Economy

Michael Fallon has given a pugnacious interview to the Sunday Telegraph. He said that Britain must end its obsession with the ‘politics of envy’ and celebrate wealth creators as ‘Olympian’. (I wonder what the minister makes of the Romford Business Awards, which are presented by his colleague Andrew Rosindell, the Conservative MP for Romford.) As well as having venerated wealth, Fallon introduced several policy objectives: a new round of privatisation (Royal Mail being the first target), employment law reform to ease the dismissal of underperforming workers or where working relationships have collapsed, and a sustained attack on 3,000 regulations.

George Osborne gave a speech to a CBI dinner in Glasgow last night. It wasn't the ideal day to do it: the OECD did downgrade its growth forecasts for Britain to minus 0.7 per cent, having previously predicted a 0.5 per cent rise. But the Chancellor remained upbeat, saying: 'The economic outlook remains uncertain but there are some positive sings. Our economy is healing - jobs are being created, manufacturing and exports have grown as a share of out economy, our trade with the emerging world is soaring, inflation is down, much of the necessary deleveraging in our banking system has been achieved, and the world is once again investing in Britain.

Downing Street is very keen to emphasise that the key theme of this reshuffle is 'implementation'. It's an exciting word, I know, but the excitement has just ratcheted up a notch with the creation of a new sub-committee called the Growth Implementation Committee. The GIC will sit under the economic affairs committee and will be chaired by the Chancellor (who also chairs the economic affairs committee). His deputy chair will be Vince Cable, which the Business Secretary will probably not appreciate, except when the Chancellor is away and he is able to take over. It will also include some of the faces of the reshuffle: David Laws will be a member, as will Ken Clarke in his new roving economic brief in the Cabinet Office.

The contours of the coalition’s autumn growth offensive are beginning to emerge. The impasse that existed before the summer appears to have at least eased. On Marr this morning, George Osborne announced that the Treasury is now working on plans for a small business bank which will please Vince Cable who has been pushing for this for a long time. At the same time, Osborne also backed more airport and runway capacity in the South East and announced that the government will announce further measures to simplify the planning system. His message: ‘we have to do more and do it faster’.

George Osborne returned from his summer holidays this week to find a cacophony of advice for him on how to boost the economy, as well as advice that his boss David Cameron should sack him as Chancellor in his planned reshuffle. He quickly torpedoed one piece of wisdom generously offered by Nick Clegg, saying the Lib Dem leader's plans for a wealth tax could 'drive away the wealth creators and the businesses that are going to lead our economic recovery'. Anyone eagerly expecting Osborne to lose his job in the next few weeks will be disappointed, but the Chancellor will continue to come under pressure, and not just from those riding the Ed Balls bandwagon.

The Office of Budget Responsibility was created to be George Osborne's friend. The theory was that under the leadership of Sir Alan Budd, the OBR would urge the Chancellor to cut. Budd would be listened to more than Robert Chote, who was then running the IFS. But when Sir Alan quit unexpectedly, Chote took over. Since then, the OBR has become the in-house prophet of doom. It not only points to a growth-free future for Britain, but keeps getting its forecasts wrong. It is proving laughably unreliable as a means for working out the likely effect of UK government policy. In the Telegraph today, Doug McWilliams who wrote the original brief for the OBR, has attacked the current chairman for causing the Chancellor 'no end of trouble' and branded the organisation a 'disaster'.

From the moment the Queen uttered the words, 'Good evening, Mr. Bond,' Britain was caught in a two-week Olympic bubble of sporting and national pride. I’m sorry to kill the buzz, but while Mo Farah was hurtling at full speed towards the finishing line, Britain’s economy was crawling on its knees. We’ve seen a shock rise in inflation. We’ve seen warnings from the TUC that the job outlook for the young is its toughest since 1994. And, with Britain now being the only major economy apart from Italy to stay in recession, we’ve been dubbed the 'sick man of Europe'. If Britain is going to perform as well as its athletes, this government needs to stop acting as a kind of feudal landlord that takes our money, no questions asked.

Hidden behind today’s gushing Olympic headlines lies more disappointing economic news. Nationwide’s latest House Price Index release today shows that house prices are continuing to fall, with a 0.7 per cent decline in July. As the graph below shows, the fall in prices is a continuation of a trend that began when the country re-entered recession earlier this year: The latest figures put prices down 13 per cent on their 2007 peak and 2.6 per cent lower than this time last year. Last year the average house price was £168,731: now it is £164,389. But if you look at these trends in an international context, Britain's prices appear relatively resilient.

Yesterday’s economic news reminds us of the need for the Government to continue to focus relentlessly on getting our economy moving – dealing with the debt crisis, boosting bank lending to the real economy, and ensuring sustainable long-term prosperity through radical economic reform. One of the key planks of the Government’s reforms is to make Britain’s tax system more competitive, ensuring that Britain is open for business, that we are a dynamic and an attractive place to invest in and to work in. Cutting corporation tax to the lowest rate in the G7 is one element of this plan. Cutting the top rate of income tax to level the playing field with our main competitors like New York is another. These market dynamics are lost on Labour.

‘Unfortunately, it’s not enough.’ That is, broadly, the conclusion of John Longworth, the director of the British Chamber of Commerce, who has penned a visceral critique of the government’s economic policy in the Observer. Nothing, it seems, is sufficient: half-hearted infrastructure investment, non-existent aviation policy, lethargic borrowing to business, and regulatory reform that leaves businesses ‘mired in a thicket of red tape’. Longworth laments economic policy being determined by ‘political short-termism, electoral calculation and presentation’.