The Tories are about to get a boost on the economy – here’s why Labour shouldn’t panic

October 25, 2012 9:16 am

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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.

  • AlanGiles

    For those loyalists who wonder why some
    of us get so frustrated and angry with Labour 2012, here is a
    textbook example.

    In an article in today’s Standard,
    Duncan-Smith once gain tries to justify a further £10 b cut to the
    welfare budget.:-

    http://www.standard.co.uk/panewsfeeds/ids-benefits-system-destructive-8225490.html?origin=internalSearch

    And what is the response of Liam
    Byrne?:

    “Iain Duncan Smith is destroying Beveridge not renewing
    Beveridge. For all the tough talk the truth is it’s working
    people who are seeing their help axed. Never before have
    working people paid so much in and got so little back… We
    were promised a welfare revolution and all we’ve got is welfare
    chaos – chaos that working people are being forced to pay for.”

    You notice? – not a single word about the unemployed, of which there are well over 2 million – yet more crocodile tears for “working people” – the “squeezed middle” or whatever soundbite is being employed.

    Let’s not pretend things would get much better – or much different – for the very poorest in this country.

     

    • jonathanmorse

       Ed Miliband conceeded at PMQ’s that a drop in unemployment means all is great. Both sides now agree that the 2 million don’t count.

      • Redshift1

        Erm…I don’t think he said ‘all is great’ now did he?  

    • Jeremy_Preece

      Hello again Alan.

      IDS is today saying that people on benefits can only have two children. Breeding, it seems, is to be a privallage reserved for well off Tories.

      What it means to the unemployed and those loosing benefits, the number of children who will be born into poverty, the people who cannot retire due to pension hardships, while so many young people cannot get their first job; these are the things that Labour should be shouting about. In this respect I take your point.

      Yes there is also a “squeezed middle” as teachers and other public sector workers have their pay frozen and even cut while the cost of living goes up, and Labour also needs to speak up for them as well. All in all the only people who are doing well are the super-rich who are getting even richer and the shareholders as more of the public sector gets privitised. I don’t think that it is a case of “crocodile tears” for these groups, it is a very real issue for people faced with the possibility of loosing their homes and being squeezed out of their way of life.

      • aracataca

        Well said Jeremy. Completely correct. 

      • AlanGiles

        Hello Jeremy, I take your point, perhaps I was a little harsh, but Byrne just seems to ignore the unemployed at each opportunity – either because he has no sympathy or empathy, or because he is rather too keen to bang the “hard-working family” drum.

        When you consider single rate JSA is £70 p.w. and next years increase will be in the region of 2%, he really should be highlighting their plight, rather than just witter on with his colleagues about increasing employment, which is not there.

        • Jeremy_Preece

          I agree, and think that we are both actually on the same page Alan.

    • aracataca

      Oh yes that’s right it’s all Liam Byrne’s fault……..yadder, yadder yadder

      • AlanGiles

        Bill, Perhaps you make some sort of sense to yourself, but I was pointing out Byrne has nothing to say about the position of the unemployed.

        Is it just that you feel you must make some daft comment about everything I write, or that you are completely blind to the shortcomings of some Labour shadow ministers – a man who – let’s be honest about it – would rather have been the Mayor of Birmingham than continue in the shadow cabinet.

        Could I ask you to at least consider the point before your childish responses(“……..yadder, yadder yadder”)

      • Serbitar

        The thing is none of us has a clue what Byrne really thinks about anything or where the Labour Party is as far as welfare goes. Many of us have been led to believe, because of the ambiguous and contradictory things that Byrne has said and written, that his approach to welfare could impoverish the poor and make their lives even more pinched and unbearable than they will be from April 2013 onwards once the Tory cuts begin biting like a rabid dog.

        Where is Labour on welfare?

        Everybody seems worryingly clueless and/or suspiciously furtive. 

        No wonder that a large number of us suspect the worst.

        • AlanGiles

          Exactly that. Byrne seems totally unable or unwilling to make a firm commitment to the unemployed, and Ed Miliband seems equally hesitant, but I blame Miliband for keeping Byrne in a job he has little talent or enthusiasm for. The fact he was willing to leave Parliament if Birmingham had said yes to a Mayor shows, at best, a declining interest in his parliamentary duties.

          Until we know which Byrne  successor will be Miliband’s choice – another hawk or somebody more empathetic, you have to suspect it is business as usual like the New Labour days.

