Coffee House

Worst recovery in history: British GDP shrinks by 0.3 per cent

25 January 2013

9:34 AM

25 January 2013

9:34 AM

Now we know why David Cameron delivered his Europe speech on Wednesday. It’s time for bad headlines again: the GDP figures just announced show that the British economy is contracting yet again — by 0.3 per cent in the final three months of last year (see above graph).

Now, you’ll hear a lot of people tell you today that quarterly data does not matter. The ONS say this is a fallback from the Olympics, which sucked economic growth forward. And they’re right: the ONS usually revises quarterly data, often dramatically. What matters more is the long-term trend, and this is pretty appalling. It now seems inarguable that Britain is going through the worst recovery in history. Slower and longer even than the 1930s.

The petty pace of the recovery is, in some respects, deliberate. George Osborne has chosen a slow path of consolidation — cutting less over five years (3.2 per cent) than Denis Healey did in one year when the Labour government was reforming its spending (3.9 per cent) at the behest of the IMF. It’s the fiscal equivalent of tearing a plaster off slowly, so as to minimise the pain. In 2010, Osborne thought he could do this and still pull off an economic recovery by 2015. It’s now clear this means he’ll be tearing off this plaster way into the next parliament. The government boasts that it has cut the deficit by 25 per cent, but Osborne knows this is no great feat. Our fellow chronic debtors — Greece, Ireland — have made far more progress. Even Gordon Brown’s plan involved cutting the deficit by 36 per cent by now. By historic and international standards, the pace of Britain’s economic recovery is pretty pathetic.


Osborne’s strategy has been to wash it all down with artificially cheap debt, thanks to Sir Mervyn King’s magic money machine. And this is creating odd results. Normally, in such a weak economic recovery, housing would crash. But it remains pretty unaffordable. People’s mortgage repayments have plunged, especially those with 40 per cent deposits, leaving the well-off with more money to spend. This has helped keep consumer spending in reasonable shape.

But the puzzle in Osborne’s recovery is the jobs. There are now more people employed in Britain than at any point in our history, as the below graph shows.

Why? One answer is immigration: foreign-born workers account for 60 per cent of the rise in working-age employment under Osborne. Data earlier this week suggested that people are also having to accept lower salaries, and more part-time or temporary work. So the quality of jobs is going down, but the number is going up.

As Cameron will know, the biggest E for this government is not Europe but the economy. If this quarter of contraction is followed by another, then it will be a treble-dip recession. As Sir Mervin King said earlier this week, ‘living standards have been squeezed for longer than at any time in living memory.’ That’s why Cameron needs Europe to be a game-changer. The current game does seem to be one he is losing.

William Hill now have Britain odd-on (2/5) to lose its AAA credit rating before June. Those who think differently can almost treble their money. And the winner of the next election? 5-4 Labour; 11-4 Conservative ; 4-1 Lab-Lib Coalition. The odds on this coalition repeating itself are now 6-1.

P.S. George Osborne has scarpered off to Davos — I doubt many of the above graphs will feature in any presentation he’s giving. Jeremy Warner has a brilliant column in today’s Telegraph asking whether Osborne and Cameron really understand business.

Subscribe to The Spectator today for a quality of argument not found in any other publication. Get more Spectator for less – just £12 for 12 issues.

Show comments
  • Edward Turnham

    Fraser, I see no logic behind your claim that slow fiscal consolidation is the cause of slow GDP growth. All economists would agree that the larger the deficit, the larger the GDP, unless some other factor interferes. Perhaps you believe that ‘market confidence’ is lacking; however, the very low interest rates on government borrowing shows that markets have no concern that the UK is borrowing too much. Please explain.

  • global city

    Brown did not only borrow when tax income at the top of the boom was flooding in, he also maxed theareas of taxation hugely. when gideon had to look for peripheral areas to raise a few Bob he was left with pasties and caravans, as evreything was already loaded to the hilt. he squeezed as much money as he could, borrowed piles more, hid lots more off the books.
    We know why the Tories will not criticise the ‘Climate Change Act’ and the massive misery it is going to cause, but I don’t understand why they have let labour off the hook with regards to the stealth tax scam. It was criminal and means that in he middle of the recession there is no space to make any adjustments what so ever.

  • Ipsmick

    ‘Data’ is the plural of ‘datum’ – so data ‘do’ not ‘does’. I imagine Boris Johnson is turning cartwheels in his grave.

