George Osborne talks a good talk, much like a good second hand car salesman, but can he walk the walk? It is easy to see his schooling along side David Cameron, but like Flashman Dave, reality seems always a little different to the rhetoric.
Today the figures were released for the growth of the economy in the first three months of this year by the National Office of Statistics. In the first 3 months of 2011 the economy grew by 0.5%. George Osborne is claiming this as a vindication of his policies. However, on closer inspection it can be seen that the economy has not grown at all now for 6 months.
Even taking into account the bad weather in the latter part of last year this is a miserable result. GDP may well be a poor indicator of quality of life and of society in general, but it is a good indication of exactly where the economy is in respect of a recovery in a growth economy environment.
For the economy to only flatline for 6 months after the deepest recession in our post war history, it is remarkable that this can be classed as a vindication of economic policy. Normally, history shows that after a deep recession we would have an initial period of steep growth in a V shape recovery.
This shows we have flatlined at best. We have missed a double dip recession by a bee’s whisker. The good news for the chancellor is that these figures include the impact of the VAT rise, yet the cuts have not started hitting people’s pockets. Only after April will we see how this shock to the economy will affect growth.
Meanwhile, others in the financial markets and in the Monetary Policy Committee, are indicating they are not expecting interest rates to rise until the Autumn, putting back the expected rise by nearly 6 months. Growth prospects for 2011 are bleak and the cuts are yet to bite, although peoples expectations have no doubt been affecting consumer confidence and spending.
There are only crumbs of comfort for any impartial observer, with manufacturing due to the weak pound doing well. Pretty much everything else is going Pete Tong!
However, it is hard to come to any other conclusion than these are devestatingly bad growth figures for the government and George Osborne in particular. With the biggest austerity program in our history just coming into being, the economy could not only flatline but revert back to negative growth.
The sad situation for ordinary people, is that the obsession with the deficit has clouded the judgement of not only the UK government, but the IMF and general political and economic discourse.
The Truth about the deficit as discussed here is that unless the economy grows the deficit will never be dealt with and we will inevitably get poorer and the deficit get worse over time. Cuts cannot deal with a collapse in tax take which is the primary reason for our deficit problems.
George Osborne’s course is set, and he is not for turning, but it may cost the rest of us dearly in the long run.