THE BLOG

It's Time for the Chancellor to Accept Responsibility for the Economic Crisis That Has Developed on His Watch

08/01/2016 07:52 GMT | Updated 07/01/2017 10:12 GMT

Thursday's speech from George Osborne is nothing short of astounding. After five and a half years in charge of the UK's economy he's reaching for excuses to explain his own failure. And while he is right to warn how what is happening in China and the rest of the world could affect Britain, the truth is that he's been far too late to wake up to this threat.

After an Autumn Statement and Spending Review in which he trumpeted unexpected high levels of growth allowing him his supposed reprieve on tax credit and police cuts, his admission today that the UK economy is facing a 'cocktail of threats' is an embarrassing admission of his own failure and, quite frankly an incompetent u-turn.

In a blog post on the Huffington Post last summer I explicitly warned George Osborne about his complacency and hubris when it comes to world economic growth and the strength of the Chinese economy.

And in October John McDonnell warned Osborne about the uncertain medium-term future for the global economy when Labour - along with most economists - opposed Osborne's fiscal charter.

Everyone other than George Osborne seemed to recognise the warning signs early on. Chinese growth has slowed from an annual rate of around 10% before the financial crisis to approximately 7% currently. Last year Chinese business and household debts rose to 207% of national income and China's foreign reserves shrank for the first time since 1992 as private capital flowed out of the country.

Not only has Osborne been blind to the risks of the Chinese economy, one of his closest advisers - the Treasury minister charged with heading up investment and devolution, Jim O'Neill - actually dismissed fears that the Chinese stock market was dangerously overvalued and other concerns about the country's financial stability.

The Bank of England - if not George Osborne - has been clear about the threat to the UK economy. In November the Bank warned that if Chinese GDP were to fall by 3% relative to its trend then output in the UK would be around 0.3% lower as a result. Similarly they highlighted how in the second half of last year global asset prices were "noticeably sensitive" to developments in China.

It is only now, in a week where China has had to twice suspend trading on its markets because of share price collapse, that George Osborne has chosen to highlight the danger.

Not content with turning a blind eye to the warning signs, George Osborne has over the last few months been doing everything he can to court Chinese investors. On his trip to China in September Osborne insisted that "no economy in the world is as open to Chinese investment as the UK". He subsequently agreed a deal offering £2billion investment in order for a Chinese company to build and run a huge nuclear power plant at Hinkley Point. Labour has been clear about the security and economic threats of selling off national assets to China, with no adequate response provided by the Chancellor.

But let's also be clear about what is behind this new found recognition from the Chancellor. Today's speech isn't simply about what's happening in China and elsewhere in the world it's about his own failure right here in the UK.

The only people who have been complacent about the outlook for the UK economy are George Osborne and his Tory colleagues. As Labour has warned, the Tories' economic plans are reliant on rising household debt, more borrowing from overseas, an unbalanced economy still too focused on the City and have overseen the biggest current account deficit since the Duke of Wellington was Prime Minister. George Osborne's failure to deliver on his infrastructure pledges, support manufacturing and drive forward our exports markets mean our economic recovery is much too fragile.

It is too little, too late for George Osborne to warn about the risks to our economic recovery, including those coming from China. Now is not the time for him to line up excuses for his own failure - if there is a cocktail of risks lined up for the British economy, it's one Osborne has helped to mix. It's time for him to accept responsibility for a crisis that has developed on his watch, and become far worse because his own policies.‎ These are your chickens, George - don't disown them when they come home to roost.

Jon Ashworth is the Labour MP for Leicester South, and Shadow Minister without Portfolio