Britain has finally emerged from its longest economic slump in more than a century, an achievement hailed by chancellor George Osborne as a “major milestone” in the recovery from the financial crash and six years of lost growth.
The collapse of Lehman Brothers in 2008 heralded a savage moment of reckoning for Britain’s economy; the shock that started in the financial sector wiped 7.2 per cent off national output, wrecking the public finances.
Of the G7 major economies, only Italy has taken longer than the UK to regain its pre-crisis size and output per head in Britain is still 4 per cent below its pre-crisis level. A muted Mr Osborne admitted there was “still a long way to go”.
The big question for him is whether the rebound has come too late to save the Conservatives at the next election, but he is convinced voters will not turn back to a Labour party that was in power when the crash hit in 2008.
“We owe it to hardworking taxpayers not to repeat the mistakes of the past and instead to continue with the plan that is delivering economic security and a brighter future for all,” he said.
The chancellor believes the Tories’ strong poll lead on “economic competence” will eventually feed through into polling figures; currently Labour typically enjoys a lead of about 5 per cent, enough to guarantee Ed Miliband a Commons majority.
Britain’s economy is recovering strongly – the International Monetary Fund predicted this week the UK would grow at 3.2 per cent this year, faster than any other major economy – but Mr Osborne knows it has yet to feed through to many voters.
Growth was so much weaker than expected in the aftermath of the financial crash that Mr Osborne was forced to extend austerity from five years to eight in order to meet his target to close the budget deficit.
But fewer people have lost their jobs over the past six years than many economists had feared and this month the employment rate reached a new record high, last seen in 2005 – a source of Tory optimism.
Output grew 0.8 per cent in the second quarter of this year, in line with expectations, which means the economy is now 0.2 per cent bigger than it was at its previous peak.
But Britain’s population has grown in the meantime and Ed Balls, shadow chancellor, said: “With GDP per head not set to recover for three more years and most people still seeing their living standards squeezed this is no time for complacent claims that the economy is fixed.”
Mr Osborne believes that Labour will have to defy the political momentum to win the next election, given the strength of the recovery and the strong poll advantage on “leadership” enjoyed by David Cameron over Mr Miliband.
Mr Miliband tried to address his “image problem” on Friday by admitting that Mr Cameron was a more slick operator and confessing that he was ill-equipped for “photo-op politics”.
He admitted that he was “not from central casting” and that he had struggled to eat a bacon sandwich in front of the cameras, but insisted that the public were fed up with political imagery and that he offered real leadership and a strong vision.
In spite of his criticism of “a politics driven by image”, Mr Miliband did not deny that he was about to appoint an £80,000-a-year broadcast officer to advise him on how to improve his image.
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