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The failure of the economic recovery to translate into a political resurgence for the Conservatives is striking
First, the good news. As the chancellor prepares to unveil his budget, there is no longer room for equivocation: Britain is recovering. For six long years, it felt as if every forecast had to be reissued and revised down. But just as the soothsayers who cook up future prospects from experience of the recent past had got used to peering back into gloom, reality overtook them again, and all the adjustments are now in the other direction. For the first time, George Osborne is steering an economy that is humming along, with growth of perhaps 3% in the coming year. Such was the depth of the ditch into which the UK had previously sunk that we are still not quite back to where we started, but he is months away from being able to pronounce that UK plc is bigger than ever.
Plenty of reasons to be cheerful, then, and with inflation falling, there is a fighting chance that the one great caveat – voters' failure to feel the recovery – will ease by polling day. Keynesian critics of Osbornomics can protest, with justice, that the recovery took longer to come than it had to, and that billions of pounds in output have been needlessly lost along the way. But the counterfactual criticism, that we could have got here sooner under different policies, will not keep the chancellor awake at night. In the Commons chamber, he will have no difficulty swatting such claims away with the brute assertion that an economy he is in charge of has finally turned the corner. Opinion polling on the recession blame game and economic trust already provides tentative signs that, together with David Cameron's, the stock of Mr Osborne may be bouncing back.
What the polling does not show, however, is any real bounce in actual Conservative support. Every self-appointed sage has long said that the next election will be a classic "it's the economy, stupid" fight, so the failure of economic recovery to translate into political resurgence is striking. Perhaps, in some diffuse way, the country is feeling uneasy about what sort of a recovery this is shaping up to be. It is, as Manchester University analysis has shown, a recovery much less of the whole country than of London and the south-east. Where Mr Osborne once promised "a march of the makers" and "rebalancing", not only have exports stagnated – something hard for any government to address when the eurozone has been depressed – but business investment has also remained stuck on the floor. If Britain is spending again, it has much more to do with a fresh puffing up of prices in a housing market where – despite the weekend promise of Ebbsfleet Garden City– the rhythm has been set by restricted supply and Mr Osborne's Help to Buy subsidised mortgage scheme.
So whatever the recovery's speed, its quality leaves a good deal to be desired, and one quality in particular makes for a special headache for the chancellor – dismal productivity. More people are in jobs than in 2008, and yet somehow we are still collectively producing less, extraordinary in an era where big data and mobile communications are supposed to allow us to do things more smartly. The immediate crunch for Mr Osborne will come in the longer-term forecasts of the Office for Budget Responsibility on Wednesday, which the Financial Times reported on Monday would pencil in slower future growth a few years out, after the current bounceback has run its course. After rising employment has failed to lift output as far as hoped, this reflects waning hopes about the potential of the UK economy once restored to full pelt. These sinking expectations feed into the fiscal forecasts, diminishing the chancellor's room for manoeuvre to advance the rival threshold and allowance income tax giveaways being pushed by the two coalition parties.
In an accelerating economy, with anaemic future prospects and a stubborn deficit, the debate should be about tax rises rather than tax giveaways, but – a year before an election – the politics point the other way. Mr Osborne will not be able to relax into this recovery unless he can use Wednesday to demonstrate that he has a neat plan to chart a course between the two.