  • Roy

    Incoming political leaders often misjudge the time to introduce hard medicine for the country at large to swallow. This has to be at the beginning of their time in office not the latter end. The people like to see firm actions, even uncomfortable ones taken as soon as possible, and with a firm hand, to show you mean business. To leave it till the near end of the period in office, is suicidal. The actions we see from Cameron and Osborne are of a couple of inexperienced college students. The fact is; this is not far from the truth, the work they have accomplished before being chosen as the leader of the party and financial chief is mind-blowing in it inadequacy.


    Join the real world whenever you see fit piece

  • David Lindsay

    All aboard the Triple Dip. Whereas there was no recession at all in the United Kingdom on the day of the 2010 General Election. The IMF is knocking at the door of the worst Chancellor ever. Ever, ever, ever.

    But hope is at hand. Ed Balls on The World at One sounded like Peter Shore, joining with the unions to exhort the listeners to “Buy British”.

    If there were a conservative, Tory party, then it would be saying the same thing. Perhaps there is? There is certainly a party for which conservative, Tory people can, should, and in huge numbers increasingly do vote.

    One Nation, indeed.

  • andagain

    It now seems inarguable that Britain is going through the worst recovery in history. Slower and longer even than the 1930s.

    Actually, that recovery looks normal enough to me until ~ 2.5 years after the beginning of the recession i.e. the moment the Coalition was elected in mid 2010. Since then we have not had a slow recovery. We have had stagnation. That may have been due to micro policy rather than macro, but the election does appear to have been an inflection point.

    • Daniel Maris

      Fair comment. And I think Boris Johnson is right when he says that Osbornian “austerity talk” has been playing a key part in blowing the recovery off course.

      Osborne is one of those annoying types who thinks he’s much cleverer than he is in reality, whereas Boris is genuinely subtle in thought and action, though he plays the buffoon.

  • Troika21

    New Labour covered up a poor economy with cheap debt.

    The Coalition is covering up a poor economy with low-quality jobs.

    Meet the new boss.

  • SmithersJones2013

    George Osborne has scarpered off to Davos

    Ironically in Davos probably lies the root of the problem in more ways than one. Surely its the rise internationalism and globalism that has seen the suffocation of nationalist interests? Just as national centralisation has seen the stagnation of many regions of this country for decades so global centralisation (into international institutions and global corporates) logically will do the same to nations who are in difficulty.

    Our economics woes are not going away soon. Sadly I suspect they are the blue print for the medium term future particularly if we are hogtied by supra national institutions and bullied by global corporate interests as we so regularly seem to be.

    • Daniel Maris

      For 30 years or so, globalisation seemed like a good deal for the mature economies. We got cheap Chinese labour turning out goods at huge cost efficiency that allowed our economies to get richer. Mass immigration seemed initially to be bringing cheap labour into those economies and delivering efficiencies there.

      However, that process was hollowing out our economies and its positive effects had to come to an end at some point.

      I think the views of the public have changed profoundly but this hasn’t been reflected in our politics fully yet. But the signs are there – not least in the growth of UKIP.

      So yes, I agree Davos is most definitely a huge symbol of all that is wrong with our politics and economics.

      People are crying out for politicians to deliver an upturn in the real economy – the things that benefit them and their families: housing, transport, jobs, education, energy and food. They want their leaders to stop chasing

      big business rainbows (mass immigration, the requirements of an overblown finance sector and super-expensive projects like Heathrow and HS2 that are not going to benefit ordinary people).

      • the viceroy’s gin

        …are people crying out for windmills and death panels, too?

  • the viceroy’s gin

    “George Osborne has chosen a slow path of consolidation — cutting less…”


    Where have the Cameroons “cut”? Why do you keep abusing the English language by saying they have? It wouldn’t bear mention, lad, other than you claim this publication to be the acknowledged master of said language in all of the English speaking world, while also previously having the temerity to accuse others of misusing that language.

    In reality, your Cameroonian heroes have increased spending, taxes and gone along with QE.

    Since you apparently are incapable of properly using the language, you Speccie teenagers should have one of the interns write a macro to insert a parenthetical in your writing drafts, so that whenever you type any of the words “cut” or “cutting” or “cuts”, some appropriate descriptive language is inserted. The inserted parenthetical should read something like “(NOTE: The Cameroons, fabulous though they are, haven’t actually cut anything, and have actually increased spending, and significantly increased the tax burden, and have willingly participated in massive bouts of money printing and QE. )”

    That should help clear up your writing a bit.

