Some green shoots - but still hard times

Today's unexpectedly good economic growth figures are welcome news. The economy grew by 1.1 per cent in the second quarter of this year, on initial estimates — well ahead of most analysts' predictions. But the figures will not dispel growing worries about where the economy is heading: the threat of a double-dip recession remains real.

Those worries have been added to most dramatically this week by the comments of the US Federal Reserve Chairman, Ben Bernanke, who told the Senate this week that the US economy's prospects remain "unusually uncertain" — a strikingly downbeat comment that has spooked markets worldwide. Our economy tends to be six months or so behind that of the US: if America is now entering choppier waters once more, we could well follow.

There are jitters in Europe, too, about today's results of EU-wide "stress tests" on banks to assess their strength to withstand further financial shocks. While British banks are expected to pass without problems, there are worries that others, notably in Spain, will be judged too frail. Any instability in the Eurozone, our largest trading partner, affects us.

The broader point is that despite today's figures, our economy remains weak, with private sector demand and hiring still low. The widespread assumption in the City is that growth will fall back in the present quarter: the question is whether the economy will remain weak but stable, as the Government believes, or whether it will start to shrink once more. With spending cuts likely to bite hard over the next year, the Chancellor will be watching those figures nervously.

The Mayor, Boris Johnson, has thrown down the gauntlet to the Prime Minister by calling on him to pay the London Living Wage — £7.85 an hour — to all government employees, something that City Hall already does for its staff and requires of contractors. This helps reduce in-work poverty, thereby reducing the benefits and tax credits bill for low-paid workers. Opponents argue that it will increase the public-sector wage bill at a time when budgets are being slashed. It also puts private contractors under more financial pressure.

Labour leadership contender Ed Miliband goes further. Not only does he support the Living Wage: today he calls on these pages for greater state intervention in banking and in executive salaries, to make London's economy more equal. It is a view likely to spark an angry response in the City. But it is right that, faced by its dispossessed, London should have this debate about poverty and inequality — and this paper is glad to have triggered it.