The chancellor took a modest recovery bequeathed him by Alistair Darling and snuffed it out
Three words sum up Friday's news about Britain's economy: dismal, depressing and inevitable. Dismal, because it confirms that national income shrank at the end of last year, and makes it odds-on that we are already into our third recession since the financial crisis began. This is the "triple dip" that pundits have been warning of; although it was only three months ago that Britain emerged from its second recession. But the GDP report is also depressing, as it underlines just how listless our economy is. National income did not grow at all last year and astonishingly remains nearly 4% smaller than it was when Lehman Brothers collapsed. The US on the other hand has made back all the output it lost in the subprime crisis – and then some. Given that the Bank of England's Mervyn King has warned of yet another five years of pain, there must surely come a time when politicians and economists stop hiding behind euphemisms and neologisms and call this episode in Britain's economic history what it is: a depression. And naturally, there is an air of inevitability about all this. It is, quite simply, the price of sticking rigidly to an historic austerity plan.
As George Osborne prepared his swingeing spending cuts, back in June 2010, this paper warned that he was "putting his ideological shrink-the-stateism ahead of sound economic management". Two and a half years on, that seems a serviceable assessment. This chancellor took a modest recovery bequeathed him by Alistair Darling (whose performance in No 11 grows all the more remarkable in retrospect) – and snuffed it out. And in doing so, he has learned the hard way the lesson that critics of austerity were urging on him at the outset: that without growth there can be no hope of bringing down the public debt. The government's Office for Budget Responsibility now admits that Mr Osborne will fail his own target of bringing down debt by the end of this parliament.
Critics of austerity were a distinct minority back then, but they have grown steadily since, so that this week even the IMF's chief economist called on the government to alter course. That is a remarkably plaintive plea from a role normally hemmed in by the need for diplomatic subtleties. Within government, Nick Clegg now admits more should have been spent on infrastructure; outside it, Boris Johnson, David Cameron's most open rival for the Conservative leadership, now urges an end to the "junk rhetoric of austerity".
If only. The chancellor will carry on as it has for the past two and a bit years – claiming the bad economic news is either Gordon's fault or the euro's fault or (as we saw in last month's pre-budget report) Obama's fault, and never admitting the role of his own dogmatic adherence to cuts. And he will lean harder and harder on the Bank of England to do all it can to stoke the economic boiler – despite the failure so far of near-zero interest rates, £375bn of quantitative easing and even bribing banks through the funding for lending scheme (billions, which have gone into mortgages rather than small businesses). Meanwhile, millions will remain unemployed or unable to get decent full-time jobs; and an entire generation of school leavers and graduates will have their career prospects scarred for life. At some point, perhaps after the March budget, the credit rating agencies will strip Britain of its AAA-rating. That will have no real impact but it will be the death blow to Mr Osborne's claim that the pain is worth it to retain full marks from the markets.
This is the time of year when businesses start thinking about how much they are going to invest and where, so take a bigger view – call it the Davos perspective – of the face Mr Cameron has shown the rest of the world this week: the prime minister of a go-nowhere economy, who has put relations with Europe in deep freeze. An odd image for the head of the party of business to present.