    • Serbitar

      To shoot down IDS’s latest brainwave about limiting child benefit to two children per family you only need to ask one question: If child benefit is to be limited to two children what happens if a poor mother dependent on benefits becomes pregnant with triplets, quads or quins?

      Should the pregnant mother choose to abort the pregnancy? Or abort one or more of the foetuses in a more limited fashion? Or should she simply, bravely bring all of her innocent babies into the world even though they might be destined to suffer poverty because support once available when British society was compassionate and civilised had been discontinued due to a Tory “two child” policy? And what about families which are members of religious or other communities which expressly forbid contraceptive methods, e.g., Catholic Christians? Are large Catholic families destined to suffer unacceptable levels of poverty and privation simply because the parents happen to be poor and devout? Is it right to punish the poor for what is, to them at least, a blessed act of God?

      This is absolutely vile, contemptible, and brutal stuff from Iain Duncan Smith, who must surely be one of the nastiest, most incompetent, and numbingly stupid Cabinet Ministers of all time; a man whose warped moralistic attitudes encourage him to consider fearful and dangerous programmes tantamount to state sponsored child neglect and cruelty if not abuse.

      Labour should not need to think about this twice about this one. 

      F*ck the polls, f*ck the sensibilities of squeezed middle, and f*ck Daily Mail.

      Forget psephology, focus group, and questionnaires and do what’s right for once.

      Labour should immediately and unequivocally state that indiscriminately cruel policies like this are wrong and that under Labour no innocent child would ever be made to suffer for anything that his (or her) parents did before or after he (or she) had been born. Labour should say that it stands for a society which protects innocent and helpless children from evil, privation, poverty and harm, whoever their parents happen to be by dint of an accident of birth. Always. Without question. Unconditionally. Because that is what we are to the core, unashamedly, forever, and those who want to be governed by a party committed to increasing child poverty and child neglect, well, they’d best vote for the Tories.

      We can do without that support.

    • Redshift1

      As someone who was unemployed for over a year under this government, I know one thing for sure.

      It would be better under Labour. The Work Programme is a national disgrace and would never have been introduced under a Labour government. The Future Jobs Fund in contrast (a decent programme for the unemployed, even if only for under 25s) would still be in place.

      I personally hate Liam Byrne but even he would run the DWP better than this. Frankly, I hope when we get back into government that isn’t the case though. He isn’t representative of the Labour Party’s views on this – his continuous place at the arse end of the shadow cabinet rankings on Labourlist is a testament to that too!

      • AlanGiles

        I think you have to remember though, that when Purnell introduced Freud back in 2009, he did say that the main effects of the “reforms” would not become apparent till 2013/14. About the only honest thing he ever did say. He said it in both broadcast and print interviews.

        I would like to think Byrne is alone in his thinking, amongst Labour politicians  but if that is the case why does Miliband retain his dubious services?.  

        I think that Byrne is just the latest and probably worse of a bad bunch of New Labourite DWP ministers and shadow ministers. Remember how Hain “helped” the disabled by starting the dismantling of Remploy in 2008 (which made the current coalitions work so much easier for them in finishing the job off – ditto Purnell/Freud transfigured into Smith/Freud. How Alan Johnson wanted to put DWP spies into GPs waiting rooms?

        Smith, I totally agree is beneath contempt both for his current work, his previous lies and deceit over his CV and the famous Betsygate scam, but Byrne has said that he agrees with three quarters of the coalitions welfare reforms, and the fact that he only speaks of working people being hurt by the changes and doesn’t even utter a word in support of the unemployed shows only too clearly he would be no better at all IMHO.

        • Redshift1

          Byrne is reflective of the old-school not-so-new-Labour triangulation obsessives. It is a dying breed in the party at large in my opinion but in the PLP it remains a significant but minority strand of opinion. I suspect Miliband has to keep Byrne, Ivan Lewis, etc in to keep the PLP happy and together (especially the ‘wrong brother brigade’). 

          I’d like to think though, that another intake, another dose of new blood, would change the PLP enough to kick them out – that relies however on party members getting good people selected as Labour candidates in their constituencies. Most of these selections for marginal seats will take place next year, and you need to be a party member for 6 months to take part. If for no other reason Alan – that’s why it’s important we sign people like you up as party members. 

          • Redshift1

            Or to put it another way – don’t wait for things to change, help us make it happen!

