This event will surely become part of the shorthand used when summing up this government’s wrong-headedness
Here is the startling thing about yesterday’s news that Britain has gone back into recession: it is not the biggest failure of George Osborne’s economic policy.
This is not to deny the political potency of Britain’s double dip, our first since the 1970s. It is a huge deal, a landmark event – and it will surely become part of the shorthand people use when summing up this government’s wrong-headedness. In the short term, a second recession will form part of a bleak backdrop to next month’s local elections – along with the cosiness with the Murdochs and what we must inevitably call the budget omnishambles. For the past two years, David Cameron and his chancellor have been given the benefit of the doubt by the majority of voters, who took it on trust that they would be at least competent. That appearance looks decidedly threadbare and, judging by our poll this week, the patience of voters is also wearing thin.
Ed Miliband now has a fallback any time prime minister’s questions isn’t going his way. As for the shadow chancellor, he can claim vindication: Ed Balls saw this all coming in his speech at Bloomberg in August 2010. And, of course, it is a blow for David Cameron, who has previously foolishly boasted to parliament about the economy being “out of the danger zone”. However Mr Osborne tried to brazen it out yesterday, make no mistake: this was not in the plan. He has sanctioned hundreds of billions in quantitative easing, tens of billions in so-called credit easing, and unveiled a dizzying array of growth strategies and wheezes. Yet none of this was enough to prevent the UK falling into recession – or to stop the chancellor being put on the critical coconut shy for his critics to fling accusations of bungling.
Because that is the biggest criticism that can be made of Mr Osborne and his colleagues: they took an economy that was enjoying an (admittedly tepid) recovery under Alistair Darling, and knocked it flat on its back. Let us assume that the GDP figures are revised up in coming weeks and that the recession is declared not to be so deep. But the economy has still shrunk over the seven quarters of this government.
As the Office for National Statistics pointed out yesterday, “The economy has … recovered less than half the output lost during the recession in 2008 and 2009″ – even while the US has made back all its lost income during the subprime recession, and then some. Nor do the superlatives stop there: this is now the weakest recovery Britain has had in over a century – worse even than the Depression. While it has made things worse, the eurozone crisis cannot account for all of this. The primary cause must be the way Mr Cameron’s government has gone about its austerity programme: stupidly comparing the UK to Greece, smash-and-grab raids on public spending (such as David Laws’s cuts in 2010), and choking whatever little confidence the private sector might have mustered. Even when the IMF urged a change of course, ministers ploughed stubbornly on.
The recession declared yesterday is one of Mr Osborne’s creation. But it is simply the most eye-catching of his failures. He predicted a record burst of business investment – it hasn’t happened. He promised an export-led recovery – which is still to turn up. As for the rebalancing, the only economic cylinder still firing is the old one of government spending. The past two years have been a massive economic gamble which many (including this paper) warned would fail. It has, and it is not ministers who are paying the price. It is the new school-leavers and graduates slung on the dole, the welfare recipients seeing their incomes cut, and the vulnerable.
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