What sighs of relief there must have been in the Treasury. Never mind that the economy is still very much bumping along the stagnant bottom, and never mind that fractional expansion and fractional contraction are, in economic terms, of little real difference. Growth – even just 0.3 per cent of it – averts a political storm far out of proportion to its practical implication.
As it is, Britain avoids its first-ever “triple-dip” recession, and the increasingly grim-faced Chancellor retains a shred of credibility for his increasingly beleaguered deficit-reduction strategy.
Given the unhelpful twists of recent weeks, he needs all the cover he can find. First came the bombshell that the seminal economic research used by many – including Mr Osborne – as a theoretical foundation for fiscal belt-tightening was flawed. Just days later, the IMF, once one of his staunchest supporters, suggested the Chancellor might consider easing up on his cuts. Then a second credit-rating agency stripped Britain of its prized triple-A status.
And all the while, anti-austerity arguments have been gaining ground in crisis-rocked Europe, providing extra – if ill-considered – ammunition for those that would have a one-size-fits-all approach to fiscal policy regardless of the country or its circumstances.
Had yesterday’s figures shown Britain to be in recession once again, the Chancellor’s ability to weather such storms would have been materially weakened. With even just a hint of growth, he could at least talk cautiously of “signs of progress”.
In fact, of course, there is as much cause for concern now as there was when the week began. Not only might future revisions of the GDP numbers erode the claim to growth. Even if it is growing, the economy is still smaller than it was before 2008, and there is little reason to expect a radical change of pace any time soon. Nor is this week’s other statistical fillip – a tiny dip in public borrowing allowing Mr Osborne to claim he is reducing the deficit as promised – anything more meaningful than another momentary political reprieve.
While the woes of the economy may be easily enumerated, however, an effective remedy to them is less so. For all the hullabaloo to the contrary, there is little evidence that public spending cuts are the decisive factor in Britain’s economic torpor. The collapse of demand in Europe – our largest export market – is far more problematic. Equally, to suggest that the Chancellor could, if he chose, simply reverse course, turn on the Treasury taps, and lift Britain back to healthy growth, is simplistic to the point of absurdity.
This newspaper has argued hard for extra infrastructure investment and continues to do so. But the money must be found from within existing budgets, and while universal pensioner benefits and Whitehall’s ring fences remain in place, some options – albeit politically unpalatable ones – remain.
Why not simply relax the austerity and borrow more instead? Two reasons. One is that the Government would not survive so spectacular a volte-face – taking with it the stability attendant on growth. The second is that the amount needed to make an appreciable difference to GDP is upwards of £30bn and perhaps as high as £50bn. Given Britain’s already unaffordable debts, even those shouting loudest for Keynes do not dare bandy such exorbitant figures. Yet to borrow less, and still sacrifice the Government, would be folly indeed.
Mr Osborne’s strategy has any number of flaws, in conception and execution. But the notion of an easy, debt-funded Plan B is a fiction.