    • Daniel Maris

      If you can’t distinguish between public expenditure, public services expenditure, benefits expenditure and consumer expenditure – then that’s your fault.

      • the viceroy’s gin

        I can distinguish that you’re rambling post has nothing to do with mine, and merely demonstrates, again, that you’re ignorant and uneducated.

        • Daniel Maris

          Probably difficult for you to understand this from the distance of the tar sands of Alberta or Dakota but there have been cuts. To take just one example, there have been cuts in child benefit; cuts in public sector employment; and cuts in services. At the same time the government is sucking in huge numbers of people who qualify for welfare benefits.

          If you think that government expenditure translates one for one into economic performance in an inverse relationship, then you are a more of an economics ignoramus than I thought.

          One word – as Boris understands this – “confidence” .

          • the viceroy’s gin

            Did you really think I was going to read another one of your ignorant, uneducated rants, one even longer than the first disjointed nonsense you posted?

  • suquman

    On a more upbeat note, the day after PM Cameron’s speech in Davos:

    – The euro hit an 11-month high versus the dollar today Friday after the European Central Bank said banks will repay 137 billion euros in cheap loans, reassuring investors that the banking system is on the mend.

    – The single currency also hit a 21-month high against the yen, helped by evidence of an economic upturn in Germany.

    – The euro reached a one year high against Sterling today.

    – German shares led euro zone bourses higher on Friday as a closely watched sentiment indicator beat expectations, helping a key regionwide index extend recent gains to a new 18-month high.

    – “Brexit” has replaced “Grexit” as Davos man’s nightmare.

    • HooksLaw

      Is an 11 month high against the dollar particularly significant? The Euro recently could hardly have sunk lower could it?
      I just ask out of interest not to snipe.

      • suquman

        At no point during the past year was the 14 year old currency trading below its historic average against the US-Dollar or against Sterling. The Euro’s low was in October 2000 when it was trading at $0.8252 and the Euro stands at $1.34 today, which I hope answers your question.

        Whatever the Spectator, Daily Mail etc write, the “toilet currency” is not showing any signs of imploding anytime soon.

        • Daniel Maris

          I remember the days of group hypnosis on this site where nearly everyone had conclude the Euro was dead in the water and the that Spain and Greece would have to leave it.

          I am pleased to say I wasn’t taken in, realising there was a real political will to make it survive – and so it seems to have turned out.

          BUt where is the political will to save our economy?

  • El_Sid

    It now seems inarguable that Britain is going through the worst recovery in history.

    There’s a very strong argument that it’s not – as I’ve said before you really need to study the Long Depression of the 1870/1880s, it’s a much better parallel for what we’re going through than the 1930s.

    • Daniel Maris

      Going back to the 1870s makes me think of the “we’re all dead in the long run” argument, but in reverse. Not v. relevant I think.

      • El_Sid

        You might think that at first glance, but in many ways it is the closest model for what we’re going through now. But it didn’t affect the US, so it doesn’t get nearly as much attention as the 1930s.
        But try this for background – an investment bubble fed by cheap credit which ended in a mass of dodgy bank financing and outright fraud, with the recovery in the “old economies” stymied by runaway growth in “new” economies who competed for resources and converted them into manufactured goods that undercut manufacturers in the “old” economies, as a world in which one superpower dominated the globe gave way to a multipolar world. Sound at all familiar? You haven’t really had that combination of factors since, although there was a bit of it in the 1970s as Japan rose to prominence.
        With that geoplitical perspective you can see that a big reason for the slow recovery in the West is that raw material prices haven’t done their usual thing of collapsing in value during a bad recession, because any “spare” resources get absorbed by China etc. It’s particularly acute in agricultural commodities at the moment – the recovery would be greatly aided without rampant inflation in the food sector over the last few years.

        • Daniel Maris

          OK, I accept there are parallels. But IIRC during that “great depression” the UK was still growing at a great rate. Not sure about per capita.

  • dalai guevara

    ‘Now we know why David Cameron delivered his Europe speech on Wednesday’

    DC delivered his speech on Wednesday, because on Tuesday, all major EU member states agreed to the introduction and implementation of the long awaited Tobin Tax. Of course, Britain will not partake.

    We now find ourselves (again) discussing the virtues of further state savings, rather than tackling the debt that is almost four times larger than any state incurred debt – the debt of financial institutions.

