Growth won't just happen: so when will Osborne get a grip?
Reform of planning and employment law has been endlessly promised but never seems to happen
IT IS NOT surprising George Osborne looked so nervous when he got up to deliver his Autumn Statement in the Commons yesterday. On virtually every measure, things have turned out worse than he expected even nine months ago, at the time of his "omnishambles" Budget, and they were hardly looking rosy then.
To be fair to the Chancellor, he is right when he claims that many of his problems are not of his own making. Whatever his shadow Ed Balls may say (and his performance yesterday was far from impressive), Labour left the public finances in a truly shocking mess. Even if everything else was going swimmingly, recovering from the Gordon Brown years would have been long and arduous.
And, of course, everything else is not going swimmingly – far from it. No one dreamt when the coalition took over, that the eurozone would get itself into such an intractable tangle. The inexorable upward pressure on energy and commodity prices, caused by demand from China et al, is another factor that cannot be laid at Osborne's door.
But it is not just excuses that have characterised his tenure at the Treasury. He has also been relentlessly over-optimistic. Again, he can argue in his defence that he has not been alone.
Back in 2010 he set up the independent Office for Budget Responsibility and gave it the task of preparing the official forecasts. Its forecast at the time was that the economy would now be growing by 2.8 per cent, a figure it has been downgrading ever since. In March the OBR prediction was that this year growth would be just 0.8 per cent. Now it is minus 0.1 per cent.
You might think once bitten twice shy. Yesterday, however, the Chancellor assured us, on the authority of the OBR, that growth will indeed return to 2.8 per cent. It's just that we will now have to wait until 2017 for it to happen.
In the meantime, he intends to trundle along much as at present. A little more spending on some things will be paid for by smallish cuts elsewhere, and while some taxes will go up a bit, others will go down a little. And so it will go on, apparently, until the economy somehow sparks back into life.
The question Osborne and the OBR never seem to ask themselves is - what if it doesn't? What if today's stagnant conditions are the new normal? The danger in the coalition's approach is that, if ministers think that growth will resume largely of its own accord, the temptation to fudge difficult but necessary decisions can easily become overwhelming.
We can see this with the banks, which still won't lend despite the Treasury's threats and the Bank of England's blandishments. We can see it with public expenditure, and the way current spending continues to rise despite the rhetoric about cuts, while capital spending is down despite the grandiose talk of investment. And we can see it in the absence of supply side reform, on matters like planning and employment law, which has been endlessly promised but never seems to happen.
The longer the recession drags on, the clearer it becomes that until someone can really get a grip on issues like these the economy will struggle to regain its mojo. The problem, of course, is that along the way a lot of powerful interests would be upset, ranging from the City to the National Trust. With the government in low water, perhaps it is understandable that embattled ministers think they have got enough on their plates to be going on with.
It is plain, however, that we can't rely on help from elsewhere. Even the OBR can't be so optimistic as to think that the eurozone is going to sort itself out any time soon, or, for that matter, that the Chinese are suddenly going to moderate their demand for oil.
Contrary to what the OBR and the Chancellor still appear to believe, growth is not just going to happen. It is going to have to be down to our own efforts, and especially the government's. At the moment, unfortunately, there is little sign the government gets this.
Looking beyond the heated but rather esoteric debate about debt and borrowing targets, the economy, like the Chancellor, is stuck in a rut. On yesterday's showing it is hard to see how either is going to get out of it. ·