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Twenty years to fix economy
Britain is in a “20 year generational battle” to rebalance the economy and return the country to financial health, according to Britain’s most senior civil servant.
Cabinet Secretary Sir Jeremy Heywood Photo: REX
By Christopher Hope, Senior Political Correspondent
10:00PM BST 02 Jul 2013
268 Comments
Sir Jeremy Heywood also suggested that the cuts made to public services to date were not sufficient and that austerity measures would have to continue for “at least” another four years.
The comments from the Cabinet Secretary will have a sobering effect on ministers, who were buoyed last week by the announcement from the Office of National Statistics that Britain had avoided a double-dip recession last year. They will also be noted by all three major parties as they draw up their manifestos for the 2015 general election.
Sir Jeremy said that the cuts pushed through by the Coalition did not go nearly far enough. He said that there was a “very long way to go” and added: “This is not a two-year project or a five-year project. This is a 10-year project, a 20-year generational battle to beef up the economy in ways that we have not seen for many, many decades.”
Sir Jeremy, who is close to Prime Minister David Cameron, was making a speech to an audience of civil servants at Civil Service Live in west London. Last week a revised analysis by the ONS concluded that growth was flat in the first quarter of 2012, following a contraction of 0.1pc in the final three months of 2011. This meant that Britain had avoided dipping back into recession.
But the ONS said that the recession resulting from the 2008 financial crisis was much deeper than originally thought. Its estimates showed that the overall contraction in the economy mean that economic output is now 3.9 per cent below the pre-recession peak.
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Sir Jeremy told the civil servants: “There is a very, very long way to go. We were reminded only last week that the economy as a whole remains about 4 per cent below the size that it was in 2008.
“Five years on from the bottom of the recession we have still not even near recovered all the output we lost in that terribly deep recession that we suffered in 2007-08.
“Those are really daunting numbers that just show the size of the challenge; there is no alternative.”
Sir Jeremy said that rebalancing the economy away from financial services and more in favour of manufacturing was “much easier said than done”.
He made clear that the cuts introduced by Chancellor George Osborne had not gone far enough because the deficit was still rising. He told his audience of about 200 Whitehall officials: “All the civil servants in the room will be well aware that the last three or four years have been tough. There have been years of austerity, years of pay freezes, of pay restraint; every part of government has been told by ministers — and rightly so — to hunt out waste and tackle inefficiencies.
“But despite all these efforts we have made over the last three years … our debt/GDP ratio is still rising, debt interest payments are rising.
“There is still an enormous amount of work to get that deficit down to a balanced level to get the debt/GDP level falling rather than rising.” Sir Jeremy praised the “remarkably smooth” spending round for 2015-16 which was unveiled by Mr Osborne last week but warned that austerity would go on until 2017, and possibly longer.
Despite his gloomy assessment, Sir Jeremy said that for Mark Carney, the new Bank of England Governor, it was a “good time to join”.
Describing the Canadian as “the world’s most impressive central banker”, he said that it showed Britain’s “self confidence” that it could have a “foreigner come to work in such an important symbol of the country as its central bank.
He added: “We will give him every support he needs.”
Twenty years to fix economy
Britain is in a “20 year generational battle” to rebalance the economy and return the country to financial health, according to Britain’s most senior civil servant.
Cabinet Secretary Sir Jeremy Heywood Photo: REX By Christopher Hope, Senior Political Correspondent
10:00PM BST 02 Jul 2013
268 Comments Sir Jeremy Heywood also suggested that the cuts made to public services to date were not sufficient and that austerity measures would have to continue for “at least” another four years.
The comments from the Cabinet Secretary will have a sobering effect on ministers, who were buoyed last week by the announcement from the Office of National Statistics that Britain had avoided a double-dip recession last year. They will also be noted by all three major parties as they draw up their manifestos for the 2015 general election.
Sir Jeremy said that the cuts pushed through by the Coalition did not go nearly far enough. He said that there was a “very long way to go” and added: “This is not a two-year project or a five-year project. This is a 10-year project, a 20-year generational battle to beef up the economy in ways that we have not seen for many, many decades.”
Sir Jeremy, who is close to Prime Minister David Cameron, was making a speech to an audience of civil servants at Civil Service Live in west London. Last week a revised analysis by the ONS concluded that growth was flat in the first quarter of 2012, following a contraction of 0.1pc in the final three months of 2011. This meant that Britain had avoided dipping back into recession.
But the ONS said that the recession resulting from the 2008 financial crisis was much deeper than originally thought. Its estimates showed that the overall contraction in the economy mean that economic output is now 3.9 per cent below the pre-recession peak.
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Sir Jeremy told the civil servants: “There is a very, very long way to go. We were reminded only last week that the economy as a whole remains about 4 per cent below the size that it was in 2008.
“Five years on from the bottom of the recession we have still not even near recovered all the output we lost in that terribly deep recession that we suffered in 2007-08.
“Those are really daunting numbers that just show the size of the challenge; there is no alternative.”
Sir Jeremy said that rebalancing the economy away from financial services and more in favour of manufacturing was “much easier said than done”.
He made clear that the cuts introduced by Chancellor George Osborne had not gone far enough because the deficit was still rising. He told his audience of about 200 Whitehall officials: “All the civil servants in the room will be well aware that the last three or four years have been tough. There have been years of austerity, years of pay freezes, of pay restraint; every part of government has been told by ministers — and rightly so — to hunt out waste and tackle inefficiencies.
“But despite all these efforts we have made over the last three years … our debt/GDP ratio is still rising, debt interest payments are rising.
“There is still an enormous amount of work to get that deficit down to a balanced level to get the debt/GDP level falling rather than rising.” Sir Jeremy praised the “remarkably smooth” spending round for 2015-16 which was unveiled by Mr Osborne last week but warned that austerity would go on until 2017, and possibly longer.
Despite his gloomy assessment, Sir Jeremy said that for Mark Carney, the new Bank of England Governor, it was a “good time to join”.
Describing the Canadian as “the world’s most impressive central banker”, he said that it showed Britain’s “self confidence” that it could have a “foreigner come to work in such an important symbol of the country as its central bank.
He added: “We will give him every support he needs.”