Here’s something to dwell on: back in 2010, at the time of George Osborne’s first Budget, the Government was predicting that by this stage, midway through 2013, the economy would be almost 3% bigger than it was at the start of the economic crisis.
Instead, today Britain’s economy is still over 3 percentage points smaller than it was before the crisis. If you compare the shortfall to trend growth (in other words what Britons should have been earning were it not for the crisis at all) the gulf is almost 20%.
The statistics help explain why now even the Chancellor is referring to what’s happened over the past few years as “The Great Recession”. All that lost output means that Britain is considerably poorer than it was even a few years ago – after all, remember that GDP is merely a measure of the total amount everyone in the country is earning. This is important: it means that although Britain may well be “turning the corner”, as George Osborne said today, it may take some time before the feelgood factor returns.
It’s worth remembering this when considering the Chancellor’s economic strategy. For the first time in years, the economy seems to be showing some genuine signs of growth. The purchasing managers’ indices suggest economic output is running at the strongest rate since the late 1990s. All being well, that should equate to very punchy growth in the GDP figures when the Office for National Statistics publishes them. Moreover, unemployment looks like it may be on the way down.
This is all good news: however, none of the above is likely to put much of a smile on peoples’ faces. It will not make Britons feel richer – particularly when you consider that real incomes are currently at around the same level they were back in 2003.
That, I suspect is one of the reasons why the Chancellor remains very wary of declaring the end of the misery. “Turning the corner”, as Mr Osborne called it today, is very different to the full, lusty “green shoots” of recovery Norman Lamont talked about in the early ‘90s.
However, there is one way a Chancellor can give people the impression of being wealthy – even when they remain poorer than they were some years ago. You boost house prices. It is hard to escape the conclusion that that is the objective of the Chancellor’s Help to Buy scheme.
It is an economic illusion, of course: you can’t realise the extra value of your home unless you downsize or move to another country. But higher home prices might at least detract from the fact that actual real incomes are still so much lower than they were before the crisis.
There may not have been any new economic policy in today’s speech, but it is nonetheless an important one. From hereon his language will be the language of recovery. The question that still remains is whether he can generate a recovery that has a feelgood factor about it.