Today the GDP figures are released, and we are able to officially confirm what David Cameron knew yesterday – we’re finally out of our (second) recession, with growth of 1% in the last quarter. This is unequivocally good news as far as the country and the economy are concerned. And of course it’s good news for a Tory government who are struggling for anything approaching good news at the moment. Inevitably though there will be some who will suggest that growth returning to the economy (as it inevitably must) is a bad thing for Labour. They will denounce Ed Balls and try to claim that his strategy of focussing on jobs and growth has failed, now that we have growth again. Here’s why those people – and the Labour Party in general – shouldn’t panic:
The growth might not be what it seems: it’s great to have growth, but we need to be sure that what we’re experiencing isn’t just a rollover of previous growth, consolidated into one quarter. So, for example, all of the ticket sales from Labour’s Olympics over an 18 month period are allotted to this single quarter, and the spending which rolled over from the previous quarter (due to an extra bank holiday) is expected to add 0.5% to GDP alone. In total, these “rollover” factors are thought to add 0.7% to GDP. So even with growth of 1%, the economy is still pretty weak. That makes it pretty brave of David Cameron to claim that the worst of the recession is over, especially if…
There’s the risk of a “triple dip”: whilst leaving recession may be good for Osborne, taking us back into recession (again) could be deadly for the Chancellor and the PM. And it’s a legitimate possibility, with economist Martin Beck telling the Today Programme ”we expect the economy to start contracting again in the fourth quarter.”
We’re miles behind where we should be: even with growth returning to the economy – we’re far from where we should be. Before today’s GDP figures were released, here’s what Osborne has done to the economy (contracted it by 0.4%). So even after growth today, the economy will have grown by just 0.6% over 9 quarters.
Bad news to come: although David Cameron may have said yesterday that there was more good news to come, he’s obviously forgotten about the Chancellor’s Autumn Statement, where we can expect growth to be revised down, and borrowing to be revised up. Osborne has no room for giveaways either – now that he’s splashed the cash on a top rate tax cut.
Polling: Labour need to retain and regain economic credibility. However, even if the Tories do get a bounce out of the economy leaving recession – which they should – that should be no cause for undue panic for Labour. After all, in early April 1997 (just a few weeks before the first of Blair’s landslides) – Labour was 22 points behind the Tories on the economy. And we know how that ended, similarly…
People won’t feel better off: the economy is growing again. Big whoop. Because unemployment is still high, disposable incomes are being squeezed, and people are still feeling the pinch. Good economic news is important, but people want to know how they are going to be better off. Keep an eye on polling around how people see their futures, and their future finances, as well as the raw “who is better on the economy?” questions, for a more accurate grasp of public mood.