Brian Monteith: There are plenty of good news economic stories around to keep the Chancellor smiling
ONE could be forgiven for believing it has been a really bad week for the Chancellor of the Exchequer George Osborne. Booed in public at a Paralympics medal ceremony and then having it transmitted by satellite news and internet around the world, there was no hiding place for his embarrassment.
He escaped being sacked by the Prime Minister (it was never a serious proposition) but the reshuffle only served to give focus to his stewardship of a British economy becalmed in a double-dip recession. As if to suggest the Prime Minister had goofed in not sacking Osborne, the Organisation for Economic Co-operation and Development (OECD) then revised downwards its prediction for UK economic growth in 2012 from a poor 0.5 per cent to a disturbing -0.7 per cent.
Then, of all things, he was guest speaker at a business dinner in Glasgow only to hear that successful Scottish businessman Jim McColl had announced that as there is no plan for further devolution of tax powers from the Chancellor to the Scottish Parliament, he was left with no option but to support independence.
Saturday probably could not come quick enough.
The truth is, I suggest, maybe a little different and I cannot but wonder that the reason the Chancellor is still smiling is that he is aware of some of the other nuggets of news that, for reasons such as the news focus on the gruesome murders in France and the success of the Paralympics, have not been generally noticed and most certainly not appreciated.
The reshuffle, as I aver, was never a serious threat to the Chancellor for the simple reason that the Cameron project is also the Osborne project. Unlike Tony Blair and Gordon Brown they are not rivals that have cut a deal, they are mates and apart from some items of detail (such as Cameron’s wish to recognise marriage in the tax code) they pretty much see eye to eye. They are a double act where the Prime Minister is the salesman and the Chancellor is the strategist and tactician working out the approach.
To replace the Chancellor would have mortally wounded the Prime Minister and whatever we may think of David Cameron he is not politically naive and would have known he might as well have invited Boris Johnson to have his job now.
There is no getting away from the fact that the economy is a serious worry, not only for all of us who want to see our families, friends and the wider community prosper – but for the coalition government also, for its whole strategy is predicated on being able to show that there is a sustainable recovery that will put the nation back to work, reverse the escalating deficit and eventually reduce the national debt.
If that is not visible in the quarter before the 2015 election then the only chance the coalition parties have of holding their seats is if Labour throws the election by looking even less credible than the coalition (a possibility that cannot be ruled out).
For all the OECD revision was a setback, the good news last week was that manufacturing output was up 3.2 per cent – the largest monthly rise since 2002 – and the broader definition of industrial output had also climbed by 2.9 per cent – the biggest improvement since 1989.
Both came as a welcome counter to the all-pervading pessimism – just as the improving unemployment figures had suggested a few weeks before that the economic growth statistics did not tell the full story. Maybe, just maybe, the economy is about to turn after all.
Another piece of good news was the investment by Honda of £267 million and Jaguar Range Rover of £370m which came on the back of an announcement by BMW in July of £250m for production of the new Mini. There was a similar raft of announcements about new investment last year from Nissan, Toyota and MG – all of it suggesting an uplift in the economy over the next few years as the investment works its way through into recruitment.
The role of Britain’s automotive industry in the nation’s economy often appears forgotten, probably because all of the large volume production marques made in Britain are either foreign or foreign-owned, but last year its output was 45 per cent up on the low point of 2009 and remains higher than it was in 1980. The key is British design and innovation married with better management brought here by the foreign companies.
Indeed, the evidence is around us almost daily of the many successes of British engineering, design and manufacturing production. Dyson, a name unknown a generation ago, has just announced sales of over £1 billion and although its manufacturing is concentrated in Malaysia, its design centre in Wiltshire employs more than 1,500 engineers and scientists and the company spent more than £59m on research and development last year, paying £70m in taxes from profits of £306m.
Other figures would also give encouragement to the Chancellor; a rise in construction orders by 0.2 per cent suggested that its decline might now be arresting and stabilising, while the purchase managers survey showed the highest jump in five months.
The private sector has created some 900,000 jobs in Britain over the past two years and for all the talk that we don’t make anything any more, it is British engineering, manufacturing and industrial production that is helping to make up for some of the job losses sustained by the financial services sector.
There’s no room for complacency and there remains a great deal to be done in improving the supply side through deregulation and finding innovative ways to unlock credit for small businesses and house buyers who, although of sound finance, continue to struggle to access the funds that would see greater private investment and help revive the ailing property market.
So if you see the Chancellor smiling, it might not be nerves but the knowledge that, like the Bank of England deciding it won’t need any more quantitative easing, the economy is about to turn and Ed Balls will be the one with egg on his face.
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Weather for Edinburgh
Saturday 18 May 2013
Temperature: 8 C to 12 C
Wind Speed: 25 mph
Wind direction: East
Temperature: 9 C to 17 C
Wind Speed: 7 mph
Wind direction: North east