Economy

The standard joke is that Sir John Major is the ultimate grey man, as if Charles Pooter had been painted by Wilhelm Hammershoi in particularly pallid light. But the pea-eating caricature of yesteryear was not in evidence on the Andrew Marr Show this morning. There was something calm and old-fashioned about Major during his interview; even his platitudes carried an air of wisdom. The former Disability Minister praised the Olympic and Paralympic Games, revelling in the fact that the games had revived aspects of our national character which he had assumed dead. The conversation was about old times: his father’s career in Music Halls during the early years of the 20th Century, past battles with the European Union and the legacy of Black Wednesday.

Much is being made today of reports that George Osborne will drop his fiscal target in his autumn statement on 5 December. Isabel reported earlier that, faced with breaking his own rule, Osborne will abandon it rather than implement more cuts to meet it. All the fuss seems to stem from a note by Citi Reasearch last Friday. You can read the whole thing here, but here’s a summary. Like Gordon Brown, Osborne has two fiscal rules. Neither says anything about eliminating the deficit, or even halving it. The first — called the 'fiscal mandate' — is 'to balance the cyclically-adjusted current budget by the end of a rolling, five-year period'. It’s a moving target, simply requiring that at any time the government plans to eliminate the structural deficit within five years.

The contents of the coalition’s grand bargain on growth will become clearer this week. On Monday, Michael Fallon will announce plans to scrap half of all existing regulation, and then later in the week Vince Cable will detail the changes the coalition will make to employment law. This combined with the planning reforms announced last week and the expected initiative on mini-jobs is the Tory supply side of the bargain. But there’s also an interventionist Liberal Democrat side to it, with the coalition announcing this week that it is adopting an industrial strategy. This is something that Vince Cable and his Tory deputy David Willetts have been pushing for over the last year or so.

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.