0.8% growth causes Tory glee: is election victory now feasible?
Conservatives accuse Labour of ‘hiding’ from positive GDP figure – but cost of living remains a live issue
BRITAIN’S economy grew 0.8 per cent in the last quarter, it was announced this morning, getting a huge sigh of relief from David Cameron and his Chancellor, George Osborne.
Osborne immediately tweeted: “This shows that Britain's hard work is paying off & the country is on the path to prosperity.” The Treasury noted: “GDP up 1.5% on a year ago. All parts of the economy grew in Q3 [third quarter of 2013].”
Conservative Central Office could not hide its glee. CCO gloated at the failure of Chuka Umunna, Labour’s business spokesman, to provide an instant reaction to the figures. They tweeted: “@ChukaUmunna are you hiding from the GDP figures? #SameOldLabour.”
Coupled with a 0.7 per cent growth figure for the previous quarter, it gives Osborne the chance to go to the Commons on 4 December with his Autumn Statement claiming that Britain’s economy is on the road to a sustained recovery.
For Cameron, the growth figures are a get-out-of-jail-free card after one of his worst weeks in Westminster, when he was hammered by Ed Miliband for a U-turn on green taxes in response to the eight to ten per cent energy price hikes.
Shadow Chancellor Ed Balls has repeatedly warned Osborne of cutting too far, but Osborne will use these figures to say he has proved Balls wrong. Tory MPs will begin to believe that they can also turn a political corner and stand a chance of winning the next election on the back of economic growth, if it can be sustained.
The GDP figures announced by Joe Grice of the Office for National Statistics were roughly in line with City expectations. There are Labour claims that they conceal the fact that London is booming while the rest of the country is still suffering, leading to a nation of two halves.
However, there was a very big fall of 6.8 per cent in electricity and gas production during the quarter, which, running from July through September, included some of the warmest weeks of the summer. The ONS speculated that the drop may have been caused by the weather, leading to less use of power for heating, but the fall suggests that the energy companies were having difficulties that have led to the price hikes.
Joe Grice said the figures represented “fairly healthy growth” across the board. The recovery is being led by construction (up 2.5 per cent) and services, and growth manufacturing was up at 0.9 per cent. However, Grice said the figures did conceal a differential in performance: manufacturing remained 8.9 per cent lower than before the recession and construction was still 12.5 per cent down on 2008 - while the service sector had recovered all its losses.
The growth figures are unlikely to be enough to undermine the campaign strategy by Ed Miliband and Ed Balls on the squeeze in living standards felt by ordinary people, who still see the cost of living rising faster than income. Balls tweeted this morning: "After 3 damaging years of flatlining it's both welcome and long overdue that our economy is growing again".
Steve McCabe, management lecturer at Birmingham City University, was one of several economic observers who refused to get over-excited at the GDP figure this morning. He told the BBC: "What we really need is an exports-led recovery and this is not that." ·