Osborne – Failing his own tests for the economy

By Andrew Lewin

I will start with a confession, George Osborne has impressed me over the last nine months.

I doubt there has ever been a chancellor who possessed such creative flair for explaining away the ailing health of an economy. First it was the snow, then it was Wills and Kate and today we learn that ‘the unusually warm weather in April’ was to blame for the derisory +0.2% growth figure we saw in Q2.

There is a serious point here, despite Osborne’s increasingly desperate tone, the Conservatives retain a lead over Labour when pollsters ask, “who do you trust to manage the economy”. Considering all he has achieved over the last 9 months, that is quite a feat for the chancellor.

One of the questions that Labour supporters need to address is how best to expose the failings of Osborne’s strategy since austerity was locked in Q4 of 2010. There are economists far better placed to discuss the detail, so I want to focus on the politics of managing expectations.

I think Osborne’s mismanagement of the economy is best illustrated by the fact that he has failed to meet every single growth forecast made by the OBR (Office for Budget Responsibility). In March the OBR forecast Q1 growth of 0.8%, we grew by 0.5%. For Q2 the forecast was for 0.4% growth and the economy grew by half as much.

At every single turn, the OBR has had to lower its projections for the economy; the (already revised) 1.7% annualised growth figure for 2011 is certain to be next.

This is hugely significant, because Osborne is failing to meet these targets, his entire strategy is at risk. The OBR is independent, but Osborne knows that if he misses these growth forecasts, his deficit reduction plan unwinds as a result.

His failure to generate growth is not only hurting the economy today, it is seriously undermining the ambition of eliminating the structural deficit in five years. In simple terms, Osborne is failing his growth test and his deficit reduction test.

This really matters, because for all the nonsense around snow and Royal weddings, the voters will judge Osborne on his ability to eliminate the structural deficit. For him to miss this much vaunted ambition would be a disaster for the coalition.

I’m a fervent believer in the need for a Plan B for the economy, but to best expose Osborne’s failings, I think the Labour Party should take him at his word and assess Plan A.

Let’s judge the chancellor by the growth test and by the deficit reduction test. It’s an awfully simple way to look at the economy, but it paints a very clear picture; Osborne is failing on all counts.