Growth figures will show slowest recovery in history. Ahead of the publication of growth figures for quarter three tomorrow, new IPPR analysis shows that the recession could last six years and that the recovery is the slowest ever in UK history.

Writing on the New Statesman blog, IPPR Chief Economist, Tony Dolphin argues: “This is shaping up to be the longest recession the UK has ever experienced. If we take the Office for Budget Responsibility’s (OBR’s) latest forecasts for 2011Q4 onwards, real GDP will not exceed its previous peak until the second quarter of 2013 – fully five years after the recession began. This will make it a year longer than the previous longest recession – the one that began in 1979.

“But the OBR’s forecasts were made in March. The outlook for growth in the UK has deteriorated since then. Independent forecasters have been revising down their growth forecasts for 2011 and 2012 and the OBR is likely to do so too when it publishes its new forecasts on 29th November (alongside the Chancellor’s Autumn Statement). If these new forecasts prove correct, this recession could last as long as six years.”

Writing on the Left Foot Forward blog, IPPR Associate Director, Will Straw argues: “Tomorrow at 9.30am, Britain will find out how fast its economy grew in July, August and September – the third quarter of this year. The pace will have to be faster than at any time since Labour was in office if growth is to meet the projections set out by the Office of Budget Responsibility (OBR).

“With growth in the first two quarters of the year hitting just 0.4 per cent and 0.1 per cent respectively, the quarterly figure will have to be higher than at any time since the recession started for the OBR to stay on track. The fastest the economy has grown since going the recession started was 1.1 per cent during the second quarter of 2010 when Labour was last in power.” IPPR’s report – ‘Deficit Reduction Averaging’ – is available from www.ippr.org.uk/publicationsandreports/publication  IPPR believes the deficit should be reduced more slowly than in the Chancellor’s plan – so that cyclically-adjusted net borrowing is eliminated by 2017-18. IPPR wants a threshold for investment spending so that it does not fall below 2 per cent of GDP.

IPPR’s deficit reduction averaging plan, has five key implications for economic management: The cyclically-adjusted PSNB will be zero in 2017/18 – on current projections, this will require a 7.6 per cent cut in the cyclically-adjusted PSNB over seven years from its 2010/11 level.

From 2010/11, the cyclically-adjusted PSNB will be reduced by 1.1 per cent of GDP each year on average to achieve the overall 7.6 per cent cut. In any year, this 1.1 per cent target will be reduced if, in the judgment of the OBR, the fulfilment of such a target would lead to an annual growth rate below 1.5 per cent. Conversely, it will be increased if growth is expected to be above 3 per cent. In each year, subject to a satisfactory outlook for growth, the annual average target reduction will be reappraised based on the latest actual data, so that the plan stays on course to hit the 2017/18 cyclically-adjusted PSNB target of zero.

If the 2017/18 cyclically-adjusted PSNB target of zero cannot be met without reducing annual GDP growth below 1.5 per cent, then the total length of the deficit reduction programme may be extended. By allowing a slower pace of deficit reduction in the next few years, the averaging approach would raise the prospects for growth in later years and so reduce the likelihood of the target of a zero PSNB in 2017/18 being missed than would otherwise be the case.