    • the viceroy’s gin

      …a minute ago you were stumbling about asking why that debt was your problem. Now suddenly it must be tackled.

      You should go back to pricing fish.

      • dalai guevara

        Diverting again? When the way we address the true issue here is by:

        a- waffling about peanuts of the EU budget
        b- waffling about peanuts that is Public Sector Net Debt
        c- waffling on about how any of the measures taken were effective
        d- waffling on about that this was our problem

        …then yes, it must be tackled. Are you saying it should be ignored? What are you saying, hot shot?

        • the viceroy’s gin

          It must be tackled, except it mustn’t be because it’s not your problem, but then again it must be, but of course it mustn’t.

          Again, you should go back to pricing fish.

          • dalai guevara

            yes but no but yes but no – did you think you were posting on the Little Britain blog page?

  • Jebediah

    Much simplified version: GDP 100 borrowing 10, GDP adjusted 110. GDP 100 saving 10, GDP adjusted 90. It’s not complicated. The error was in not cutting in year 1. Expenditure should have been cut 10% immediately across all departments (except NHS, you don’t mess with religion). It’d be over by now.

  • Oli Burgess

    I honestly think Osborne is simply crossing his fingers in hope. How much has the government done economically speaking? Only small beer stuff.
    To be fair, no matter what levers he pulls I don’t think Osborne can change the fundamentals in any meaningful way. We’re heavily dependent on a flagging European economy – we’re just going to have to wait for the global circumstances to improve.

  • Swiss Bob

    Import millions of immigrants, pay them ludicrous benefits and watch the locals depart for better jobs, more money and less tax , then tax the remaining workers more and more.

    I’m not surprised the mad bad and deluded one and Ballsup thought it would work but Osborne?

  • Russell

    Nothing wrong with Flat, flat could be the way of things for the next 10 years.
    Perhaps this government will now make a determined effort to reduce public spending and getting the UK finances balanced, and then some positive changes in our current account.
    GDP increasing year on year is not the only way to balance the books.

    The UK public sector is too large and too expensive, big reductions are necessary. Never mind pay freezes or 1 % caps on public sector wages, we need cuts in pay, and big cuts in pay for large swathes of the public sector like 10% for ALL public sector workers on salaries over £50,000 per year for a start.

    • Carl Thomas

      With the population growing there’s a fair bit wrong with flat.

      • Russell

        Not if the population is reduced, in the immediate future by throwing out about a million ‘Illegal’ immigrants, takes steps to ensure a repeat of Labours massive influx of eastern europeans (from Bulgaria and Romania) doesn’t happen, and safeguards the British population from being overrun with Muslims, who have been responsible for almost every terrorist act in the world for years and who influence British born Muslims.

    • HooksLaw

      This govt – any govt, if it is honest – will have to bear down on public spending for many years. We might expect a supposedly intellectual publication like the Spectator to bear that in mind.

      The fact that the govt are not massively cutting public pay is in fact to their credit – to do so would be counter productive in trying to boost the economy – and defeats the object of those trying to pretend that poor growth is somehow the responsibility of the govt.

      Brown’s growth was built on a sea of debt and that is the very problem we face now.

      • Tom Tom

        It was PRIVATE SECTOR DEBT largely. Banks CREATE Credit not Government. The Credit Multiplier is inside the Banking System

      • Carl Thomas

        Perhaps you could share this revelation with the current Chancellor given that his plan for deficit reduction in part consists of keeping asset bubbles inflated and increasing private debt.

        • HooksLaw

          Brown’s growth was built on a sea of public sector debt. At a time
          when he should have been paying off debt by running surpluses he spent more than the country could afford. Thats why we have a structural deficit.
          At a time of rising house prices the public felt good because they took equity out of their houses.
          The point being that under labour whilst we had notional growth it was nothing to do with a sound economy.

          Its a funny supposed recession that has booming car sales.

    • HJ777

      The reason why flat isn’t great is that we have a rising population, so GDP per head is falling.

    • Ipsmick

      You’re not working in the public sector, then? Nope, too mean-minded to take on board the notion of serving any interests other than your own.

      • Russell

        Worked 44 years with no breaks in private sector employment paying the tax and NIC which goes towards paying public sector employees wages and pensions. If you bothered to read all of my comment I referred to employees getting more than £50K per year getting a 10% pay cut.
        You no doubt are working in the public sector,then ? Serving your own interests in terms of wages and pensions with strikes and demonstrations, before other peoples interests (the ones who pay your wages).

