This Thursday we will find out whether or not the UK economy is in an unprecedented triple-dip recession. Economically, however, whether the country finds itself in a triple dip recession or not is largely symbolic - the chancellor's austerity policies are failing and there is every chance they will go on failing unless he injects some stimulus into the economy.
This Thursday we will find out whether or not the UK economy is in an unprecedented triple-dip recession.
Most prominent economists expect the country to narrowly avoid the triple dip, but the idea that this will constitute any sort of victory for George Osborne – however minor – is far fetched.
The economy has now been flatlining for almost three years and the chancellor is facing increasing criticism from influential economic bodies for his intransigence. The UK has also been downgraded by two credit ratings agencies and the thesis fawned over by austerity hawks – that high public sector borrowing stifles growth – has been debunked by a PHD student.
Add to this the fact that figures were released last week showing that unemployment has risen by 70,000 quarter on quarter, and public borrowing figures for March, which are out tomorrow, may well show that the deficit has risen in real terms, and you have a fairly damning indictment of the occupant of Number 11.
As Alastair Darling pointed out on Sky’s Murnaghan show, the consensus appears to be hardening against the chancellor as even previously supportive institutions such as the IMF are call on him to change direction.
The IMF rebuttal has received widespread coverage but in reality has been only the latest in an increasingly prominent chorus of influential figures who have parted ways with the chancellor over his approach to the economy.
Former United States secretary of the treasury Larry Summers recently slammed Osborne’s austerity economics and said the chancellor’s ‘Help to Buy’ housing scheme went “against basic things taught in economics textbooks”. In it’s response to the budget, the National Institute of Economic and Social Research (NIESR) also said public finance numbers had been severely distorted by a number of what were essentially accounting gimmicks.
It added that deficit reduction had stalled “as receipts fall as a consequence of the weak economy”.
The triple dip is not really the issue here; and as George Eaton has pointed out, the chancellor could revise it away using upgraded ONS figures if he chose to do so. Even if the country does avoid another recession, it’ll only be by a few fractions of a percentage – wages and living standards will continue to stagnate for most people and, without significant growth, the deficit could grow.
Politically this could be a make or break week for George Osborne. Economically, however, whether the country finds itself in a triple dip recession or not is largely symbolic – the chancellor’s austerity policies are failing and there is every chance they will go on failing unless he injects some stimulus into the economy. It makes a great deal more sense to borrow for growth than to borrow because your austerity plan is failing.
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