You have to laugh. Britain has been in recession for decades. Growth means very little to the man in the street who reaps none of the benefit. Lets get real and stop thinking about recessions or depressions. The country is fooked. Simples.

seems to me were witnessing damage limitaions is been put in place.hopefully double dip won’t happen otherwise all we will hear is labour put us in this situation/mess.finally what niggles me is how many of the present cabinet were in place(banking)but didn’t see the banking crash coming considering their inside the know.BEGGERS BELIEF

Do not feel that Duncan Weldon is embarking on doomsday type scenarios.

Duncan’s reasoning is as follows:

“As I currently see it, for the OBR to be more right than wrong, four (nearly) impossible things have to happen.

1 – The impact of spending cuts on growth has to be a lot lower than the IMF estimate them to be.

2 – We have to experience very fast export growth (despite our major trading partner, the EU, being wracked by problems and austerity) and, at the same time, historically slow import growth.

3 – We need a mid/late 1990s style investment boom. Something that is not happening yet.

4 – The household savings ratio has to fall and households having to starting borrowing and spending again.

Whilst one or two of these things might happen, I just don’t see them all occurring. And that means that by Q2/Q3 the economy could be serious trouble. Again.”

http://duncanseconomicblog.wordpress.com/

I think these points all have a great deal of merit. I also think that Duncan has been quite bold in clearly stating his conclusions. The risk of a further fallback during 2011, for me, is still quite high.

The interesting point is that Duncan has given full consideration to factors which underline the economic recovery as opposed to projecting sector by sector growth/decline by month quarter or Snowstorm. Duncan has provided a much broader perspective than has been bandied about in the press and blog sphere of pretty well all commentary to date. I think that his further work should focus on elaboration of the impacts these factors will have. It should be used to build on.

In this way whether the economy experiences marginal growth, flat lines or declines, a more comprehensive perspective could be developed that will enable more long term and future assessments to be made in a consistent manner.

So, let me make sure I’ve got this clear. You’re suggesting that the best political strategy for left-wing opposition to Osborne is to make intentionally wrong economic predictions, to make the economic situation look better than it is, so that when what you actually thought would happen does, Osborne will look even worse than he otherwise would have because even his critics didn’t think it would be that bad?

It just strikes me that intentionally lying about your economic forecast is not a way to re-establish a reputation for economic competence.

oh don’t be dense cim – there’s a difference between Ed Balls believing that GDP growth is likely to be lower than expected, and deciding to write an editorial broadcasting that belief. The OP is quite clear about the distinction. If Mr Balls or Duncan knew the future, clearly things would be different, but the point is that economic forecasts are highly uncertain and as the OP says the payoffs to being right/wrong are not symmetrical.

note that the OP says less well known forecasters have a reason to risk making bolder forecasts … I don’t know whether Duncan would say that applies to him .

Sure, this is about expectation management after all. It’s far more sensible to pitch the general line that the Tories look like bungling the generally rosy economic situation they inherited (if you can keep a straight face while saying this, of course). Then, unlses the economic performance is actually pretty good, any outcome can be spun as ‘disappointing’.

But I suspect it’s way too late for this advice to take hold. The narrative from labour since before the election has been that any cuts to public expenditure would lead to economic and social catastrophe. The rhetoric has been so extreme that anything other than a prolonged second recession, and severe social unrest will look like a reasonably good outcome.

The problem for Labour is that their rhetoric now will be judged against the economy’s performance in 2015, and betting on a second recession really was leaving a hostage to fortune.

I think the fundamental problem is people misunderstand forecasts. Absolutely no one is saying this or that is definitely going to happen. It is a matter of looking at data and what is known about behaviour and assigning probabilities to various outcomes. A double-dip recession could occur during Q2 & Q3. However, the consensus sees it as a low probability outcome. Duncan looks at the same data and sees a double-dip recession as a high probability outcome. Therefore, his view of reactions and likely behaviour must be different. I see the British corporate sector with lots of cash on their balance sheets and think the probability of them spending it is high. Duncan must see that as a low probability outcome.

Moreover, not everyone is equal in their ability to assign probabilities accurately in the long-run. The IMF are useless forecasters. Everyone hates Goldman but I would pay attention to their forecasts before the IMF.

Extreme forecasts that are far from the near-consensus do not mean that they will be wrong. As long as there is reasoning behind the extreme forecast it is just different weighting of probabilities. However, forecasts that are contrary to the data seem to me just being contrarian for the sake of it. I would not say Duncan is doing that, but I do not see everything heading south like he does.

Bravo – finally we get some realistic political acumen in display. Well done Chris.

Managing expectations is key part of the political process and unfortunately Labour has been found wanting and the message has been confusing on a whole range of issues related to economy and growth.

First – we have heard arguments until very recently that there was no structural deficit in the UK prior to the banking crisis which was ridiculous and indefensible at best.

Second – on the whole cuts issue – if you are going to make cuts the big argument then you need to say specifically where the cuts are unwanted. Yes we need investment for growth and jobs and we need to have a long term strategy but there has been little focus on the cuts on early intervention or the regional growth strategies.

Unfortunately, because of a coherent message we have had loudest voices making the argument for the opposition who have argued that there should not be any cuts. Then suddenly Mr. Miliband comes out and says we would have cut 2/3rds of what the Tories are cutting but failed to provide any specific areas of cuts.

