What is to be done? This question has to be asked of UK economic policy. Only the complacent can be satisfied with what is happening. Yes, the 1 per cent increase in third-quarter gross domestic product is welcome. But GDP stagnated over four quarters and was 3.1 per cent lower than in the first quarter of 2008.

I remain convinced that the decision to move towards fiscal austerity so sharply in 2010 was a huge error. A salient aspect of the mistake was that the UK reinforced the move towards austerity in the EU. In an article entitled “Self-defeating austerity” published in the October National Institute Economic Review, Dawn Holland and Jonathan Portes argue that UK GDP could well be 4.3 per cent lower this year and 5 per cent lower in 2013 than it would have been without these consolidation programmes, including the UK’s. Moreover, in 2013 the UK’s ratio of public sector debt to GDP might be 5 percentage points higher than it would have been without the co-ordinated contraction. This is a step forward and maybe two steps back.

The case for a reconsideration of fiscal policy remains strong, for the EU as a whole and for the UK on its own, given its record low long-term interest rates. But there are also powerful arguments for adding to the set of policy tools. The first (and less satisfactory) is that fiscal policy will not change. The second (and less unsatisfactory) is that, as Andrew Smithers of London-based Smithers & Co points out, the demand deficiency may not be short-term and cyclical, but long-term and structural. If so, fiscal stimulus offers, at best, a temporary solution.