It looks like growth. It sounds like growth. But – unless you’re a London estate agent – does it feel like growth?
This is what George Osborne’s critics are asking in response to all the talk about ‘turning a corner’ and recovery being under way – a narrative we’ll hear much more about in the December 4 Autumn Statement.
The doubters have a point. Many of the economic indicators are heading in the right direction. And, much to the chancellor’s delight, the International Monetary Fund has revised its UK growth forecasts upwards.
But on the ground, real wage levels are in freefall, with many employees on zero-hours and sub-minimum-wage contracts. Public sector pay is now in decline.
Meanwhile, energy, housing and fuel costs have soared. Outside of a few property hot spots, there is precious little sense of a feel-good factor.
In fact, as Jonathan Portes spells out (cover feature), this is the weakest recovery in UK economic history. GDP has grown by less than a third of the rate predicted by the Office for Budget Responsibility in 2010.
And short-termist measures such as Help to Buy merely risk stoking un-sustainable levels of personal debt.
We may not be in a full-blown housing bubble yet, but most economists agree that pump-priming the market to boost housing receipts could easily lead to one.
So where does that leave the ‘hard-working families’ the government says it’s so keen to protect?
Politicians of all stripes are eager to show they are sensitive to the needs of hard-pressed voters – hence all the offers of mortgage sweeteners, energy-price freezes, free school dinners and marriage tax breaks.
However, as the chancellor himself has stressed, it’s the state of the economy that underpins living standards. And with growth so fragile, he’s taking no chances.
Osborne’s commitment to achieving a surplus by 2020 is little more than a Treasury mission statement – ‘forward guidance’ to the markets of his intention to forge ahead with a decade of austerity.
Growth levels are nowhere near strong enough to make a serious dent in the deficit, so more of the same medicine is all that’s on offer. And as Rob Whiteman argues (opinion piece), that’s a grim prospect indeed.
As for cash-strapped public sector staff and service users, they must be left wondering whatever happened to sharing those proceeds of growth.
This opinion piece was first published in the November issue of Public Finance magazine