3 – We have had arguments coming about how Ireland, Portugal, Greece should be allowed to default – and highlighting Russia and Argentina as successful case studies. But the period between the default and the economic recovery in both those countries was horrible where millions of people were pushed into poverty and people could not afford food. And inflation was over 80% and in Argentian people started using the barter system. But at least those countries could print currency -neither of the three European Countries can do so and they simply don’t have the money to pay their people without loans.

And also all of these arguments have failed to forsee the pressure on UK Germany and France especially as people would come to our shores and which would put unbelievable pressures on our public services as well as on our finances.

Also there has been no consideration from Duncan especially about the exposure of our and other European banks to those debts.

The Public Accounts Committee has today released figures which show that the UK government had to borrow £124 Billion to support the banks and the interest on that is about £5 Billion a year. And imagine how much it would be if all these countries default. Its just shows basic lack of understanding, in my humble opinion.

4 – Also it seems that we (the wider left) want to see the government fail and the country go to doldrums – and everyday we get more and more comments about how the government is ruining the country. And right before the previous employment figures were released there was plethora of comments about how the figures would be really bad and would prove Mr. Balls right.

But the results showed unemployment down, employment especially in the private sector up, massive export growth and lower inflation – its early days but those are not something to snub at.

By lowering expectations so much and then when the results are even partially optimistic tribal people need to realise that they are helping Osborne and not hurting him. That is the message Chris is sending and I think he is spot on.

The republicans in the US wanted Obama to fail and they went all beserk over it and still are but that is not hurting Obama its hurting the Republicans. I am by no means implying we are as bad as the Republicans no – but I think we need a better comms strategy.

Even the much vaunted Tory led government line is not working – in fact there has been little or no traction.

On the other hand, our massive involvement and arguments and hyperbolic rhetoric about the tuition fee is indirectly hurting the most vulnerable teenagers. Many disadvantaged teenagers are shying away from University because they think they have to pay upfront fees – and this is coming from the Helen Kennedy foundation that helps poorer students get into higher education. Labour cannot say we do not bear any responsibility towards it.

The country comes first and our messaging should reflect that and it should be tactically clever but I feel we are suffering from groupthink once again.

So I for one welcome Chris’ intervention.

Luis – I do get the distinction. Though, wasn’t one of the big criticisms related to the last recession that “no-one” saw it coming? (By which I mean that everyone except economic forecasters saw it coming) This strategy seems to be a recipe for doing the same again.

Yes, tactically, there are short-term political advantages to only expressing positions marginally to the side of the opposition. But I think if you are fairly sure that something worse than that will happen, saying so is better, because then you were right as opposed to marginally less wrong.

I think that the post underestimates the negative consequences to the forecaster of not predicting a recession (that does happen), though. If you don’t predict a recession, and then there is one, it looks like you didn’t have much idea about economics either. “Marginally more accurate than Osborne” is not – in the event of a recession – going to be a great place to be. Conversely, if there isn’t a formal recession, the cuts are still going to personally be bad for people who are more likely to disbelieve the economic figures downwards.

(Now, if Osborne is actually right, and by 2015 the economy is doing great and the private and voluntary sectors have completely stepped up to replace the public sector without loss of quality … then yes, his opposition is going to look a bit silly. On the other hand, in that scenario, he’ll have been right, and his opposition were going to look silly however they did it)

Tuition Fees: Confusing Rhetoric Is Discouraging Disadvantaged Students From Applying To University Says Charity
http://www.egovmonitor.com/node/41775

Just wanted to highlight the unintended consequence of hyperbolic rhetoric

I’m sure Duncan would be the first to say all forecasts ought to be taken with a pinch of salt.

Ah he did (more or less)

http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2011/04/dont-forecast-recession.html?cid=6a00d83451cbef69e201538e00229e970b#comment-6a00d83451cbef69e201538e00229e970b

‘In (1) Osborne will say: “My critics forecast recession. Their warnings about the effect of my cuts were wrong. This shows you shouldn’t believe them.” In (2), however, he can’t say this. But his critics can say: “We thought the cuts would have bad effects, but they turn out to have been worse than we thought.”

If you want to play this game, then you also need to take into account risk versus reward. In (1), yes, definitively forecasting recession and it not being true is bad for your rep. But forecasting recession and it being true brings a much greater reward in recognition of competence than more general claims of gloom. Osborne can’t claim that his critics are wrong, wrong, wrong, but it matters much less that he doesn’t have that defence. And it’s not as if he doesn’t also have several fallback defences anyway, but playing a ‘The situation was even worse than we thought’ is much harder against a recession than in lower than expected growth.

As a free-marketeer I’m happy to admit that in the short term the cuts may damage the recovery. However, I also happen to believe that the system is still full of bad investments that have to be liquidated, even if this is a painful process.

sorry cim, I thought you were being obtuse, I apologise. Yes it would be a fine thing to correctly predict a recession, I suppose the OP is based on the idea the probability of doing so is low.

I think if there isn’t a recession – say 1-2% growth – the left can still say unemployment is higher and growth lower than it needed to be, because of the cuts. Whereas if the left has loudly predicted a recession, that’d be drowned out by jeering Tories.

Where is the integrity in debating tactics for saying something you don’t believe?

Total cynicism

Quite right, Chris. Made a similar point at my Uncut piece here. If the double-dip recession doesn’t materialise, we look a little foolish – like the Tories did when the sky didn’t fall in after minimum wage, gay rights etc.