Double-dip recession or not? Blanchflower slams Coalition 'spin'
Coalition cheerleaders have been questioning accuracy of figures that show UK is in recession
ECONOMISTS are at war over the question of whether the UK is actually in a recession, following a series of statements casting doubt on the accuracy of official figures which last week confirmed Britain had experienced two consecutive quarters of negative growth.
Now Danny Blanchflower, a former Bank of England adviser, has accused the Coalition of spinning its way out of a double-dip recession.
The Independent on Sunday's Hamish McRae is one of the optimists. In his column yesterday, he quoted research by investment bank - and occasional vampire squid - Goldman Sachs which suggests the British economy has not gone into recession and we're actually doing a lot better than the Office of National Statistics, which compiles growth figures, suggests.
Indeed, in what reads like quite a Pollyannaish column, McRae argues that the UK "is currently growing at an annual rate of between 1 per cent and 2 per cent" but it might not be until 2015 that the current negative figures can be revised upwards.
McRae and Goldman Sachs are not the only ones to suggest that all might not be as it seems with the latest growth figures - which were predictably seized upon with relish by the shadow chancellor Ed Balls as proof that the coalition's austerity plan isn't working.
The Daily Telegraph reported last Wednesday that even the Bank of England was questioning the validity of the figures, while City types puzzled over the disparity between recent surveys which have shown the economy beginning to recover.
Andrew Goodwin of the Ernst & Young ITEM Club told the newspaper: "Our reaction is one of disbelief. The divergence is virtually unprecedented and must raise significant question marks over the quality of the data."
However, former Bank of England wise man David Blanchflower, long an opponent of George Osborne's Plan A for the economy, has taken to the pages of the Independent today, blasting the government by claiming that: "The facts aren't going the Coalition's way, so it has resorted to spin."
Blanchflower, the only member of the Monetary Policy Committee to predict the 2008 financial crisis and suggest corrective action, first warned in June 2010 that "I am now convinced that as a result of this... the UK will suffer a double-dip recession or worse" after 'Slasher' Osborne's first Budget.
The economist, who now teaches economics at Dartmouth College in New Hampshire, pours cold water on suggestions that the negative growth figures will be revised up later, suggesting they are far more likely to turn out to be worse.
He tears into Coalition policy, claiming that "fiscal retrenchment through deep public spending cuts to reduce the deficit has not boosted private sector investment; quite the opposite".
Lib Dem Chief Secretary to the Treasury Danny Alexander, Osborne's number two, comes in for a particular kicking because of his insistence that the Coalition has created 634,000 private sector jobs. Blanchflower accuses "the ex-Head of Communications for the Cairngorms National Park Authority" of "spin", pointing out that half of those jobs were created under the previous Labour administration and that since May 2010 - when the Coalition took office - unemployment has gone up 185,000.
But the final word on the 'are-we-aren't-we-in-recession?' question should go to Tim Harford, The Financial Times's 'undercover economist'. In an insightful column he explains why "the nation's commentariat has become fixated on this question of whether the economy shrank over the last quarter because if so, we can call it a recession, if not, we can't".
What we should be more worried about than technical definitions, Harford suggests, is that the "economy hit a peak in 2008 and we're still not close to passing that previous peak. This is unprecedented in living memory; even in the early 1930s a recovery sufficient to pass the pre-recession peak would have happened by now. By any reasonable measure, the British economy is in deep doo-doo."