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Tangled up in Blue

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Out of recession – but how did we get there and what happens next?Despite tomorrow's good news Labour fears economy may slip back again by the time of a May general election
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Patrick Wintour, political editor guardian.co.uk, Monday 25 January 2010 22.10 GMT Article historyBritain's 18-month recession is expected to be declared officially over tomorrow. But cabinet members privately fear a disastrous rebound with the economy shrinking in the first quarter of this year – figures that would be published 11 days before a May 6 polling day.

Downing Street is expecting the economy to have grown by 0.3% in the last quarter of 2009, but No 10 is not planning any triumphalism when the announcement is made tomorrow morning, formally ending the deepest British recession since the thirties. The economy has been contracting for six consecutive quarters.

Labour's caution stems in part from the lack of any opinion poll evidence that the public credits the government for ending the recession, and its own uncertainty about how the economy will perform now that VAT has been restored to 17.5%. Labour strategists fear that the economy could slow again in the first three months of this year, figures that would be published by the Office of National Statistics on 23 April. Such an event would torpedo the Labour campaign.

Shadow cabinet members believe fear of a stalled recovery could still persuade Gordon Brown to go for a poll earlier than May 6.

But Brown's hopes that he will be given political credit for steering the economy through the storms caused by the banking crisis look likely to be dashed, at least in the short term.

A Channel 4 opinion poll published tonight showed only 12% of voters said the end of the recession would make them more likely to vote Labour, while 72% said it would make no difference in how they voted.

The lack of a political dividend partly stems from the fact that nearly 46% still feel that they are financially worse off than 12 months ago, with only 43% feeling fairly confident about the future. Meanwhile, a Guardian ICM poll published last night showed that voters think Gordon Brown's leadership made the recession worse.

Brown, trailing the slow start of the recovery at a Downing Street press conference today, simply said he was confident Britain was emerging from the recession.

Trying to persuade voters not to take a risk with the Conservatives, and repeatedly highlighting his judgment, he said: "There are dangerous global forces … which mean that the world and the UK economy remain fragile."

He repeated his warnings that Tory plans for spending cuts from this summer risk strangling the recovery, and enjoy no support among other world leaders.

He said: "The risk to this country and right across the world is withdrawing the stimulus too quickly and therefore allowing the economy to go into negative growth again. Those parties who propose policies to remove the stimulus now are actually the risk to the recovery that we are determined to have."

He said the task ahead was to blend tax rises, deficit reduction and growth.

Brown also insisted he would make cuts in low-priority areas, adding he had a track record of taking tough decisions on spending. "I am someone who made big cuts in 1997 and 1998 when I was Chancellor of the Exchequer.

"I cut the budgets of seven departments in the last spending round. I take the tough decisions when the tough decisions are needed to be taken."

The shadow chancellor, George Osborne, tonight described the 6% shrinkage of GDP over the last 18 months as "the great recession", adding it would be seen as Gordon Brown's legacy.

He said: "Brown's promise that Britain would lead the world out of the recession lies in tatters. We were one of the first in and now today we are the last out. One of the reasons is clear: Gordon Brown's decisions as chancellor left Britain ill-prepared and his judgments as prime minister made the recession even worse."

A Tory dossier published tonight claimed the UK was the last of the G20 economies to leave the recession, pointing out that many other economies, such as France, Germany and Japan, left recession in the second quarter of 2009.

At his press conference the Tory leader David Cameron said his party would deal with "the bulk" of the £175bn budget deficit "within a parliament", or five years, and would start work immediately upon its election.

Labour strategists hope that in the coming months they will be able to point to specific measures they have taken to prevent the recession being worse, especially for the younger unemployed. Ministers pointed out that it took 21 quarters for unemployment to fall during Margaret Thatcher's first recession, compared with just seven quarters in this downturn
 
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