  • HooksLaw

    Brown’s ‘plan’ was pie in the sky. It would have been victim to the same circumstances as the present government face. The present government face the same circumstances as the German government. The German economy shrank by 0.5% in Q4.
    The French economy shrank in Q4. 230,000 more French unemployed since Hollande came to power, whereas our jobless in falling.

    We have interest rates at 0.5% (for endless months!) we have injected money into the economy – all standard procedures in a recession yet Mr Nelson endlessly persists in his sneering know all posts. Does he want the govt to increase the deficit? To spend more?

    Mr Nelson is complaining about growth yet at the same time he says this is because the govt are cutting spending too slowly?? Where is the logic in this? Mr Nelson talks himself endlessly round in circles trying to sound clever.

    The notion that Jeremy Warner can write a brilliant column is of course laughable. Rather than complain about politicians not understanding business Mr Nelson would be better off shouting at barrow boy bankers who are strangling our economy.
    No doubt that is a step too far for Mr Nelsons prejudices and a great leap beyond his imagination.

    • Tom Tom

      The notion that Jeremy Warner can write a brilliant column is of course
      laughable.” Very true. The Banking System should have been sidelined by creating NEW BANKS but Brown was taken hostage by his Banker Friends… doubt Fred Goodwin, Victor Blank, Shriti Vadera all held his hand as he opened the doors to the Treasury for them to LBO the country

      • HooksLaw

        I am happy to agree, from my admittedly limited perspective, that the banks have behaved disgracefully. I am not sure how ‘new banks’ could have been sensibly created or where they would have got the money from to lend out.

        The question we must ask is where where the shareholders when their investments were being trashed? How is it that these banks became sociopaths playthingsH

        • Daniel Maris

          Well QE would be a source of funding for new banks. So would taxation.

    • Daniel Maris

      No there is a difference. People didn’t believe Brown was personally targetting them for unemployment. When the Mortician Osborne came in with his talk of general austerity, just about every public sector worker felt he meant them (and that communicated itself to partners and close family as well of course). The result? A massive contraction in consumer confidence. That hobbled the recovery, which led to a further lowering of business confidence.

      Meanwhile we are losing about 300,000 mostly well educated and trained workers every year and importing 500,000 mostly low skilled workers.

      Put it all together and it’s hardly surprising the economy is going down the pan.

  • StandingUpForLefties

    The recession of 2008-09 has been followed by such a feeble recovery due to indebtedness by consumers and businesses. The strong recovery people expected failed to materialize because people chose to save rather than borrow once the recession ended.

    Comparing the 2008-09 recession with the “Great Depression of the 1930s is pointless, because it affected the US far more than us. What people should look at is the Great Depression of the early 1920s in the UK. It was a far worse recession for the UK and people don’t talk about it as much.

    • Tom Tom

      True. The media love showing thr Roaring Twenties because US film stock is always available – they forget Bank Rate was raised in 1921 and Sterling went back to Gold at $4.8675 in 1925 thus locking in the Doom Loop

      • StandingUpForLefties

        The Roaring Twenties and Lost Decades of the 1930s are focused on so much because the world thinks the US is the centre of things. What we should really be doing is looking at Japan’s lost decades, which still continue to this day. It would be very worrying for people to assume everything’s back to normal after the crash we had in 2008.

        It was a financial recession, where output remains below its peak for longer than other recessions. Even if Labour were in power, I assume growth would be just as bad, because they would be cutting too, and consumers and businesses would be deleveraging, regardless of who was in power.

    • HooksLaw

      You mean people like Spectator editors which a chip on their shoulder?

    • global city

      One of the (many) mistakes that the government have made was deciding to leave out the statement that everyone should pay down their debts, from the first speach Cameron made upon taking office. We could be on the way to recovery now if only he had the bottle to have said that.

      • StandingUpForLefties

        I think you’re missing out something. Household debt as a percentage of income has been falling since 2008. People are paying down their debts, but so are businesses and the government. Barely anybody is spending, which is causing the economy to become stagnant.

        I remember when that planned speech was pulled, and if you ask me, the debt deleveraging process would have only become worse if Cameron had said those things. The government is unwilling to spend, businesses may be starting to spend, but consumers are being pinched at the moment. Wage growth is far exceeded by inflation, and then there’s the record low interest rates. Savers and pensioners are barely getting anything, and even with low interest rates, people still can’t borrow due to the debt burdens they’re slowly chipping away at.

