Havens and headwinds

MARINE analogies have been in fashion this week in Britain to explain the worsening forecasts for the global economic outlook. Both George Osborne and William Hague said that Britain had become a fiscal “safe haven” while Sir Mervyn King, chairman of the Bank of England, warned that “headwinds were becoming stronger by the day”. Shadow chancellor Ed Balls took the view that the good ship Britannia was becalmed.

Mr Osborne's appearance in the House of Commons on Thursday owed everything to the riots and nothing to the state of the economy -- he would still have been on holiday in Beverly Hills, California, but for the looted shops and burned premises that made North London and other places resemble Los Angeles in the riot season. The Chancellor's news was that his deficit reduction programme had been vindicated by a situation that was more dangerous than 2008 and that the “reckless folly” of those who said he had cut too far and too fast had been exposed.

But with the Bank of England's growth forecast revised for the fifth time this year and lowered from 1.8 to 1.5 and manufacturing figures down by 0.4 per cent in June the Chancellor had to acknowledge that recovery will take longer and be harder than had been hoped while denying that his target for eliminating the structural deficit by 2015 was at risk.