Editorial: The 'lost decade' is a vivid phrase, first used by Ed Balls, but what is the point of it?

Share

Is the British economy, five years after the credit crunch of 2008, in the middle of a "lost decade"? That was the question posed by Ed Miliband, the Labour leader, in a meet- the-people session in Birmingham yesterday. Posed, but not really answered. This is certainly the longest recovery from recession since Victorian times – although there are positive features, notably the jobs market. Unemployment has not been as bad as it was in the 1980s, let alone in the 1930s. Since the election, job losses in the public sector have been more than offset by new jobs in the private sector, even though the GDP figures have been more or less flat.

The "lost decade" is a vivid phrase, albeit one first used by Ed Balls, the Shadow Chancellor, in September 2011, when he warned of "a lost decade of economic stagnation". But what is the point of it? Does Labour mean that the UK faces the kind of stagnation suffered by Japan after its banking crisis in 1990? In which case, it is more than a decade since the phrase applied to Japan, which has now had 23 years of close to zero growth. Or does Mr Miliband mean that the British economy should have recovered more ground by now and would have done so had Labour been the largest party after the 2010 election? Those are two very different readings of the country's economic situation.

But our situation is not like Japan's. The national debt of Japan is more than twice its national income. Even the worsening forecast presented by George Osborne, the Chancellor, in the Budget last week was that the UK national debt would peak at 85 per cent of income in 2017.

Britain is in a recovery phase that has been held back by the crisis in the eurozone, which is the market for 40 per cent of our exports. On top of that, one of our main exports, financial services, is restructuring and will not for many years, if ever, get back to the over-heated money-go-round it was before 2007. Furthermore, North Sea oil output is contracting, taking 0.5 percentage points off national income each year. And finally, tax rises and spending cuts intended to restore the public finances have themselves helped to suppress growth. Recently, the independent Office for Budget Responsibility admitted that this effect might be greater than it had predicted.

Hence Mr Miliband's expression of confidence in Mr Balls in an interview yesterday: "He called it right on the economy." The Shadow Chancellor made the case for higher borrowing in the short term to maintain demand and therefore growth. The Independent on Sunday agreed with him, but we can never be sure that he, and we, were right, because we cannot know what would have happened in an alternate universe. Also, more importantly, this fails to tell us what Labour would do if it won the election in 2015.

By then, the case for borrowing more will be weaker, partly because the Government will already have borrowed so much more than it expected. Mr Miliband acknowledges that by refusing to commit the Labour Party to any change in the fiscal stance beyond what it would have done in last week's Budget.

That is prudent politics, especially as the crisis in Cyprus is a warning that the eurozone might pull our economy still further back. But it opens up a dangerous rhetoric gap between Mr Miliband's promise that Labour save us from a "lost decade" and the reality that there is little that any politician can do to change the economy's rate of growth in a single Parliament.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Ashdown Group: Marketing Manager (B2B) - Romford - £40,000 + car

£35000 - £40000 per annum + car and benefits: Ashdown Group: Marketing Manager...

Ashdown Group: Helpdesk Analyst - Devon - £20,000

£18000 - £20000 per annum: Ashdown Group: Helpdesk Analyst - Devon - £20,000 ...

Ashdown Group: Data Scientist - London - £50,000 + bonus

£35000 - £50000 per annum + generous bonus: Ashdown Group: Business Analytics ...

Ashdown Group: IT Project Coordinator (Software Development) - Kingston

£45000 - £50000 per annum: Ashdown Group: IT Project Coordinator (Software Dev...

Day In a Page

Read Next
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month  

General Election 2015: Politics is the messy art of compromise, unpopular as it may be

David Blunkett
File: David Cameron offers a toast during a State Dinner in his honour March 14, 2012  

Vote Tory and you’re voting for the rich to get richer and the poor to get poorer

Mark Steel
General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'