          • AlanGiles

             My conscience would not allow me to rejoin, Redshift – there are still too many of the old waxworks in the museum (or rogues gallery!).   With the added danger that some of the old expenses swwindlers who got kicked out in 2010 might be back. Also, where I live we have the honour of having John P Reid of this parish as the main man, and it is fair to say anybody to the left of Hugh Gaitskill isn’t exactly welcome. He lives in fear of 1983, as you will have read from his various LL posts, and I think my voice would be drowned out. To John, bless him, I am probably one of those reds under the bed of his imagination.

            I got into trouble with “aracataca” , as William now terms himself,  this week, because I was unable to attend last Saturday’s march – I think to date he has reminded the readers of this transgression on five or possibly six occasions. The truth is I could be of far more practical use and help where I was at the time.

            When I read some of what those two gentleman and others like Paul Richards, Rob Marchant and A.N. Other post on LL, I can hardly believe that they are in the same party that I supported for 50 years. If they are the future for Labour, well, thanks, but….

          • Redshift1

            Nevermind the future, I’m far more concerned Rob Marchant doesn’t even live in the present! I’m sure he’s stuck in a time-warp with ‘Things Can Only Get Better’ on repeat. 

            I do understand the situation with your local party being a turn-off as well because in contrast it was a good (very much left of the party-line) local party that got me to sign up in the first place. I’ve moved around and been in other CLPs since that I’ve been less impressed with but I’ve always sought to change them, with varying levels of success. The key has generally been getting people like you involved Alan. It isn’t entryism, it is your party. You’re just reclaiming and revitalising it. 

            Anyway, I’ll keep working on you! lol

          • AlanGiles

            I’m too old and tired, Redshift. There are too many bright young things who want to turn the party into the Conservatives mark 2 (a slightly lighter shade of blue) – one or two of whom appear on LL regularly. As for Mr Marchant (I always thought, BTW  it was “Things can only get bet-ah, yeah” :-) – I always remember about 5 a.m. on the morning of 2nd May 1997 Mandy jigging up and down to yet another airing of it,  on the South Bank while Prescott tried to join in looking like a bulldog chewing a wasp), one hopes he stays a “former” Labour party manager, but I have a nasty feeling that he, like a lot of the other emblems of New Labour might come crawling out of the woodwork if Labour win the 2015 election.

            As for my  local party, I can’t say what I honestly feel because though I might be  a b*st*rd, I am not a total b*st*rd and I don’t want to be personally hurtful to another poster, but suffice it to say that if you read some of the posts from that source, they lack quite a lot of -polish -shall we say?.

            On the national side, I frankly don’t think Ed Miliband has the “oomph” to ever be totally his own man – nice enough, but like John Major a prisoner of his own right wing.

            I couldn’t get involved in electing New New Labour, (imagine fighting to help Tony McNulty or Jacqui Smith, or – God forbid, James Purnell back to Westminster) , though FWIW I think Labour will win (Or more honestly the coalition will lose) and I spend my time these days trying to help in more practical ways, both human and animals, plus with the clocks going back today and less garden time, I am about to embark on a rather arcane but interesting project ….

            I sometims wish I had stuck to my idea some years ago and retired to the coast. If I were in Brighton, I would be fighting for Caroline Lucas to retain Pavillion, TBH…… (I’ll probably get banned for saying that)

          • Alexwilliamz

            Come on Alan, get involved, raise the heat and watch the ‘waxworks’ melt.

  • metrolivia

    So the figures look good because of the Olympics..however once this boost has been filtered through the system we are back where we started….nowhere, flat lining and back in recession.  The Tories cannot take credit for the Olympic boost to the economy, this was down to Labour in winning the Olympics in the first instance.  The Tory financial recovery for UK is still an utter mess!

  • Winston_from_the_Ministry

    I don’t see how anybody can claim Ed Balls strategy has failed. He hasn’t been running anything.

  • DanMcCurry

    The big question is whether people have formed a settled view on the economy. If growth picks up will they forget everything previously or will they continue to view the Tories as incompetent?

  • Jeremy_Preece

    I have said it before and I will say it again. Labour in opposition allowed the Tories to get away with blaming Labour for the whole of the world-wide banking crisis. In so doing it also allowed a myth that somehow the Tories are better at economics and had only they been in power in 2008 then things would have been better. Of course this is lie, but by not facing it down, we have allowed the Tories to win a propaganda victory.

    It is the perceptions of voting public that determine who will win the next election. Facts come a poor second to that, and with the power of the media - reality comes a poor third.

    It is bad news if we in Labour are to be stuck in the posistion of wanting bad economic news, to prevent the Tories getting in properly at the next election.  

