The chancellor has given up on any rebalancing of the economy and has fallen back on what can only lead, further down the line, to another crash.
George Osborne is likely to get a boost this morning when the latest quarterly GDP figures are announced, which are expected to show the economy growing at its fastest rate since before the recession.
UK GDP is still below its pre-crisis level, but considering that this time last year the country was facing a possible triple dip and was about to be downgraded by Moodys from AAA to Aa1, this is a remarkable turnaround.
That said, however welcome it may be to see growth return to the economy it has taken three years to get here. When George Osborne announced his emergency budget in 2010 the economy had been growing for three successive quarters.
What’s strange is how Osborne can take over growing economy, leave it floundering for three years, get it back to where it was before he took over and be hailed as hero for doing so.
That said, continued economic growth is certainly welcome and it signals a likely return to higher living standards in the not too distant future (although, despite what Tory HQ might tell you, we’re not there yet).
What is worrying, however, is the extent to which many lessons from the 2008 crash clearly haven’t been learned.
Companies are struggling to export and the recovery is being primarily driven by what looks like another house price boom. People are shopping again, but not because they are necessarily any better off, but because they’re once again comfortable racking up large credit card debts. The stock of household debt is now 140 per cent of GDP compared to 167 per cent in 2008. House prices in London surged more than 10 per cent in 2013 (to get a sense of how uneven the recovery is, in the North East they fell by 1.6 per cent).
Even some Tory MPs are worried. Earlier this month Douglas Carswell accused George Osborne of following in Gordon Brown’s footsteps, and of generating a credit boom that will ultimately lead to bust.
“Many of the warning signs of yet another credit-induced boom are already there; increasing reliance on consumer spending, surging house prices, falling savings ratio and a deteriorating current account balance,” he said.
“I fear a repeat of the mistakes of the past,” he added.
In other words, the lofty talk about rebalancing the economy that we heard so much of from the chancellor in 2010 has been abandoned in favour of a dash for growth – any growth by any means.
And who can blame George Osborne? This time last year there was much talk of his job being at risk if economic growth wasn’t forthcoming.
The chancellor’s job is a lot safer today, but in securing his position Osborne has given up on any rebalancing of the economy and has fallen back on what can only lead, further down the line, to another crash. This isn’t what was promised in 2010, and it certainly isn’t a vindication of austerity.
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