The Lead Taker

The Devil in the Detail




As autumn leaves hit the ground in earnest during recent gales, the Chancellor of the Exchequer was delivering his own seasonal statement....

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p> As autumn leaves hit the ground in earnest during recent gales, the Chancellor of the Exchequer was delivering his own seasonal statement.

 

And why link these two events? Well, the casual observer of a deciduous tree can now contemplate the tree's structure and note any rotten branches; whereas George Osborne's take on the UK economy, and how to mend it, remains less than clear.

 

As usual, the problem is one of interpreting the figures (both compiled and projected) and establishing whether or not the roots needed for the post-recession blossoming of the economy are healthy.

 

Reflecting current momentum, the Office for Budget Responsibility (OBR) has revised its forecast for GDP growth up and revised borrowing down so that theGovernment's budget is back in balance by 2018-19.

 

However, the OBR does not expect the quarterly growth rates seen during 2013 to be sustained in 2014.

 

Apparently, while consumer confidence, credit conditions and the housing market have improved, productivity and real earnings growth have remained weak, and ultimately, productivity-driven growth in real earnings is necessary to sustain the recovery.

 

Worryingly, the outlook for productivity growth is "the key uncertainty confronting all UK forecasters", according to the OBR. 

Put bluntly, we don't know if George Osborne's pledge to "secure the economy for the long term" is currently based on the Help to Buy Scheme and consumerswho have been repeatedly told that confidence is returning and have generally plateaued out on despair.  

 

(And who wouldn't go for a little retail therapy in such circumstances, especially when there is a promise / threat of further austerity to come even if the recovery is sustainable?)

 

While I am fully behind getting the UK's balance of payments back in order I amnot convinced that a government-subsidised housing bubble and loosening consumer credit will do the trick ... and worse still, regardless whether this unlikely mix succeeds, Mr Osborne is planning austerity till the cows come home.

 

Unless that is, in the spirit of Douglas Adams' Hitchhikers Guide to the Galaxy, the cows exit to another planet with the parting comment "Thanks for all the grass".  

 

Should that day come, I reckon the cows will look down and see for the first time just what an island race we British are - in some ways like the Japanese in our self-effacing attitude.

 

However, the tendency to be self-effacing can result in the need to beat ourselves up just to show we are better than our neighbours and feel comfortable in taking the moral high ground.

 

Patriot as I am, I believe that this element of British-ness amongst our leaders needs curbing right now. There is no moral high ground in a plan that devastatesnation so some of us can say "look how good we are".

 

I am not advocating taking the US line of spend, spend, spend and don't deal with the trillions of dollars of debt but surely there has to be a middle road.

 

The way I see it, the Government would appear to be backing a vote-winning strategy by offering good news in the short-term (consumer borrowing is OKagain) and good news in the long term (the books will balance). Where, then, is the medium-term strategy that will mean the all important productivity-driven growth gets underway?  

 

I can't see it myself and am petitioning for a gentler path, please Mr Osborne, so we can at least keep the cows on board and so we don't mistake your version offiscal British-ness for brutishness.

 

After all, some among us who haven't had the benefit of a top-class education and inherited wealth might get confused and turn a bit brutish themselves.

 

As for the medium term, it would seem that gut instincts are the best monitor. So try this acid test ... what will it be for you on Christmas Day? A bottle of Moë&Chandon or M&S Cava?

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