Whoever wins the 2015 election may win the next one tooby David Hale / May 22, 2013 / Leave a comment
Will George Osborne’s latest policies bring growth? (© LEON NEAL/AFP/Getty Images)
The British economy has been in the doldrums for nearly 18 months. It has been the United Kingdom’s longest period of sluggish growth since the early 19th century and its performance has lagged behind all other G7 countries, except for Italy.
There was relief at the Treasury in April when official figures showed that the economy grew by 0.3 per cent in the first three months of 2013 and avoided the danger of a “triple dip”—a third period of recession. In early May the Confederation of British Industry discerned signs of recovery. In his final forecast as Governor of the Bank of England shortly after, Mervyn King was optimistic, saying that “a recovery is in sight.” The Bank’s most important committee agreed that “a modest and sustained recovery in output was in prospect.”
However, it’s worth asking why Britain has found recovery quite so hard, whether George Osborne or his predecessors are to blame, and whether growth really is now finally returning.
Let’s start with the bald figures, which spell out just how painful this period has been for the UK. The downturn was the worst since the Second World War for many countries, but for the UK it was the worst since 1830. The economic crisis caused UK GDP to fall by 6 per cent compared to 9 per cent in Japan, 8 per cent in Italy, 7 per cent in Germany, 5 per cent in the United States and 4 per cent in France.
Robust upturns often follow severe downturns, but not this time. Britain technically emerged from recession in 2009 but output is still 2.9 per cent below its previous peak. It has grown by about half the rate of Germany, Japan and the US since then, although it has done better than Italy and Spain, which have been in recession for the past two years—France slipped back into that state in May.
There are many intertwined reasons why the UK has struggled. Some do lie in the last few years—Osborne, in pursuing his austerity programme, failed to produce policies which would offset its effect plus that of the eurocrisis and global slowdown. In April, the International Monetary Fund lectured him that “near-term flexibility in the fiscal adjustment path might be needed.”
But many reasons stretch…