There’s more bite in this bear
Pick out a few of Alistair Darling’s forecasts from his budget speech on Wednesday and you might think the worst of the recession was behind us. He thinks, or says he thinks, that the UK economy will be recovering by the end of the year. Better still, he thinks it will grow by 1.25% next year and by a splendid 3.5% the year after that. We’d love to think he might be right, but we strongly suspect he isn’t. There may be the occasional green-looking shoot around, but these represent more statistical inevitability than recovery: even the most brutal of downturns comes with the occasional positive number.
Even if there were signs of things getting worse less fast than they were, this doesn’t for a minute mean a real recovery will follow. The number of unemployed has already hit 2.1 million. But that’s just the beginning. Wait until this school year ends. Think all those new adults will find work by September? Think again.
At the same time, house prices aren’t going to rise again anytime soon. Nor are earnings. And the savings ratio looks set to keep rising – who spends money in an environment like this? Add in a rising tax burden and it’s clear there will be a drag on consumption for many years. It’s hard to see how an economy can grow at anything like 3.5% in these circumstances, particularly when it’s weighed down by record levels of public-sector debt. We may want it to happen, but in recessions like this, wanting isn’t getting.
• Read the full editor’s letter here: There’s more bite in this bear yet