George Osborne makes a familiar argument today, seeking to blame the double dip recession on the eurozone. The truth is the causes of the recession are primarily domestic.
In the Sunday Telegraph, the chancellor writes:
“Our recovery - already facing powerful headwinds from high oil prices and the debt burden left behind by the boom years - is being killed off by the crisis on our doorstep.”
Although trade was a very modest net drain on GDP in the first quarter, this was due to a rise in imports rather than a fall in exports.
The ONS’s most recent trade release found:
“The deficit in trade in goods with EU countries widened by £0.7 billion to £4.5 billion in March, compared with the deficit of £3.7 billion in February, as exports were virtually unchanged at £13.2 billion (up by 0.1 per cent), and imports rose by £0.8 billion (4.4 per cent) to £17.6 billion.”
A much larger contribution to Britain’s double dip recession was a 4.2 per cent quarter-on-quarter drop in gross capital formation, or investment (see Annex B).
Readers should remember that this is not the first time that Osborne has wrongly tried this trick.
No wonder the shadow chancellor, Ed Balls, says today:
“It’s deeply complacent and out of touch for George Osborne to blame Europe for a double-dip recession made in Downing Street. He will fool nobody with these increasingly desperate excuses.”