After yesterday’s ‘great train snobbery’ George Osborne is this morning waking up to an anniversary that nobody will want to celebrate.
It’s two years to the day since the Chancellor announced his spending review – a gamble that faster tax rises and deeper spending cuts would secure the recovery and get the deficit down – to cheers and waving of papers from Tory and Lib Dem MPs.
These days the Chancellor has to get used to being jeered than cheered as on three main counts – economic growth, borrowing and fairness – his plan has delivered the opposite of what the country was promised.
First, on economic growth, the Chancellor said his plan would secure the recovery and “bring stability to the economy”.
But stability has meant stagnation at best. Our economy has shrunk by 0.4 per cent since the spending review and Britain has been one of just two G20 countries to go into a double-dip recession.
Twelve months ago the IMF forecast growth of 1.6% in 2012 and said a plan B would be needed if growth were to be lower than expected. A year on, with the IMF downgrading its growth forecast to minus 0.4% this year, there can be no question that a change of course is urgently needed.
The IMF has also said that spending cuts and tax rises have had a much bigger negative impact on the economy than they first thought. Yet the Chancellor continues to cling on to his failing plan and refuses to do anything to kick-start the economy.
He has ignored calls from Labour and others for real action to boost jobs and growth like a bank bonus tax to fund jobs for young people, a temporary VAT cut, genuinely bringing forward infrastructure investment or a house-building programme paid for from the proceeds of the 4G mobile spectrum auction.
Of course there have been some welcome chinks of better economic news this week, but the underlying trends remain a cause for concern. Unemployment is falling, but long-term unemployment continues to rise. Almost one million young people are out of work and 1.4 million people who want to work full-time have been forced to accept only part-time jobs.
With billions of pounds of Olympics TV rights and ticket sales from the last 18 months all accounted for in this quarter, next week’s growth figures are expected to show we will finally emerge from the longest double-dip recession since the Second World War. The respected National Institute of Economic and Social Research are forecasting growth in this quarter of 0.8%, while Jim O’Neill of Goldman Sachs is expecting up to 1%.
But this one-off boost from the Olympics is not a long-term strategy and it should not breed yet more complacency from Ministers, however big it is. Even growth of 1% would simply mean the economy is the same size as a year ago. The big questions are what is the underlying level of growth in our economy, what growth can be generated in future quarters, and whether and how we can catch up all the ground we have lost over the last two years.
Second, on borrowing, the Chancellor said he had a “four year plan” to get the deficit down and promised he would balance the books by the 2015 election.
That pledge now looks set to be broken by some margin as his plan has proved self-defeating. By choking off the recovery with tax rises and spending cuts that go too far too fast, George Osborne has ended up borrowing billions more – not to invest in the jobs of the future, but simply to pay for the bills of economic failure.
No growth and high unemployment means his borrowing targets have already been raised by £150 billion over the course of this parliament. Borrowing is higher in the first half of this year than in the same period last year and there are now real question marks over whether his second fiscal target, on getting the debt down, will also be missed.
Finally, on fairness, the Chancellor famously promised “we are all in this together”. We don’t hear that line any more – not after a Budget which cut taxes for millionaires while raising taxes for millions of pensioners. Not when families with children are losing an average of £511 from the government’s changes this year. And not when cuts to tax credits have left thousands of part-time working parents better off quitting their jobs.
With this government’s unfairness and economic failure now so plain to see, it’s no wonder thousands of people – young and old, private and public sector workers, pensioners and the unemployed – are today marching in London for a future that works.
And as this Prime Minister and Chancellor divide rather than unite the country, we must show there is a fairer and better alternative which only a One Nation Labour government can deliver.
Rachel Reeves is Labour MP for Leeds West and Shadow Chief Secretary to the Treasury