World commentary
Alan Fisher
Wrong moves in Afghanistan
Norman Fenton
The frog and the scorpion
Thinkpiece
Jill Stephenson
The myth about university education
Life of George
George Chalmers
Paris daze
Arthur Bell
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Economic commentary
It may not be too long
before the anger of
the masses is felt
Alf Young
The UK Budget due in two weeks time will, we are told, be all about getting the UK economy growing again. ‘The Budget is going to be unashamedly pro-growth, pro-enterprise and pro-aspiration’, George Osborne promised his party’s spring conference in Cardiff on Saturday.
But apart from a lot of the usual waffle about setting people free to realise their dreams, the only hard advance pledge the chancellor came up with was to create 10 new enterprise zones across parts of Britain that have missed out in the past 10 years. By Britain he meant Midland and Northern England, I think. And at a cost to the Treasury of just £100m over four years, it hardly adds up to an enterprise revolution even there.
We’ve been here before, of course. The Thatcher government in the 1980s deployed enterprise zones right across these islands to try and stave off the worst ravages of de-industrialisation. Each zone offered tax breaks and simplified planning regimes in a bid to kick-start business building in the designated areas.
But like a lot of other tax-driven interventions of this kind – the Thatcher era Business Expansion Scheme also springs to mind – that first generation of enterprise zones had a very patchy record on delivery. According to a recent analysis by the Work Foundation, their impacts were short-lived and up to 80% of the jobs they created were simply displaced from existing firms in surrounding areas.
International evidence suggests such zones, if they are to work at all, can be a very expensive policy option. That’s California’s experience. The last time we tried them in the UK, the Work Foundation reports, the cost per job created was as much as £23,000. So if the Treasury is only looking to spend £100m on the Osborne version over the next four years we would be looking at a little over 4,000 jobs in total. Or just over 1,000 jobs a year. That adds up to 100 jobs per zone per year.
Pro-growth perhaps. But only at the outer margins. Hardly transformational. As the coalition’s business secretary confessed in a Mansion House speech in London a couple of days before Mr Osborne’s zone promise, Vince Cable is becoming increasingly exasperated by commentators who ‘expect that the government can somehow guarantee an immediate, miraculous return to rapid economic growth’.
Last week the governor of the Bank of England told MPs he was surprised the public isn’t more angry at banks for precipitating the recent crisis and the recession that followed.
That speaks to a central dilemma for the coalition’s own aspirations as it approaches its first anniversary. It has talked and acted very tough on sorting out the UK’s deficit, slashing spending, raising taxes and cutting into public sector employment. It has had a lot less to say, up till now, about how it proposes to put Britain back on the road to sustained growth and prosperity again.
Those horrible GDP figures for the final quarter of 2010 – since revised to read a shade grimmer still – signalled the stark probability that the rebalancing of the UK economy away from debt-fuelled consumption towards investment and exports is not happening nearly fast enough. Independent forecasters and business lobby groups are revising sharply downwards their expectations for growth this year.
And if that wasn’t headache enough, inflation is surging, not least at every filling station and every trip to the supermarket. Global food and commodity price rises were already inflating the cost of living for millions of families. Now, thanks to the constitutional instability sweeping the southern Mediterranean and the Arab Gulf, the price of oil has been soaring to historic highs. Coalition ministers have been vying with one another on how high it could go. $150 a barrel? $200? Apocalypse next week? Apocalypse next month?
Having played the austerity card so single-mindedly lest Britain be turned into the next Ireland or Greece, the coalition is now confronting the chilling prospect of a recovery much more anaemic and tentative than ever it envisaged. Throw in widespread job insecurity across the public sector and the most sustained assault since the 1920s on the living standards of millions of families on both sides of the public/private divide and it becomes obvious why coalition ministers are desperately scrabbling around looking for a convincing narrative promising better times ahead.
Scattering 10 new enterprise zones across central and northern England doesn’t begin to meet that challenge. Nor will delaying the next planned hike in petrol duty. Last week the governor of the Bank of England told MPs he was surprised the public isn’t more angry at banks for precipitating the recent crisis and the recession that followed.
Top bankers are paying each other multi-million pound bonuses again. They seem beyond shame or sanction. If the lot of the broad mass of the British public is to be a protracted period in the economic doldrums, with widespread job insecurity and a soaring cost of living, it may not be too long before the anger of the masses is felt. Not by bankers but by politicians who claimed to be saving us from national humiliation but seem incapable of changing gear, even when the road conditions ahead take an unexpected turn for the worse.
Alf Young is an award-winning journalist who writes regularly for the Scottish Review
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