The only flicker of cheer is that inflation is easing off a little. Otherwise, the economic picture is unremittingly gloomy. Yesterday's official figures reporting falling growth came as little surprise. Forecasts were being downgraded as long ago as September as manufacturing, so central to the recovery, started to dip. And with unemployment rising, every measure of confidence falling, and the Governor of the Bank of England warning of "dark clouds hanging over the world economy", it hardly needed confirmation from the statisticians.
The question now is, what happens next? In the immediate term, it is as good as certain that the Bank will launch more quantitative easing next month. But the Old Lady of Threadneedle Street cannot keep the economy out of double-dip by itself. The Government must do more than express "disappointment" and blame the euro crisis. It must take action.
The Opposition certainly has plenty to suggest. Claiming the GDP figures as vindication of their softer stance on public spending cuts, Eds Miliband and Balls recommend a string of measures to stimulate the economy. They are only half-right: right that attention must shift more markedly from cuts to growth, wrong about how to do it.
In fact, Labour's prescription differs by mere shades from that of the Coalition. But where it does diverge – on increasing borrowing to fund a temporary VAT cut, say – it downplays the role of stable fiscal policy in fixing the interest Britain pays on its debts. It is not more borrowing in itself that might spook the markets, but what such a change says about the predictability of government policy. Reasonable or not, that is the reality. Although there may be a time when the need for all-out, borrowing-funded Keynesian stimulus outweighs the risks, it is not yet. Until then, George Osborne and David Cameron are right to hold their course.
That is not to say there is nothing the Government can do. Far from it. The Chancellor's efforts to push our economic interests in emerging markets such as China are laudable. But they do not make up for the fact that attempts to boost domestic activity are making little discernible impact.
Too focused on cuts, it took until November for Mr Osborne to flesh out his growth plans. While some were interesting, such as the scheme to underwrite small business loans, progress has been unacceptably slow. Proposals for tax cuts to be included in the April Budget are to be welcomed, provided they are big enough to make a difference and can be paid for without extra borrowing. But there is still more that could be done, with more long-lasting effect: bringing forward capital investments, for example, or speeding up planning reforms, or expediting the proposed youth jobs scheme. Thus far, the Chancellor's strategy has been lop-sided. He must stop tinkering and act decisively.
That said, the Government's claim that the eurozone crisis is central to Britain's parlous economic state is a valid one. Even more reason, then, for making all possible efforts to resolve the situation. Instead, in a bid to curry favour with his Eurosceptic backbenchers, the Prime Minister withdrew Britain from the negotiations. In any circumstances, Mr Cameron's veto would have been irresponsibly short-sighted. In the context of the risks facing the British economy, it was unforgivable.
For all the ideologues' claims that Britain is better off without Europe, our immediate economic future hangs, to an uncomfortable extent, on next week's EU summit and those that follow. The Government must make up what ground it can. Just like Britain, Europe desperately needs a plan for growth, to balance the austerity. Mr Osborne should be setting an example. Without robust measures both at home and in Europe, the outlook is bleak indeed.Reuse content