        • global city

          People may have acted faster if prompted to by the new prime minister. We will never know now, but I favour getting things done as fast as possible. At least now there would be a little more potential ‘wiggle room’

          • StandingUpForLefties

            It’s the generally agreed idea to get things done as fast as possible, but it doesn’t work if everybody decides to do it at the same time. People are reducing debt, but there’s nothing to spur growth in their wake, and so we’ve had stagnation as a result. Japan has had the exact same problem.

            They have a period of growth, then monetary and fiscal policy is tightened, but when they go back to easing policies, there is no response, because people are too indebted to borrow anymore. The government chooses to inject fiscal stimulus, as it’s just done right now, to stimulate growth. At some point, the government may tighten fiscal policy AGAIN, and the process will repeat over and over again, with the size of the economy shrinking more and more as it gets repeated.

  • HJ777

    The 1930s recovery in the UK was actually remarkably strong. After the ‘Austerity Budget’ of 1931, the economy grew steadily and strongly while never running a deficit of more than 1% of GDP.

    It was the US economy which remained sluggish for most of the 1930s, despite running a huge deficit due to various government spending programmes.

    • HooksLaw

      Well we can thank Hitler and rearmament for the ’30s recovery. Good old WW2 eh? The 30’s recovery left us with the biggest debt in our history. Hardly a benchmark for the present.

      • HJ777

        That may be true of the USA, but it certainly isn’t true of the UK.

        The UK economy grew steadily for at least four years before re-armament spending kicked in. Even then, the budget was in near balance until the eve of war and debt levels were modest (indeed reducing as a % of GDP) throughout this period.

        • Tom Tom

          Rearmament commenced in 1935 when Chamberlain started funding projects such as RDF and Rolls-Royce and building Advance Factories like at Crewe…….

          • HJ777

            Yes, but the economy had already been growing from 1931.

            What is more, rearmament expenditure didn’t really kick in in any substantial way until well into 1936 – and even when it did, the budget deficit was kept below 1% of GDP until close to the verge of war.

        • Daniel Maris

          It’s probably fair to say the south of England was booming during this period – this was when the suburbs were being built and electricity was transforming light industry.

          • andagain

            As I understand things, the south is doing OK now. It is just that in those days people further north could move south to find work.Think of all those new homes that were built for them to move into in the 1930s. Isn’t allowed to happen now.

            • HJ777

              A good point.

              As I have pointed out above, many of the Jarrow marchers (1936) subsequently moved to many of the places further South through which they had marched. The march opened their eyes to the opportunities available elsewhere.

          • HJ777

            Yes, it is certainly true that the recovery in the 1930s was strongly concentrated on the South (especially) and in the Midlands. Hence the Jarrow March in Oct 1936 – much of the North didn’t recover in the same way. However, overall, UK GDP grew pretty strongly

            In fact, any of the Jarrow marchers who had stopped on the way in places like Welwyn Garden City, subsequently moved there to work and live because jobs were plentiful.

      • global city

        No, the war did that. Hitler didn’t help build all those suburbs around our major cities and those nice art deco office buildings and white goods factories.

  • Parl Kilkington

    Cost of living is so high because, 70m of us share a third of the land, the aristocracy owns the rest of the uk, 67% in fact.

    • Rhoda Klapp2

      Blimey. Kier Hardie is dead, you know, as is Wat Tyler.

  • Mark Allan

    You who advocated deep cuts before the economy healed were warned this would happen and now it has.
    Nice picture of Osborne,Cameron and Boris at slap up dinner in Davos,all in it together while families queue at food banks and live in b&b accommodation.

    • Derek

      What cuts?

    • HJ777

      What ‘deep cuts’ would those be? Present your figures.

      The Osborne deficit reduction plan was based principally on tax increases in the early years followed by spending cuts later in the parliament. So far, we’ve only really had the tax increases.

    • Tim

      Er, spending is rising.

      Back of the class dunce

    • an ex-tory voter

      What fecking cuts, government spending is up not down, debt is up not down and even the deficit is only marginally down.

      • HooksLaw

        And so low growth is not the result of govt policies. If we had sound finances from the start we might have been able to boost the economy by borrowing, but borrowing at too high a level is where we came in.

        • Daniel Maris

          Surely Clegg’s point is an important one: what are you borrowing for? If we were cutting child benefit but increasing capital infrastructure investment. But cutting child benefit for middle income families, and then increasing welfare payments to non-UK citizens sucked in by our mass immigration policies makes little sense.

