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Longest slump in a century ends - Osborne hails milestone Tories eye election pay-off - Miliband hits at 'image politics'

Published:Wednesday | July 30, 2014 | 12:00 AM

 By Sarah O'Connor and George Parker

Britain has finally emerged from its longest economic slump in more than a century, an achievement hailed by chancellor George Osborne as a "major milestone" in the recovery from the financial crash and six years of lost growth.

The collapse of Lehman Brothers in 2008 heralded a savage moment of reckoning for Britain's economy; the shock that started in the financial sector wiped 7.2 per cent off national output, wrecking the public finances.

Of the G7 major economies, only Italy has taken longer than the UK to regain its pre-crisis size and output per head in Britain is still 4 per cent below its pre-crisis level. A muted Mr Osborne admitted there was "still a long way to go".

The big question for him is whether the rebound has come too late to save the Tories at the next election, but he is convinced voters will not turn back to a Labour party that was in power when the crash hit. "We owe it to hardworking taxpayers not to repeat the mistakes of the past and instead to continue with the plan that is delivering economic security and a brighter future for all," he said.

The chancellor believes the Tories' strong poll lead on "economic competence" will eventually feed through into polling figures. Currently Labour has a lead of about 5 per cent, enough to guarantee Ed Miliband a Commons majority.

Britain's economy is recovering strongly - the International Monetary Fund predicted this week that the UK would grow at 3.2 per cent this year, faster than any other major economy - but Mr Osborne knows many voters have yet to feel it.

Growth was so much weaker than expected in the aftermath of the financial crash that Mr Osborne was forced to extend austerity from five years to eight in order to meet his target of closing the budget deficit.

But fewer people lost their jobs over the past six years than many economists had feared and this month the employment rate reached a high last seen in 2005 - a source of Tory optimism. Output grew 0.8 per cent in the second quarter of this year, in line with expectations, which means the economy is 0.2 per cent bigger than it was at its previous peak.

But the population has grown in the meantime and Ed Balls, shadow chancellor, said: "With GDP per head not set to recover for three more years and most people still seeing their living standards squeezed, this is no time for complacent claims that the economy is fixed."

Mr Osborne believes Labour will have to defy the political momentum to win the election, given the strength of the recovery and the poll advantage on "leadership" enjoyed by David Cameron over Mr Miliband.

Mr Miliband tried to address his "image problem" yesterday by admitting that Mr Cameron was a more slick operator and confessing that he was ill-equipped for "photo-op politics".

He admitted that he was "not from central casting" and that he had struggled to eat a bacon sandwich in front of the cameras, but insisted that the public were fed up with political imagery and that he offered real leadership and a strong vision.

In spite of his criticism of "a politics driven by image", Mr Miliband did not deny that he was about to appoint an PS80,000-a-year broadcast officer to advise him on how to improve his image.

(c) 2014 The Financial Times Limited