The long and slow recovery of the UK economy
It may not have seemed like much at the time, but if the National Institute for Economic and Social Research are right in their latest forecasts for the UK economy, the first three months of 2008 will mark the high point for British living standards for some time to come.
After possibly the steepest recession since the 1920s, this respected think-tank now says it could take six years for income per head in the UK to get back to where it was early last year, before the recession began. (To be precise, they think it could take until the first quarter of 2014 for Gross Domestic Product [GDP] per capita to return to the level it reached in the first quarter of 2008.)
The Office for National Statistics has said that the revised 2.4% contraction in GDP in the first quarter of this year was the steepest since 1958, when output fell 2.6%. But the NIESR's director, Martin Weale, thinks that if you measured the 1958 data the same way we measure it now, that first quarter fall would be "probably the worst quarterly economic performance since the 1926 General Strike."
The forecast is for a 4.3% fall in GDP 2009, with growth of 1% in 2010 and 1.8% in 2011 - the year when the Treasury forecasts growth of 3.5%. These forecasts are not much changed from April, though the institute is now gloomier about the pace of recovery between 2010 and 2012.
If all of this is right, GDP overall will not return to the level reached in first quarter of 2008 until autumn of 2012 - after the Olympics. It will take longer - 6 years - for GDP per head to get back to its peak because of our rising population. (Of course, it will take less time for GDP per head to catch up if, say, more Eastern Europeans go home than the government currently expects. The authors think that is quite possible).
The institute is not just gloomier than the government about the pace of the recovery after 2010 - it also thinks tax revenues for a given rate of economic growth will be lower than the Treasury predicts. That has some stark implications for the public finances, and for any future government.
According to Ray Barrell, one of the report's authors, the Treasury is expecting tax revenues from housing, for example, by 2013 to be back to the level seen in 2004. Only in 2004, we were in the middle of a great house price boom. Hmm.
With what it considers a more realistic view of the likely path for taxes and growth, the NIESR thinks that in 2013/4 the government would still have a deficit of £160bn pounds if it sticks to the nominal spending and tax plans it laid down in the budget, not the £97bn forecast in the Budget.
In other words, on unchanged policy, the NIESR thinks the government would be borrowing £60bn more in 2013-14 than it currently expects.
Then again, how likely is it that policy will remain unchanged? Not very. In practice, the chance are that the spending plans will be somewhat tighter, and borrowing somewhat lower. Though the NIESR still thinks the deficit will be more than £120bn by 2013-14, or 7.5% of GDP.
Of course, these are just forecasts. They come with usual health warnings attached - nothing is likely to go quite as the NIESR expects. But they are by no means outlandish. Many other independent forecasters are much gloomier.
Is there any good news in this report? Well, the NIESR economists do at least agree that employers are shedding labour less quickly than past experience - especially the early 90s - might have led us to expect.
But you can hold off on the champagne: they still expect unemployment to carry on rising for at least a couple of years, peaking at 9.3% of the workforce in the middle of 2011.
And when, you might well ask, will unemployment be back to where it was in those halcyon days of early 2008? I'm afraid the answer appears to be 'approximately never'.
In their "long-term projections" the NIESR forecasts an average unemployment rate of 6.8% between 2013 and 2017. Back in March 2008, unemployment stood at 5.3%. Estelle was number one, with American Boy - and the Queen was just about to open Terminal 5 at Heathrow. We didn't know how lucky we were.