          • the viceroy’s gin

            …sorta like windmills, then?

  • Tom Tom

    “when the Labour government was reforming its spending (3.9 per cent) at
    the behest of the IMF.” Sorry Fraser but this is simply untrue. Helmut Schmidt had written to the US opposing the conditions William Simon, the US Treasury Secretary was forcing on the IMF team led by Alan Whittome…..if you read Whittome’s Obit from 2001 you can see: – “He was prepared to agree with Healey that Treasury forecasts of the public sector borrowing requirement may have
    been too high, but his boss Johannes Witteveen, the IMF’s managing
    director, took a harder line, calling for £2 billion of spending cuts
    when Callaghan would only reluctantly agree to £1 billion.

    Whittome was finally persuaded to accept the lower figure, but Witteveen intervened again, by telephone from Washington, to insist on a second billion – at which point Healey told Whittome to tell Witteveen to “take a running jump”.”

    With impeccable understatement, Whittome smiled and replied: “We seem to have reached an impasse.” When Healey followed up with the threat of a general election on the issue of “the IMF versus the people”, Witteveen gave way, allowing Whittome to conclude the agreement.

  • Derek

    Massive market manipulation, higher taxes and a failure to recognise that the UK’s business model of being reliant on consumption has a vanishing point when the world will no longer lend: what do you expect? It is actually impossible to think of a single positive action the coalition has made to help the economy. Every choice has been the wrong one: front load taxes, don’t make any real cuts, manipulate money whilst making the banks hold more capital, come out with a list of minor brownish sound bites which then have to be paid for green investment bank etc. no new airport, hs2, energy market intervention. Osborne is dim.

  • Chris lancashire

    If you contrive to have 10 years of boom built on completely unsustainable borrowing at both personal and national level it is unsurprising that the recovery is long and difficult. And, quite correct, we may well find that the ONS revises all this in three months time so calm down everyone and slog on.
    And just as everyone was telling us what a brilliant job Brown and Balls were doing in 2006/7/8 it’s a little early to pronounce Osborne is doing badly (I don’t think he is).

  • Dogsnob

    ” The current game does seem to be one he is losing.”

    He is winning. He is doing precisely what was started by his predecessors and what will be done by those who replace him.
    The people suffering most are the low to middle earners and they don’t really matter much because they will take it over and again, returning to the milk parlour.
    Main thing is that we keep on flooding the economy with cheap foreign hands to rid us once and for all, of all that fair pay nonsense.
    And people will still miraculously find the money to go to buy things to keep the economy going. It’s quite jolly if one just thinks about the simplicity of it.

  • Simon Dalley

    Massive house building project is required. This recession is the lasting effects of the right to buy [houses] policy in which people bought their council houses for far too little and then sold them at great profits and bought houses where they always wanted to live inflating the whole housing market. We either wait until the market comes back and that could take decades or we build more affordable houses – increasing supply reducing real term value of the houses out there and preventing a generation of renters.

    • Tom Tom

      Absolute twaddle. Banks are loaded to the gills with Mortgages and don’t want to sell any more. I recommend flatpak cardboard boxes to make homes affordable for people who cannot obtain credit or perhaps shanty towns like those many of our new arrivals are leaving behind

  • Carl Thomas

    The UK is uncompetitive, costs of living are too high and the major component of that is housing.

    Singapore has the highest GDP per capita in the world and is a tiny city-state yet our cost of living is 1.4 times higher.

    About the only thing the UK is generating growth in is the housing benefit bill due to people being priced out of home ownership and having to take jobs that don’t pay enough to cover the enormous rent.

    The low housing suppoly is a quite intentional government policy to preserve asset prices, which obviously hasn’t worked, the wealth the asset owners have clung onto has not gone into the productive economy it’s gone into buying more property while demand is siphoned out of the economy by higher rents.

    We need to build a huge amount of homes, and have those homes built to a decent standard but without the red tape, excessive environmental regulations and inefficient procurement in order to keep them to a reasonable cost.

    Any council that plays the NIMBY game in the hope that somewhere else will pick up the slack can go forth and multiply. This goes especially for the most vociferous NIMBYs, the suburbs of our cities and specifically London.

