The third-quarter growth figures due out this Friday will give a clearer picture of exactly how much trouble UK plc is now in. But it already looks as if all the "wheels are coming off Gordon Brown's bus" at once, said Roger Bootle in The Sunday Telegraph. Is the chancellor's boast that we've seen "the end of boom and bust" true? "Pull the other one."
First up, the world's leading economic thinktank, Paris-based OECD, produced a survey of the British economy. And while it praises the UK for the exemplary economic stability of the last decade, it says that Britain's prosperity now only ranks mid-table for advanced developed countries - and it slashed its forecast on UK economic growth, raising the spectre of massive tax rises, or spending cuts to the tune of £13bn. The OECD now thinks UK GDP growth will come in at just 1.7% (revised down from 2.4%). The new figure is approximately half Gordon Brown's official Budget forecast (3%-3.5%) and substantially below his recently revised estimates of a shade under 2.5%.
The OECD is hardly a lone voice. It joins both the IMF and the European Commission in the line of international organisations queueing up to downgrade Britain's growth rate. And domestic forecasts haven't been any more encouraging. The Ernst & Young Item club, which uses the Treasury's own forecasting model, has also been sticking the boot in, said Heather Stewart in The Observer. According to Item, the UK's weaker growth (it predicts 1.6% this year) should be blamed on "home-grown" problems, chiefly the downturn in the housing market causing consumers to tighten their belts. And when it comes to our collapsing public finances, "the basic problem we have is that we have a chancellor who believes that prudence is not a matter of building up a precautionary surplus in the good times - it's about moving goalposts" in order to gloss over problems and win elections.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Damning stuff - but where can the Treasury turn for signs of comfort? Not to shoppers, said Harry Wallop in The Daily Telegraph. Retailers are facing a "Christmas Armageddon", with high-street sales at their weakest for two decades. And not to international trade, said Alex Brummer in the Daily Mail - at £5.3bn, Britain's trade deficit in August was the biggest in history. Meanwhile, the Government's preferred measure of inflation, the CPI, has risen to 2.5%, its highest since 1997, and unemployment is up for the eighth consecutive month, to its highest level in a year and a half.
All of which makes Gordon Brown's continued penchant for lecturing the rest of Europe on its mistakes look ever more inappropriate, said Jeremy Warner in The Independent. The liberalisation of labour and capital markets in Europe might be proceeding at a snail's pace - but at least it is "edging in the right direction". Britain, by contrast, seems to be "hurtling at breakneck speed the other way".
Equally embarrassing is Brown's shamelessly selective approach when it comes to making comparisons, said Stephen King, also in The Independent. By picking the ailing EU states, the chancellor handily ignores the US, Spain, China, India - and "all the others who are currently enjoying faster economic growth than the UK". The truth is that the loss of momentum in growth this year has been greater than elsewhere - and that's what is so worrying.
But not surprising, said Roger Bootle. For some time now the UK economy - boosted in recent years by debt-fuelled consumption and unsustainable public expenditure, but fatally weakened by lack of progress on productivity and an overvalued exchange rate - has been an "accident waiting to happen". UK policy makers quite deliberately stimulated the domestic economy "to offset the weakness of the traded sector in the face of a weak world economy. But all along there was a danger that this policy would come back and bite them. That is what is happening now."
-
Going part-time could leave a £58,000 hole in your pension: how to plug the gapThere are many reasons for switching to part-time work, but some savers don’t consider the impact on their pension until it is too late
-
Three bargain investment trusts to add to your portfolioThese three investment trusts are bargains compared to their net asset value (NAV), but one fund analyst thinks the deep discounts are unwarranted.
