Britain’s economy is now the fastest growing in the world, with its Gross Domestic Product (GDP) matching pre-credit crisis levels. We’ve also had six consecutive quarters of economic growth, and the International Monetary Fund has, again, upgraded its forecast for the UK economy. So, surely it’s time to break out the champagne and party like it’s 2007, right?
While the increase in GDP, like the continued growth of the economy, is of course welcome and could be seen as a validation of the Chancellor’s programme of austerity, it would be a mistake to think that the economy is well and truly out of the woods. Mr Osborne is unlikely to be reaching for a self-congratulatory pat on the back just yet, and it remains to be seen to what extent the growth in the economy will result in either a changed approach at the Treasury or a re-commitment to the principle of austerity.
It has been reported that the growth in the economy has not seen corresponding increases in tax revenues for the Treasury. This means the Government’s will have little in the way of additional revenue to spend or to allocate during the Chancellor’s autumn statement. All the while, despite the economic growth, the budget deficit remains high and will require years more tightened public spending of the sort we’ve seen throughout this parliament.
On the other side of the House of Commons despatch box, Labour’s National Policy Forum saw off activist efforts at the weekend to commit the Party to abandoning coalition spending plans, in what Jon Cruddas (Labour’s head of policy review) has described as a “turning point in the history of the Labour Party”. Meaning that, if Labout wins next year’s General Election and forms the next government, the Party has – in theory at least – committed itself to a careful financial programme that will not be based on huge increases in public spending.
So, despite the good news of economic growth, there will not be huge reductions in tax for a population that has experienced years of rising living costs that have not been matched by corresponding wage increases. There will not suddenly be tens of billions of pounds more in funding for the beleaguered NHS. There will still be concerns over housing prices or rising fuel costs. The reality is that much of the public will be feel little if any effect of the economic growth and will, when presented with the IMF’s forecasts, quite reasonably say “so what?”
Unless the public can see the tangible benefits of economic growth, this news will not be the crowning achievement that guarantees David Cameron the keys to Downing Street for another five years. But that doesn’t make Labour’s job any easier, as the Party can ill-afford to use economic growth as the basis for a programme of increased public spending that would leave the UK economy looking like the proverbial house built on the sand.
Increased growth will only represent a success at the ballot box for the Tories if they can explain how it benefits the individual; Labour will have to explain how it would consolidate and build upon a the solid foundations they might inherit in May 2015.