    • Tom Tom

      Not true. Interest Rates were in single-digits from 1694 to 1971 when Edward Heath deregulated the Banks in Competition & Credit Control Act setting off a Credit Boom causing high inflation and huge import binge making Property an Inflation Hedge. It has been the same ever since. It is not a shortage of housing but an excess of credit. I am surrounded by empty houses for sale as Government subsidy to Redrow and David Wilson has them churning out more with guaranteed 95% Mortgages……favoured developers (ie Conservative Party donors) get taxpayer-subsidised mortgage guarantees and other houses stand empty. There is not a shortage of housing – the indigenous population is falling and not covering replacement rate.

      • Carl Thomas

        All well and good – are these houses where people want to live and where the jobs to pay the mortgages are?

        • dalai guevara

          Then decentralise. Job’s a good’un.

          • global city

            Decentralise the government control of strategic decision making. Big government and state planning with it’s Londoncentric are what did for Liverpool, stripping the commercial and governence infrastructure from a world significant payer. If the EU is allowed to develop similar centrist powers then Liverpool’s 20th C fate will be but a foretaste of what lies in store for the South East. What will smug prats like Kelvin McKenzie say then?
            Economic historians should really investigate what happened to Liverpool, as it is a sorry tale of what happens when a city’s (country) ability to control it’s own destiny is taken off to another place.

            • dalai guevara

              Aha, very good point indeed – only that it would be a false conclusion to believe that only because one thing is true in one instance, it would equally be true in a completely different case. A riposte would be that China demonstrates with excellence how a centralised government works rather efficiently with regard to economic performance of the entity it controls.

              But is that the ultimate goal?

              • global city

                That is true, but the example of a resurgent China in a way helps proves my point. The government of Beijing has loosened the hands on, central control that the post war British economic model developed, enabling local/city delegations to ‘steer’ day to day business development and growth in other cities and regions. In the UK everything was dictated or micromanaged from Whitehall, especially with regards to the nationalised business’ and services.
                Maybe the situation in China can only see things grow so far, before the over all control that Beijing still commands becomes obstructive. It is also easy to get something going from nothing by allowing some autonomy. Witth Britain it was the other way round, as in when things are taken to the centre then everything else begins to unravel.
                The UK is too centralised and doing something to counter this would begin to allow our cities in particular to explore how to revive a proper economic and commercial base. The situation with Liverpool was longer term and involved the loss of finance and brokerage infrastructure etc, so some ‘devolution’ would not sort everything, like!

        • Tom Tom

          Well they are expensive houses so I suppose you have to have a good income to afford them.

          • Carl Thomas

            Are the jobs available within commuting distance to have the income to afford them?

    • andagain

      We need to build a huge amount of homes, and have those homes built to a
      decent standard but without the red tape, excessive environmental
      regulations and inefficient procurement in order to keep them to a
      reasonable cost.

      I remember the Telegraph a few months ago boasting on its front page about how it had gutted the governments plans for planning reform.

      Lets face it: the owners of those assets are mostly Tories. They will never allow anything to be built as long as they are in power.

      I’ve always voted for them. Don’t expect to be doing that again.

  • Its_not_craig

    We have to face facts.

    Gideon is just not up to the job. For years we’ve carped on about Brown and Balls and seemingly missed that our own man is making a bigger mess of it than even (gulp!) they did.

    • Span Ows

      NO. It’s not good but it’s hardly surprising either. The fact that you call him Gideon indicates you most definitely aren’t in the ‘our man’ camp for Osborne.

  • telemachus

    why does Osborne not listen to the charismatic one?

    “Let’s commit that money ….. and build, over the next two years, 100,000 new homes – affordable homes to rent and to buy – creating hundreds of thousands of jobs and getting the construction industry moving again.”
    He will also call for a “stamp duty holiday” for first–time buyers, which would cost about £500million.

    • Noa

      You must stop reading those old Ronnie Barker scripts to yourself, Tapeworm.

      We both know that Ed is a walking zombie since his economic advice to sad, mad Gordon broke us all. His primary purpose now being to hold Yvette’s handbag and collect the second home allowance.

    • AB

      Possibly because the reviews of previous stamp duty holidays for FTBs has shown that they make practically no difference to the number of FTBs buying homes and almost the entire amount of the money saved by purchasers translates into increased house prices. Increasing the price of already unaffordable housing and reducing the amount of money coming into the Exchequer to do it is extraordinarily self-defeating.

    • Tom Tom

      Only 100,000 ? with 500,000 a year entering Britain each should expect a new home, car and carpets to their specification. I suggest Tel-Boy you ask all these immigrants where they would like to live and send them the house and car keys