George Osborne has a bit of soft spot for the Organisation for Economic Co-operation and Development. Not because of the qualities institution’s most people usually associate with the OECD – its economic analysis, its social prescience, its capacity to help developed countries improve their infrastructure and welfare systems. He likes the OECD because, he will sometimes admit in public, “they stuck with us.”
Throughout the crisis, while so many other international organisations and economic forecasters lined up to criticise the Chancellor’s fiscal austerity programme, the OECD remained unfashionably loyal, repeating, even through the dark days, that Mr Osborne’s plan was indeed “appropriate”. And he has reason, once again, to feel warm towards his friends in Paris today as they upgrade their economic forecast for Britain more than for any other major developed country.
|Previous forecasts (June 2013)||NEW forecasts (Nov 2013)||IMPROVEMENTS|
My full story can be found here, and the report itself here. As ever, there’s plenty of rather more worrying stuff in the small print than in the big numbers. For while the OECD thinks growth in the UK will be pretty decent next year and in 2015 (though not much more than the OECD average – let’s not get carried away), it is a little worried about the provenance of this growth. In particular, it is a little concerned about the Chancellor’s new Help to Buy scheme, about which it says: “The recently established government ‘Help to Buy’ property programme needs to be carefully monitored, as planned, and swiftly adjusted if it risks triggering sharp increases in house prices as a result of supply rigidities.”
It points out that in Britain real house prices are still 57.2% higher than in 2000. Compare that to 11.9% higher in the US and 5.1% lower in Germany. And though Britain doesn’t have a housing market which is overheating right now, mortgage activity is certainly on the rise.
It’s also clear that even after the hard work on austerity is over, Britain still has further to go to restore its public sector balances back to a healthy level. After Japan, it has the biggest task among the G7 in terms of long-term fiscal consolidation, as this chart shows.
However, the broad picture is that, finally, growth is starting to return to Britain. That it’s coming while some serious concerns remain about the rest of the world is doubly welcome, from the Chancellor’s perspective. After all, the one thing better than doing well yourself, is doing even better than your neighbour.