Brian Monteith: Chancellor banking on new governor

New Bank of England chief Mark Carney. Picture: PA
New Bank of England chief Mark Carney. Picture: PA
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GEORGE Osborne may not have much good news for us, but at least Mark Carney is on his way writes Brian Monteith

How the Chancellor George Osborne must wish he had made his Autumn Statement at the end of last week. The publication of Lord Justice Leveson’s report into press ethics has dominated the Westminster village while the resulting coalition fall-out and media-led debate would have drowned out his bad news and have left him to get on with trying to save the economic recovery – and with it his political future.

But on Wednesday a herald of harrowing news he must be; and it will be an uncomfortable moment only made bearable by the fact that his counterpart, shadow chancellor Ed Balls, has even less credibility.

It’s not that the economy does not have some positive aspects to it: the continuing growth in private sector employment by over a million jobs is especially welcome, as are the growing reports of domestic and foreign investment. But that is not what the Autumn Statement is really about, and although we can expect Osborne to fill his speech with positive titbits, when he gets down to it, he must address the state of public finances and it is here that the chancellor is really struggling.

Bill Jamieson has written chapter and verse in this newspaper on the problems Osborne faces over the next five years and I see no need to repeat the detail here, suffice to say the Chancellor has already coughed up the truth – the recovery is going to take at least two years longer.

Recovery is generally understood to mean pulling ahead of the UK’s economic performance when the financial crisis broke back in 2008, and while Osborne inherited an atrocious hand and has not been helped by the subsequent eurozone crisis he has not played that hand especially well.

Labour has, correctly, decided to assume that the Liberal Democrats are electorally dead in the water and therefore rarely talks of the coalition. Instead Labour always blames the Conservative government, even though it does not actually exist as such. This approach also offers the possibility, as we witnessed last week over the responses to Leveson, of allowing Ed Miliband to work a pincer movement with Nick Clegg when it suits him.

The reasoning is obvious, so long as Labour remains ahead of the Conservatives in the polls, but Cameron remains ahead of Miliband in the personal ratings there is every possibility of another hung parliament in 2015. The Labour leader might just need those few Liberal Democrats that are left to give him a working majority.

It is therefore vital for Osborne’s strategy that if economic recovery is insufficient to deliver an outright win for the Conservatives it at least ensures they remain the largest party and in a position to claim the coalition should continue.

We can all speculate what difference there might have been if the Conservatives had been elected without the need for Liberal Democrat partners, but the hard fact is that the coalition government has essentially delivered economic policies that have been described presciently by Tory backbencher Douglas Carswell as “Continuity Brown”.

The Edinburgh economist Mike Nevin has made a compelling case explaining how the quantitative easing begun under the aegis of Gordon Brown, Alistair Darling and Mervyn King has actually hampered recovery rather than helped it. The issue is possibly too technical for most people to engage in but what they do fear is the constant mantra that we are enduring too much austerity and that the cuts are too soon and too deep, thus causing the recovery to stall.

Anyone who cares to look at the government’s figures will see that we have not in fact experienced anything worthy of the name austerity and that public spending will in fact continue to climb. We can all point to individual examples of cuts, but these are more than outweighed by the budgets of other programmes that continue to climb, such as health and welfare.

Having sown the seeds that austerity is not worth the darkness of a smaller candle and that Tory Toffs are living in the bright lights, Labour stands to inherit an economy that will still be in better shape than what it left to Osborne in 2010 – while it plays up to the public’s sense of unmet expectations.

This is not One Nation politics, but divisive opportunism, for the idea that Labour would have done much different is laughable. Indeed such has been the growth in public spending and borrowing under Osborne that coalition Plan A and opposition Plan B are like twins separated at birth.

What we are enduring is in fact not competing economics but the competing politics of three mainstream parties, all of whom are supplicants of the corporatist approach that was so disastrous for Britain in the seventies.

The idea, often posited by others in this paper, that the global economic recession or the UK’s especially unhappy experience of it has been caused by unbridled capitalism is simply not borne out by the evidence. Were our politicians to genuinely want economic growth then they would not submit to the political correctness that forces energy prices up, making our goods and services less competitive, nor would they support the maintenance of institutional agreements (such as those provided by the EU) that limit our trade and innovation.

They would look to the countless economic models around the world but most especially the revelation that was Hong Kong under the guidance of the Scot Sir John Cowperthwaite or to more modest achievements by Australia and Canada that have either avoided our problems or taken the medicine to deal with state intervention.

For Osborne there is, however, some hope, and it comes more through the appointment of the Governor of the Bank of Canada Mark Carney, to replace Mervyn King than it does through any policies he is willing to make himself. Canada has the best record for fiscal stability in the G7. By rejecting all of the usual suspects we are hopefully at last seeing a break with that cozy consensus that has constrained Conservative policies.

For Osborne, Carney cannot come to the post soon enough.