    • aracataca

      True. but the Tories have had the media at their beck and call.

      • Jeremy_Preece

        Yes the media and their relationship with the Tory party means that Labour never compete on a level playing field. I would however make two points:

        1. Until the conference speech we have had tow years of almost silence from the front bench on this and there has been an attitide of not trying to win this argument but hope that with time it will go away by itself; which it won’t.

        2. We have heard much from Ed Balls about cutting too much and too quickly, which is correct but does not give any indication of what should and should not have been cut. This also doesn’t help as we have no answer to the obvious questions about what we would do if in government.

      • http://twitter.com/renieanjeh Renie Anjeh

        The idea that the media loves the Tories is false. The Tories’ relationship with the media has broken down completely. Centre-right papers and rightwing papers have been attacking the Government and Murdoch hates them too. If Boris became their leader, then that relationship will probably be repaired.

  • jonathanmorse

     But that’s there ongoing policy. Brown never argued policy, and, since it worked so well for him, and Ed’s his biggest fan, it’ll work for Ed, surely?

    Ed has put ideas into the mainstream without people noticing. I am so hoping he is cleverer than he comes over and we will find out good things at the election.

  • jonathanmorse

    They never show the size of the economy, they show the quarterly changes. It’s likely to fall back next quarter after the odd things like the Olympics disappear out. We need to know the average, the momentum, and that’s too low. But will the Ed’s say so?

  • jonathanmorse

    The main part of Tory economic strategy is to drop the value of Sterling, by QE, the decline in the economy and the banking sector. Because of the fall in the Euro that isn’t working. Our exports are cheaper, but not cheap enough, imports are more expensive.

  • leslie48

    We have the continuing demonization of -all- those on Benefits. I doubt if many folk know about Beveridge especially the  under 60s. Labour needs to remind people that the welfare system we all pay into  is there to support the unfortunate .  All are vulnerable to redundancy, serious and chronic illness or disability through road accidents etc., Labour  needs to re-educate society about what the Welfare state means.  At the moment the Daily… and it is daily propaganda …from the Express, Mail and Sun suggests claimants are foreign families or over indulged parents with umpteen kids living on council estates. On both education and welfare we have no Labour ‘big hitters’ just Gove and  JDS telling us about their social revolution which will help lift the working classes.

    • AlanGiles

      Part of the problem, I feel, is that Byrne and especially his predecessor Purnell  either genuinely believe, or like to pretend to believe for convenience,  the tabloid press view that people are unemployed because they choose to be so (indeed Labour has been guilty of the phrase about “being on benefits…a lifestyle choice”).

      Of course those of us who live in the real world  know that the young, and the middle aged find it harder to obtain work, and this has been compounded by both major parties choosing to raise the retirement age – which will result in fewer jobs being available for younger workers, and when older workers lose their jobs, but have to soldier on post 60, employers are less likely to take them on.

      Just this last few days, Fords have announced major closures and the “Argos” chain are to close over the next few years at least 75 of their stores, reduce their catalogue and concentrate more on “on line” trading. There are, and will continue to be fewer jobs to be had, something both the right wing of Conservative and Labour either fail to grasp, or choose to ignore.

    • Quiet_Sceptic

      I’m not sure reference to Beveridge would help because the present welfare system bears little resemblance to that outlined by Beveridge.

      Interestingly the examples that the Right love to throw up to attack welfare highlight exactly those areas where the modern welfare state has abandoned  the key principles in the Beveridge report – the loss of the contributory principle (aka the freeloader/scrounger issue), dwindling of non-means tested benefits/huge growth in means testing (paying in something for nothing etc).

      That said, I don’t think a return to the original principles outlined in the Beveridge report would be very popular with many on the Left.

  • http://pulse.yahoo.com/_ZPXYLRVP4XOIGGDJWAL6HUO7U4 David

    While I agree with the overall thrust of the article (that “one swallow does not a summer make…”), I have some concerns presented in the spirit of constructive criticism.

    Firstly, the alignment of the editorial line in this article with the Shadow Treasury’s response is of course fair given the purpose of this site, but I humbly suggest that parroting (if that is what it is) presents a danger for the site’s credibility if this single response suffers under scrutiny, as it appears to be.

    Specifically, according to the ONS themselves: ”It is not possible to quantify the overall impact of the Olympics and indeed some of the activity may have displaced other activity (for example, the comments on watching the Olympics in preference to films or DVDs) but the text above provides some idea of where the main impacts were likely to have been.”

