Britain’s chancellor of the exchequer, George Osborne, celebrated a turnaround in the island nation’s economy as vindication of his austerity program on Thursday. “We have held our nerve while those who predicted there would be no growth until we turned the spending taps back on have been proved comprehensively wrong,” he told lawmakers in London.
As recently as April, Osborne was urged by both the opposition Labour Party and the International Monetary Fund to increase public spending in order to stimulate growth. Since, Britain’s has been one of the fastest growing economies in the developed world. Osborne said forecasts showed growth in 2013 was expected to be 1.4 percent, rising to 2.4 percent next year.
The government’s popularity doesn’t seem to have been affected much. Public approval hasn’t exceeded 30 percent in months while Labour still outpolls Osborne’s Conservatives.
The encouraging economic data is nevertheless a challenge for the socialists one and a half year before the next election. As The Telegraph‘s Fraser Nelson points out, “It is now impossible for Ed Balls,” Labour’s economic policy chief, “to make his flatlining gesture and ludicrous for him to claim (as he once did) that a million jobs would be lost when government tightens its belt.”
Unemployment has come down from a 8.4 percent high in October 2011 to 7.6 percent in September. A record number of Britons, close to thirty million, is now in work. Yet the economy is still smaller than it was in early 2008, before the start of the financial crisis, and despite Labour’s recriminations there have hardly been deep spending cuts.
The ruling parties have reduced the deficit by a third in the last three years but public-sector spending in real terms has continued to rise. Borrowing last year was higher than in the year before. Government spending should be reduced 1 percent over the next five years and the shortfall wiped out by 2018-2019. Which is three years after the deadline Osborne set himself when the Conservatives and Liberal Democrats came to power in 2010.