By Tim Montgomerie
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These better-than-expected figures will be a huge relief to the Government. If we had had another quarter of negative numbers the Government would have become under huge political pressure. People would have begun to wonder if the real pain that they had been suffering was all for nought. The Government has now bought some time. A few quick observations:
It is important that the Government strikes a sober tone. The economic situation remains very uncertain. Jubilation today might look silly in three or six or twelve months if the international economic backdrop deteriorates. As I bogged yesterday – the Chancellor should urge the public to focus on the wisdom of the Coalition's long-term reforms, not any short-term and possibly reversible pick up. Nick Clegg certainly seems to be striking the right tone. He told a City UK audience yesterday that the recovery would be "slow and fitful".
There is no room for complacency on growth. Read Allister Heath today. The UK tax burden is still too high and complex. Energy policy remains a mess. Banks are being asked to lend more and at the same time build up capital. We should move to a counter-cyclical regulatory policy for the banks. The Lib Dems are still blocking necessary cutbacks to red tape. One quarter of better GDP figures is no excuse to slow down the post-reshuffle push for pro-growth policies.
An economic recovery doesn't necessarily mean a political recovery. And if you don't believe me just ask John Major. His government was sunk by sleaze and a sense that it wasn't in charge of the country. Norman Lamont's "in office but not in power" line captured something that people felt to be true about the Major government. While an economic recovery is necessary for political recovery it won't be enough for David Cameron. He also needs to demonstrate more competence (I fear he's missed the post-WCML opportunity to launch a fundamental review of the workings of Whitehall) and also have a blue collar message. Restoration of the 10p tax band and a massive push for more starter homes should be the flagships of that blue collar message.
Just to underline the past point – growth does not necessarily mean that there'll be any feel-good factor. Some data today suggests that Britons would be £1,800 better off if we had stayed on the pre-crash economic trajectory (Times report (£)). You don't have to believe in that data to know that higher household electricity bills and the prospect of higher mortgage payments that might easily accompany higher growth (see Andrew Lilico) will mean that economic recovery could be pretty miserable.
Ed Miliband should be asking himself some searching questions about Ed Balls' economic tactics. Labour has maxed out on pessimism. Labour has opposed every difficult economic decision that this government has taken. At this doldrums stage of the economic cycle that has paid electoral dividends. But what if the public, especially by the time of the next election, come to believe that the medicine was necessary and is working? Cameron and Osborne will be able to paint Labour as deeply irresponsible and unpatriotic for not acting in the national interest when tough decisions were needed. If a party comes to be seen as self-serving and unpatriotic then that is deadly.
The statistics are very unreliable. On Coffee House yesterday Jonathan Jones produced this graph by way of reminder of how the GDP numbers are very prone to revision…
The ONS numbers really don't deserve the attention they get.