    The “text above” largely states 0.2% is as much as can be quantitatively shown, far from the 0.5% claimed.

    Secondly, the use of “Labour’s Olympics” as an expression is not something I would recommend: it could be seen to present us as small and petty minded, and once again does not really bear up to close scrutiny (it works from the point of view that Labour were in power and with a Labour mayor when the bid was made and won, but the bid team was led by the Tory Lord Coe, and ultimately delivered under a Tory Mayor), and if one starts to go down that line where does it end: “Labour’s Financial Crisis”, “Labour’s Iraq War”, and the latest “Tory Recovery from Recession” are not, for example, helpful (or necessarily fair) monikers.

    Finally, “the economy is growing again. Big whoop. Because unemployment is still high, disposable incomes are being squeezed, and people are still feeling the pinch.”

    Yes, it is a big whoop: we should applaud each and every job gained, just as we should rightly decry each job lost.  Likewise, recent news has been good on all counts (according to Stephanie Flanders): ”inflation, employment, retail sales and now the public finances have all come in better than expected.”  To be seen to ignore these and present the negative aspects of this for political reasons risks appearing unhappy with any good news.

  • Jeremy_Preece

    Due to the Olympics, in the UK for about one month, people started spending money. As a result there was a 1% growth in the economy. This will probably fall back as the olympic effect receeds into history.

    Why does this help strengthen the Tory austerity arguments? In fact doesn’t. It actually blows a hole in the austerity argument. Spend and the economy grows, cut and unemployment goes up, the economy shrinks and there is less revenue generated to pay off loans.

    Let’s not allow the Tories to twist this into justifying more cuts.

  • http://twitter.com/renieanjeh Renie Anjeh

    Mark’s point regarding Polling is wrong. The thing about 1997 is that Labour faced an unpopular, tired, divided, disreputable Tory government and had an extremely popular leader with a strong agenda to change the country etc etc. Also, in the 1997 the economy was not a great concern but people were more concerned about the NHS and education (probably because the economy was fine). Now, the economy is the Number One concern of people. If the Tories regain their reputation for economic competence, then we should be worried.

  • markfergusonuk

    Labour were 20+ points behind on the economy as the country was recovering from a recession, and Tory mismanagement of the economy. You may disagree with me, but I am not “wrong”.

    • Serbitar

      Better watch yourself or he’ll “flag” you.

      • http://twitter.com/renieanjeh Renie Anjeh

        Your evidence. When have I flagged a comment?

    • http://twitter.com/renieanjeh Renie Anjeh

      Sorry, I’m not saying your polling evidence is wrong what I am saying is that the point you made that Labour was 22 points behind the Tories before the 1997 election, but went onto win a landslide cannot be applied now because back then not only did the Government completely lose its reputation for competence but the economy was third on people’s list of priorities whereas now it is overwhelming at the top. Therefore, there is cause to worry if they do get a bounce.

  • Martinay

    The + 1% GDP arises in substantial measure from public investment in significant infrastructure for the Olympics. By Blair and Brown.

    Nuff said.

  • MrSauce

     Just thinking:  the recovery of the UK public finances isn’t going to happen quickly.
    Remember all that mis-sold PPI that was so profitable for the banks over the past decade or so?
    I guess the tax on those profits was a good money-spinner for the Treasury, too.
    Not only has that income stream gone, but the compensation costs represent a huge loss that will discount the banks’ tax bills.  A double whammy of tax income reduction for the Govt.
    I hope that cheers you up.
    It has all gone a bit flat here since the good economic news started coming in.

  • Jeremy_Preece

    So Renie, we can say that the media is biast towards the Tories as a whole, but dislikes this current leadership. They might be blasting Cameron, but they are not exactly praising Labour.
    Sadly, for many of the papers, Cameron is still not hard rigth enough for them, and Boris of course is hard right. It is just that Boris does the bumbling bafoon bit, and knows how to publicise himself better.

    • http://twitter.com/renieanjeh Renie Anjeh

      Boris is not hard right. The Mirror, the New Statesman, the Guardian, the Observer, the Independent. We have supporters. To be fair, The Times is a fairly centrist paper.

  • aracataca

    The economy fine in 1997? That’s not how I remember it. All the ‘golden legacy’ stuff is a great big Tory myth and John Major was the most shambolic and complacent PM ever to have disgraced the office of Prime Minister. 

    • http://twitter.com/renieanjeh Renie Anjeh

      Labour did inherit strong growth from Ken Clarke after a recession, it’s just that Labour made the growth even stronger.

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