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Will this autumn be easier than Andy Burnham and John Healey feared? The International Monetary Fund gave the pair some good news today in the form of a better-than-expected growth forecast for this year. The fund’s World Economic Outlook puts GDP growth this year at 1.3 per cent, up from the 1 per cent it had previously predicted in July, with growth for next year downgraded slightly from 1.3 per cent to 1.2 per cent. As Michael Simmons say here, this would make the UK the joint second fastest growing economy in the G7 after America. You can just hear that line being shouted across the Commons by the Prime Minister and Chancellor whenever the Tories dare question their economic policy.
Healey welcomed the report, saying: ‘Conflict in the Middle East and Europe is hitting people in the UK and around the world. But Britain’s economy is showing strong international resilience in the face of these challenges.’ He is making the final touches to his Budget, which is now only a fortnight away, but today’s boost from the IMF isn’t much more than a pat on the back (and only one involving an extra 0.3 per cent of growth, which should not be an excuse for any real celebration). It is also a pat on the back that is contingent on the government not borrowing more and actually cutting back on spending. That’s quite difficult already given the promises that Burnham has made – and given the decisions he has yet to take on real welfare cuts, for instance. It is an assumption of something we really do not have the evidence the Prime Minister wants to deliver.
Speaking of things Burnham may or may not deliver, his Defence Secretary Wes Streeting has been giving evidence to MPs on the Defence Select Committee this afternoon. He has told them that he’s ‘confident’ the government will be able to make the target for 3 per cent of GDP spent on the armed forces by 2030, but that to commit to it without detailing where the money is coming from would have a similar effect to Liz Truss’s mini-budget. He said: ‘We have had very bitter recent experience of a former prime minister making unfunded commitments to spend more, tax less and borrow more all simultaneously, and it led to enormous loss of confidence, people’s mortgages going up and a level of fundamental loss of confidence in Britain among investors and this country is still recovering from that.’
So the autumn won’t be easier, and next year will be even harder, given that’s where Burnham has deferred the decisions on defence and welfare to. The regained investor confidence is contingent on the government not splurging on spending, but voter confidence is in part based on ministers hearing people’s pain on the cost of living. Something has to give, and Burnham and Healey aren’t ready to tell us yet what it is.
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