For all the politicians' wheel-spinning, the UK has basically gone nowhere in the past 18 months
It's a mark of what low expectations are now brought to bear on the economy that Thursday's announcement that Britain didn't fall into a third recession, the dreaded triple-dip, was greeted with such relief. An "encouraging sign" is how George Osborne described it. "We haven't triple-dipped, so that's … a welcome thing," was Nick Clegg's more plaintive response. And then there were the outriders in the rightwing press; people who should have known better, blogging triumphantly about how the "Tories are back in business" or "GDP relief leaves … Labour party under pressure".
Instant reactions are often the least-thoughtful ones and waving thumbs-up or thumbs-down a popular game at Westminster. But even so, such a reaction is out of all proportions with Thursday's actual news. The fact that the economy grew at all in the first three months of this year is undoubtedly a good thing. But the 0.3% rise merely takes the UK's GDP back to where it was in autumn 2012. As the Office for National Statistics observed in its first substantive point on the first page of Thursday's release: "GDP… has been broadly flat over the last 18 months." For all the politicians' wheel-spinning, the country has basically gone nowhere. Moreover, even after the first quarter's spurt-let, the UK is earning 2.6% less than it was in the first quarter of 2008. Strip away the double-dips and triple-dips and jeering over the despatch box, and the basic picture of what has happened to the country is this: a massive and long recession hit the economy in 2008, and it has still not fully recovered. There were initial signs of a bounceback in 2009-10, thanks to Alistair Darling's modest fiscal stimulus, but those have all been wiped out.
If this is technically a recovery, it is the weakest in 100 years. That is in stark contrast to America, which has made back all the GDP losses incurred in the subprime crash, and is enjoying a tepid, but tangible, recovery (as Friday's US GDP report will surely underline). And it is worse even than Europe. Given that this is the state of the economy five years after an existential crisis, and that the Bank of England assumes there's another five years to run, it would be far better to refer to this as a depression. And coming from the government that vowed to rebalance the economy away from the Square Mile and towards the rest of the UK, it's worth looking at the sources of growth in the three months just gone: services up, a bounceback in North Sea production – but a drop in construction and industry.
Couple this with the other indicators – such as the surveys showing a mini house-price boom in London, even while homes are sold for a pound a time in Stoke, or the announcement in the last budget of a plan to boost housebuying – and the picture that emerges is of a coalition that now wants growth at any price, and is not too fussed if it comes from the same bubble-tastic sources as before. The politics here are easy to read, but the gulf that is opening up between London and the south-east and the moribund rest of the country should worry all the main parties at Westminster. This has been a week of near-misses for Mr Osborne. He managed to bring down this deficit from last year – by a whopping £300m. Such a reduction would have been achieved by a crackdown on every last paperclip, and it is still barely visible to the naked eye.
The bigger picture though is of a coalition that bet in 2010 that the private sector would spend more than enough to make up for government cuts, backed itself into a corner in arguing the case and must have spent nearly every day of the past three years ruing its mistake. Meanwhile, the IMF, the EU and across southern Europe have clearly given up on "peak austerity". In his rhetorical support for spending cuts, Mr Osborne now looks more of an outlier than at any point since moving into No 11.
Still, at Westminster, David Cameron has pulled off a modest reshuffle this week, and Britain has avoided a triple dip just days before the local elections. Such tiny victories are precisely what low expectations are made of.
