Half an economic success story

The Chancellor said it would take one parliament to eliminate the deficit, and now says it will take two
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The Independent Online

The Conservative Party leadership intends to focus on the economy to the exclusion of all else in the nine months to the general election. David Cameron, George Osborne and their election adviser Lynton Crosby hope that one of the oldest messages in politics, "things are getting better, don't let the other lot ruin it", is going to work for them.

The cynicism with which they are pursuing this strategy is a little alarming. Mr Cameron's main interest in the shocking situation in Iraq, let alone problems closer to home, from next month's referendum in Scotland to the National Health Service, seems to be to make sure that they do not distract voters in marginal seats from the proposition that the Conservatives' long-term economic plan is working.

Our objection is not only to the single-mindedness of the claim, however, but also to its accuracy. In our view, the coalition made the mistake of claiming too much last month when official figures showed that the output of the UK economy had recovered to its level before the crash of 2008. This benchmark was not what it seemed, because the population has grown since then. The level of average real earnings is still about 7 per cent lower than the peak in 2007.

Indeed, Mr Cameron long ago gave up any hope of answering in the positive another of the oldest lines in politics: "Are you better off than you were five years ago?" Having become Prime Minister at a time when living standards were still falling, his best argument is that his Government has turned things round and that the economy is moving in the right direction.

Against that, Labour going on about the "cost-of-living crisis" seems a bit off the point (as well as tone deaf to the music of the English language). As we report today, the opposition is making much of new figures on energy prices and new regulations on train fares. The voter might protest that the election is not about how we got here, but about who is best placed to get us out.

Nevertheless, the argument about how we got here is important. As Ben Chu argues today, "if the analysis of the recovery is wrong, then misguided policy could easily follow".

This newspaper's view is that Mr Osborne cut too deeply in his first Budget and choked off a recovery already under way. That the economy started to grow steadily two years later could hardly be attributed to that initial "austerity", especially because the recovery, when it came, was accompanied by a relaxation of the pace of public spending cuts.

The uncertainty over the causes of the recovery mocks the Conservative slogan, the "long-term economic plan". There is no such thing: the Chancellor said it would take one parliament to eliminate the deficit and now says it will take two. This kind of making it up as he goes along makes Ed Balls, the Shadow Chancellor, look like a rock of unchangeable principle. Mr Balls may be stubborn – or cynical – in refusing to accept that the Labour government borrowed too much, but he is right to insist that this weakness did not cause the crash, and his understanding of macroeconomics seems to be better than the Chancellor's.

Labour is too grudging in its welcome for job creation. One thing for which we should be grateful is that, if there is a trade-off between jobs and wages, the recovery is generating hundreds of thousands of new jobs, rather than, as in previous cycles, reserving the benefits to those in work and leaving the unemployed to fester. Despite Margareta Pagano's argument today, jobs are better than no jobs.

But when it comes to the choice facing the nation next year, the fact that the economy is moving in the right direction does not lead to the conclusion that Labour would ruin it.