The British economy is now bigger than it was before the recession.
A relief? Certainly. It was the longest peacetime slump of the last 100 years.But the smug ministerial grins on show yesterday are somewhat premature. This recovery has been a long time coming, longer than was necessary, and has some significant weaknesses.
Progress in emerging from the recession has been drastically slower in the UK than in America, which was very badly hit following the credit crunch, or Germany. They returned to their pre-recession peaks years ago.The UK is the second last G7 economy to reach what the Chancellor calls this major milestone.
Loading article content
The depth of UK Government austerity certainly contributed to the drag. Taking demand out of the economy during a recession, such as by slashing welfare, will always delay recovery and that is what the Government's deep-cutting austerity has done. Conservative Party plans to gouge another £12 billion out of social security do not bode well.
Of course, voters and businesses can forgive a lot once the good times return but, with wages still below pre-recession levels and the standard of living depressed, there is a mismatch between what the economic indicators say and how prosperous people feel. The Tories and the Liberal Democrats may well be punished at the ballot box for that.
Drill down into the figures and the picture is not quite as rosy as it first seems. GDP per person is still lower than in 2008, by about 5.5 per cent. The service sector remains over mighty. It accounts for a full three-quarters of output and grew 1% in the second quarter of the year, while manufacturing grew just 0.2% and construction diminished, by 0.5%. Those two sectors are 7.4 per cent and 10.7 per cent behind where they were at the start of 2008.
Rising house prices in London and consumer credit are still driving growth.
Last week, official figures showed Scottish GDP to be at record levels, but, as with the UK figures, caution is required. Exports and business investment are still behind where they should be and there are serious concerns about the impact on consumer confidence and small business costs of even a small interest rate rise in future. There was also a reminder of the dark days of recession this week with news that Scottish corporate insolvencies in the three months to June were up more than a third on the same period of 2013.
Frances O'Grady, general secretary of the TUC, makes a fair point when she says economic growth is being driven by low pay and low productivity. While employment rates are up, more people than ever are working part-time because they cannot find full-time work. Those who class themselves as self-employed to avoid the professional setback of a period of unemployment are often earning a tiny fraction of what they were.
So the boom times have not returned, no matter what the latest macro-economic indicators may say; and what good news there is has been a long time in coming.