BRITAIN has slipped behind Brazil in the global economic league table. The Bank of England has now kept the official cost of borrowing at 0.5 per cent for three years and is part way through a third dose of electronic money creation.

Living standards are on course to fall for a third year in a row, and the London-based Institute for Fiscal Studies says that poor households and families with children will bear the brunt of government austerity over the coming year. Pressure is mounting on finance minister George Osborne to scrap the 50 per cent income tax band for income above £150,000, while the business secretary, Vince Cable, expresses frustration about the government’s lack of a ‘compelling vision’ — an accurate assessment, if a cheeky one given that he is part of the team responsible for this mess.

In short, the last seven days or so offered little reason to be optimistic about the UK economic recovery. Only Nissan bucked the gloom by announcing it will build a new small car at its plant in Sunderland, northeast England.

The Economist recently published its ‘Proust index’, a measure of how much time had been lost by the recession. In Britain the clock has been turned back to 2004, and the hands are moving forward at a painfully slow pace. The recovery here has been weaker than in the US, Germany, France and Canada, and was slower than in Japan until the tsunami of a year ago.

Explanations trotted out for this woeful performance include the likelihood that the official figures are wrong, that the UK has been hit harder than other leading industrialised countries due to the importance to the economy of the City, and that cuts to public spending have derailed the recovery.

As Capital Economics has noted, however, official data is as likely to be revised down as up, Britain’s financial services sector is no bigger as a share of the economy than that in the US, and most public spending cuts are still to come. None of the standard explanations, therefore, is convincing.

Even so, there is a belief that recovery will come eventually. The Bank of England assumes that if it keeps bank rate low enough for long enough while continuing to print money, demand will pick up and the economy will return to its trend rate of growth. George Osborne is working on the basis that reducing government borrowing, cutting business taxes and red tape, and liberalising planning laws will create a stronger and bigger private sector to fill the gap left by the paring back of the public sector.

The confidence of the Bank and the Treasury may well be justified, although on the basis of what has happened to the economy not just recently but over many decades it looks ill-advised. — The Guardian, London

The writer is the Guardian’s economics editor.