge from the university since the 1960s, 81% remain active today, employing more than 2,700 staff globally. That performance places the University of Edinburgh ahead of institutions such as MIT in terms of the number of start-ups it generates; an innovation hothouse that underlines why one in four graduates remain in Edinburgh and why blue chip brands such as Amazon, IBM and Microsoft all have R&D facilities in the city.

One such spin out making its mark is PureLiFi, founded by Professor Harald Haas to commercialise his groundbreaking research on data transmission using the visible light spectrum. With data transfer speeds 10,000 times faster than radio waves, LiFi not only enables bandwidths of 1 Gigabit/sec but is also far more secure.

Edinburgh’s universities play a pivotal role in the local economy. Through its core operations, knowledge transfer activities and world-class research the University generated £4.9bn in GVA and 44,500 jobs globally, when accounting for international alumni.

With £1.4bn earmarked for estate development over the next 10 years, the University of Edinburgh remains the city’s largest property developer. Its extensive programme of investment includes the soon-to-open Higgs Centre for Innovation. A partnership with the UK Astronomy Technology Centre, the new centre will open next year and will supply business incubation support for potential big data and space technology applications, enabling start-ups to realise the commercial potential of applied research in subjects such as particle physics.

It’s a story of innovation that is mirrored across Edinburgh’s academic landscape. Each university has carved its own areas of academic excellence and research expertise, such as the University of Edinburgh’s renowned School of Informatics, ranked among the world’s elite institutions for Computer Science. 

The future of energy

Research conducted into the economic impact of Heriot-Watt University demonstrated that it generates £278m in annual GVA for the Scottish economy and directly supports more than 6,000 jobs.

Set in 380-acres of picturesque parkland, Heriot-Watt University incorporates the Edinburgh Research Park, the first science park of its kind in the UK and now home to more than 40 companies.

Consistently ranked in the top 25% of UK universities, Heriot-Watt University enjoys an increasingly international reputation underpinned by a strong track record in research. 82% of the institution’s research is considered world-class (REF) – a fact reflected in a record breaking year for the university, attracting £40.6m in research funding in 2015. With an expanding campus in Dubai and last year’s opening of a £35m campus in Malaysia, Heriot-Watt is now among the UK’s top five universities in terms of international presence and numbers of international students.

"In 2015, Heriot-Watt University was ranked 34th overall in the QS ‘Top 50 under 50’ world rankings." 

Its established strengths in industry-related research will be further boosted with the imminent opening of the £20m Lyell Centre. It will become the Scottish headquarters of the British Geological Survey, and research will focus on global issues such as energy supply, environmental impact and climate change. As well as providing laboratory facilities, the new centre will feature a 50,000 litre climate change research aquarium, the UK Natural Environment Research Council Centre for Doctoral Training (CDT) in Oil and Gas, and the Shell Centre for Exploration Geoscience.

International appeal

An increasingly global outlook, supported by a bold international strategy, is helping to drive Edinburgh Napier University’s growth. The university now has more than 4,500 students studying its overseas programmes, through partnerships with institutions in Hong Kong, Singapore, China, Sri Lanka and India.

Edinburgh Napier has been present in Hong Kong for more than 20 years and its impact grows year-on-year. Already the UK’s largest higher education provider in the territory, more than 1,500 students graduated in 2015 alone.

In terms of world-leading research, Edinburgh Napier continues to make its mark, with the REF judging 54% of its research to be either world-class or internationally excellent in 2014. The assessment singled out particular strengths in Earth Systems and Environmental Sciences, where it was rated the top UK modern university for research impact. Taking into account research, knowledge exchange, as well as student and staff spending, Edinburgh Napier University generates in excess of £201.9m GVA and supports 2,897 jobs in the city economy.

On the south-east side of Edinburgh, Queen Margaret University is Scotland’s first university to have an on-campus Business Gateway, highlighting the emphasis placed on business creation and innovation.

QMU moved up 49 places overall in the 2014 REF, taking it to 80th place in The Times’ rankings for research excellence in the UK. The Framework scored 58% of Queen Margaret’s research as either world-leading or internationally excellent, especially in relation to Speech and Language Sciences, where the University is ranked 2nd in the UK.

In terms of its international appeal, one in five of Queen Margaret’s students now comes from outside the EU, and it is also expanding its overseas programme offer, which already sees courses delivered in Greece, India, Nepal, Saudi Arabia and Singapore.

With 820 years of collective academic excellence to export to the world, Edinburgh enjoys a truly privileged position in the evolving story of academic globalisation and the commercialisation of world-class research and innovation. If he were still around today, Senator Moynihan would no doubt agree – a world-class city indeed.

For further information www.investinedinburgh.com