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Sustainable Economy > Published by Richard Exell, November 29th 2010 at 5:50 pm

OBR: Recovery “at a slower pace” than in the 70s, 80s and 90s

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Today’s Economic and fiscal outlook from the Office for Budget Responsibility updates the forecast for GDP growth in the June Budget forecast. The Chancellor told the House of Commons “the plan is working” but that isn’t really justified by the report, which revises OBR’s forecasts up for 2010 but down for the next couple of years:


GDP growth
2009
2010
2011
2012
2013
2014
2015
Today’s forecast -5.0 1.8 2.1 2.6 2.9 2.8 2.7
Change from June -0.1 0.6 -0.2 -0.2 0.0 0.1 0.0

The explanation they give is that the growth we have seen in the second and third quarters of this year was “largely a timing effect”, with strong growth in construction and from firms replacing stocks more quickly than was originally expected – and both trends are likely to “unwind” soon.

These figures are very subdued for the upswing of the economic cycle and the OBR comments that the recovery will be:

“…at a slower pace than in the recoveries of the 1970s, 1980s and 1990s.”

They point out that it is “unprecedented” for growth not to rise above 3 per cent during this phase; this reflects:

“…the headwinds to growth from the outlook for credit conditions, efforts to reduce private sector indebtedness and the scale of the fiscal consolidation, which is yet to have its full effect on the economy.”

Tomorrow’s papers will probably note the forecast that, by 2015, public sector employment will fall by 330,000, 160,000 less than the 490,000 forecast in June. Thirty thousand of the difference is down to “methodological refinements”. The remaining 130,000 reduction is because the Spending Review cut more from social security and less from departmental budgets than OBR expected – a different balance of misery, rather than a genuine improvement.

The economic and financial outlook takes a peek beyond the 2015 horizon for most of their forecasts and adds that unless there are further welfare cuts, they expect public sector employment to fall a further 80,000 in 2015-16. Even so, today’s forecast does not reflect what managers in public sector organisations expect.

The Local Government Association expects 140,000 jobs to be lost next year and the Chartered Institute for Personnel and Development says that their members in the public sector expect very large scale redundancies – much larger than the OBR forecasts.

If today’s figures are right, by 2015 unemployment will still be above its pre-recession level – claimant count will be more than one million and ILO unemployment just under two million. At least a third of a million public sector workers will have lost their jobs – and people living on benefits will be particularly hard hit. The recovery will be weaker than the recoveries of the last three recessions.

If that’s what it’s like when the plan is working…

  • http://twitter.com/nigelstanley/status/9306596941234176 Nigel Stanley

    RT @leftfootfwd: OBR: Recovery “at a slower pace” than in the 70s, 80s and 90s: http://bit.ly/gSTnbm reports the TUC's Richard Excell

  • http://twitter.com/itellsya/status/9315273844723712 Cha Sea
  • http://twitter.com/pcs_gonw_branch/status/9331985675718656 PCS GONW Branch

    RT @leftfootfwd: OBR: Recovery “at a slower pace” than in the 70s, 80s and 90s: http://bit.ly/gSTnbm reports the TUC's Richard Excell

  • http://www.stephenwigmore.blogspot.com Stephen W

    This is sophistry. Yes, things are bad. The reason for that would be that Labour fucked things up quite so badly over the last 13 years. If you’re really claiming that Labour have a magic wand that would make everything better then you’re plain delusional. This is just utterly partisan grandstanding at its very worst.

  • http://twitter.com/spsot/status/9367347009683456 Spir.Sotiropoulou

    RT @leftfootfwd: OBR: Recovery “at a slower pace” than in the 70s, 80s and 90s http://bit.ly/i59ffl

  • Mr. Sensible

    richard these numbers show us just what a risk Osborne is taking.

    I think the Institute of Directors branded these predictions as ‘optomistic.’

  • Ash

    So the fact that the economy grew faster than expected this year – particularly in the three months before Osborne’s budget, but to a lesser extent also in the three months before his Spending Review – is evidence that “the plan is working”? Have the Tories discovered backwards causation?

    More plausibly, to the extent that higher-than-expected growth in March-September was the result of Government action, it was the result of the *previous* Government’s actions; and it’s the downward revision of the *next* two years’ growth forecasts for which Osborne can claim credit.

  • Anon E Mouse

    Ed Miliband and the whole of the Labour Party leadership should link to this article to show exactly why Labour needs a renewal which involves stopping this type of partisan nonsense immediately. This article illustrates in a nutshell what is wrong with the left in this country.

    What is more worrying is that the author is actually employed in what appears to be a senior position at the TUC. Small wonder union membership is at an all time low.

    Labour needs to think long and hard before this type of rubbish is printed…

  • Mr. Sensible

    Entirely right, Ash.

    Of course, there is I think at least 1 more revision to the figures for the third quarter due, and we won’t know the impact of the spending review until at least January.

  • Chris

    @Stephen W & mousey

    Any chance you could actually respond the article rather than just denouncing it out of hand?

  • Anon E Mouse

    Chris – It isn’t deserving of a serious response although judging how useless Ed Miliband was at PMQ’s today I can see why the union stooge was elected by groups like the TUC.

    Not the Labour Party mind you Chris, just the unions…

  • http://twitter.com/blogsoftheworld/status/10018196081872896 blogs of the world

    The Office for Budget Responsibility today said the recovery will be ?at a slower pace tha… http://reduce.li/hfnvfz #slower

  • Chris

    @mousey

    “It isn’t deserving of a serious response”

    Why bother commenting then? Why should writers be forced to have your unadulterated drivel associated with their articles? And why should the owners and readers of this blog be forced to have you polluting the comment box?

    “I can see why the union stooge was elected by groups like the TUC.”

    WTF? You clearly don’t even know what the TUC is, moron.

    “Not the Labour Party mind you Chris, just the unions…”

    Have you stopped taking the anti-psychotics again?

  • Anon E Mouse

    Chris – You’ve backed a loser. The PLP didn’t (they know) but the union dinosaurs backed the wrong man.

    Everybody knows it. You know it in your heart but then it’s obvious by the closeness of the polls that even in the face of massive cuts and potential unpopularity, Labour are doing so badly.

    David Miliband is witty and political and looks like a PM.

    Little Ed Miliband is a useless two faced union stooge who will never ever take Labour to an election win. It’s not his inability to speak clearly or that he just isn’t that bright (he isn’t) it’s the fact that either Clegg or Cameron could eat him for breakfast.

    I bet on a Wednesday morning Clegg begs to be allowed to give Little Ed a whipping at PMQ’s.

    It’s only time before the tax avoiding property millionaire becomes an object of pity. That time isn’t long – I’m giving him 6 months which is generous.

    It’s over Chris – you need to move on dude…