Economy

As Britain gets fit for what David Cameron calls the ‘global economic race’, figures out this morning confirm Britain remains hamstrung by poor productivity. UK productivity per hour has remained stagnant over the last year (having fallen by 1.76 per cent since 2008). When he eyed the competition at last week’s G8 summit, the Prime Minister will have clocked that only sclerotic Russia and stagnant Japan have worse productivity than the UK. According to a recent Office of National Statistics (ONS) review, Britain lags 16 percentage points behind the G7 average, 27 behind the US. Ageing infrastructure and under-investment has blighted the oil and gas sector.  Manufacturing productivity last year fell by 5.

The Labour party used to joke that the Tories would act as their cleaners: win, take the political pain, abolish the deficit by 2015 and then hand over a balanced budget when they lost the election. George Osborne has, at the very least, put paid to that. His Spending Review this week made it clear how painfully little progress is being made. Whoever wins the next election could close every school, open every prison, cede Northern Ireland, close every embassy and sack every soldier, sailor and airman — and it would still not be enough to put the government back in the black. Britain is a terrifyingly long way from fiscal sanity. If the Chancellor had actually cut the government machine when voters expected him to, the pain would be almost over by now.

The other day, George Osborne was walking with his wife across the courtyard of the Royal Academy. In the evening sunshine, the Chancellor spotted another Tory MP in the opposite corner. The MP was on his mobile: a wave would have seen courtesies observed. But Osborne, who was dressed for dinner, strode over and waited from a polite distance as the call was concluded. His eagerness to talk was particularly striking since the MP had been a frequent critic of Osborne’s handling of the economy. When the conservation started it was clear that the MP’s criticisms were the reason Osborne had come over. The Chancellor, in buoyant mood, wanted to get the MP’s views on how the economy was going. He asked the question because he knew the answer.

When a politician’s speech is spun ten days in advance, you know there’s trouble behind the scenes. Next week’s Mansion House dinner will be seen by City attendees principally as a farewell to Sir Mervyn King — and journalists present (including your columnist) will be timing the ovation to see how it compares with Eddie George’s full five minutes in 2003. But we learn that the Chancellor is ‘poised’ to use the occasion to ‘signal’ a public offer of Lloyds Banking Group shares that could raise up to £17 billion and mark a turning point in the post-crisis clean-up of the banking sector. By giving discounts to small investors, it might also swing votes away from Ukip.

Ed Balls’s speech today is significant for two reasons. First, it implied that a Labour government in 2015 would not spend more on current spending. But, rather, it would borrow more to fund higher capital spending—what Gordon Brown used to calling ‘borrowing to invest’. This, I take it, means that a 2015 Labour government wouldn’t introduce the five point plan for the economy that Balls has previously outlined. The second was the announcement that Labour would stop winter fuel payments to higher and top rate taxpayers. This will save about a £100 million a year, which is hardly enough to give Labour a reputation for fiscal rectitude. But it does concede crucial ground on universality.

Labour is apparently thrilled with the OECD's assessment of the UK economy, released today. The think tank cut its growth forecasts from 0.9 per cent to 0.8 for 2013 and from 1.6 per cent to 1.5 per cent for 2014, while warning of 'strong headwinds' from the eurozone. So Chris Leslie, the Shadow Financial Secretary to the Treasury seized on the report, saying: 'The OECD has once again cut its growth forecasts for the UK economy, warning that youth unemployment is too high and that weak growth means wages are not keeping up with price rises.' His colleague Rachel Reeves said it was 'time for the government to listen and act on growth'. If you're the sort of person who gets their news from Labour press releases, you might be dancing around your sitting room shouting 'Plan A isn't working!

Everyone seems to like talking about the ‘creative industries’ these days. For arts folk, it gives the impression that what they do is hard-edged and economically viable, it makes geeky people like programmers and software designers sound more interesting and it allows ministers to talk about rather slippery and intangible elements of the economy in the same way that they talk about manufacturing and financial services. Ever since Labour culture secretary Chris Smith invented the ‘creative industries’ in 1998, this ingenious term has served both political and creative types well. Such has been the success of the UK’s creative industries that some more enlightened government circles began to understand that other sectors could learn from them.

There are times, I confess, when I wonder about politicians. They are a rum breed and it still seems possible to rise to quite elevated heights without possessing very much of an idea about anything. Consider the cabinet minister quoted in this Telegraph article: Mr Cameron won the leadership promising to modernise the party, but one Cabinet minister said it should now “move on” to more “traditional” Conservative issues such as welfare reform and immigration control. “The 'toxic’ issue has been neutralised,” the minister said. “Now we can move on to the red meat Conservative issues.

In association in Centrica How can consumers ensure they are receiving the best possible deal for their energy bills? In this special View from 22 podcast, the Spectator's political editor James Forsyth discusses issues within in the energy market and some potential solutions for getting the lowest possible energy bills. Is shale gas the answer? Do green subsidies need to be cut? And is the government doing enough to help the consumer? Joining the panel are the Rt Hon Peter Lilley MP, Conservative MP for Hitchin and Harpenden and member of the Select Committee on Climate Change, Peter Moorey, Principal Advocate for Which? Consumer Review services and Ian Peters, the Managing Director of British Gas.

It now looks almost certain that Andrew Mitchell will be our next EU Commissioner in 2014. The job was not advertised and the backroom selection process remains a mystery. In the wake of the Plebgate row, though, we can make an educated guess as to why, according to the FT, Downing Street has asked Mitchell ‘to consider’ the offer. This would be no ordinary consolation prize for Mitchell. Downing Street has big hopes for Mitchell in the role. Senior Whitehall sources indicate that Britain will be pushing hard for a big economic portfolio when the new commission is appointed next year. The aim is to make the case for financial reform of the EU, resist protectionism and safeguard the competitiveness of the City of London.