Economic Growth: Desperately seeking 'some thrilling and utterly unexpected change'

Cameron at Davos: (AP Photo/Keystone, Laurent Gillieron)

When I'm after some pointed comment on economics I often read Chris Dillow, the avowed Marxist who writes a column for Investor’s Chronicle and a blog (rather more noticeably Marxisant) called Stumbling and Mumbling. He posts a lot, always provocatively; but with the UK economy shrinking over another quarter – this piece from a US vantage in The Atlantic, ‘Britain's Economy Is a Disaster and Nobody Is Entirely Sure Why’, pretty well sums up the dismal mood - I'm reminded that I've kept revisiting a post on Dillow’s blog from August 2011, ‘The Growth Problem’, which still seems to these eyes to tell the whole predicament. There's no good bolthole for capital to flock to, the Eurozone isn’t buying, generous credit is for yesterday, the coming industries we ought to have nurtured and developed we lag hopelessly behind in, our austerity - whatever you make of its degree - isn’t working, because none of the conditions under which it’s worked previously are now present - and so on. Last week Dillow suggested he believes the economy is being further depressed by ‘irrational animal spirits that drive [investor] sentiment and capital spending.’

Another economics commentator I look to a lot is Merryn Somerset Webb at Money Week, who is not a Marxist, or at least I doubt she is. She ended 2012 on a note not so far from that Dillow sounded in 2011: 'It is perfectly obvious that, barring some thrilling and utterly unexpected change in our national circumstances, we should continue to be in a low growth environment for the foreseeable future. It is also pretty obvious that there isn’t much we can do about it.'

And there was me thinking I was a black pessimist... In the past I may have sounded sarky on this page about Ed Balls’ Five Point Plan, but then the leading critiques of it have argued that Balls isn’t indicating willingness to borrow/spend what it might take; and for various reasons, he’s not going to get a chance to do that. As for the government, I have in recent times been quite sympathetic to David Cameron’s arguments that the UK must ‘rebalance its economy’ and ‘pay its way in the world’, but now I think – trying to be charitable to myself – that I’ve been wasting my own time, talking a load of wishful rot. I guess these are nihilistic times. Here's to the surpassing of rock-bottom expectations, then - or else to that thrilling, bolt-out-of-the-blue change...

PBR preview, second annual...

O happy day: amid the nervy, opportunistic, end-of-days irreality of our current politics, as we slouch toward an election - it’s Pre-Budget Report time again. Is it already a year since Alistair Darling did this last? Most of the key stats turned out worse than he predicted then, but he will say that’s no great surprise, and I daresay most of us, wearily or sceptically, will agree.
So what punts into the darkness has he got this time? I'm first to admit I’m no augur, never adept at sifting the guts for omens. Still, sifting the bloody auguries of others, I assume the price of my beer is going up. That NHS IT project will take a slash, presumably. One expects some action on the much-discussed want of Chinook helicopters in Helmand. Me and my Mumsnet comrades can probably expect to witness the further waning unto death of the middle-class tax credit. And it’s mooted there could be some great clunking ‘super tax’ on bankers’ bonuses, or rather the ‘bonus pools’ of specific banks.
If the last is true, one can expect to hear cries of outrage on behalf of the financial services, Britain’s last surviving industry of global stature. This blog does feel that the rich bankers could afford to take a bullet or two for the team, so I wouldn’t cry for them, not least if further changes to personal allowance and national insurance widened the net of straitened households obliged to reckon themselves ‘rich.’
The biggest issues remain the deficit and the scale of borrowing, the sitting-target scale of the public sector, and the quest for a return to growth, all issues that Darling claims to be thinking about for the purpose of the next 3-4 years. This package won’t change any of that, indeed couldn’t, because Darling won’t be Chancellor anymore come next summer, by which time we can expect an emergency budget from the new mob. The other day John Rentoul observed with a dab of acid that ‘Cameron's average lead in the polls has slumped from 14 points to about 12.’ Last year while I was thinking aloud about the PBR I wrote that Cameron’s average poll lead had ‘taken a bashing’ in falling from something like 17 points to something like 11 – obviously a wild provocation, one that briefly got this blog some zealous attention from the sorts of Tory bloggers I’d hoped never to meet outside of Hell, where we're all headed. But presumably those lads are a bit more relaxed inside their skins this year, those poll numbers being so settled, and Labour still led by this Prime Minister, the only cause for fret being the obvious urgency to get on with the great task of transforming the country...

Whose NHS?

What’s it worth to you, this National Health Service of ours? Are you a true believer in its virtues? Are you essentially agnostic? Or might you indeed deem the NHS to be the work of the Devil? Of course this issue of the imperfections of our health system became banner news over the summer of 2009 owing to President Obama’s healthcare reform travails. The flat-out moronic element amid the opposition to Obama, as given a prize platform by Fox News, unwisely mouthed off about the communistic horror of Britain’s ‘socialised medicine’ and, quick as Dickens, I – just like you, I’m sure – started getting emails from friends and strangers proclaiming ‘We love the NHS.’ Both Labour and the Tories, meanwhile, acted like they would prefer to talk about something else.

Don’t get me wrong, I like the NHS a great deal, but there’s a debate we all need to have – a debate that isn’t moronic or wicked even though Fox News are among those who would wish for it. ‘In a world of ageing patients, explosive medical costs and galloping scientific advance,’ John Lichfield wrote in the Independent, ‘there can be no such thing as the perfect health service.’ Quite, and that’s why we haven’t got one.

But I have not a moment's quarrel with whatever is my National Insurance stake in the NHS (about £300 a year, I think, though people seem to perceive it as much higher). That is a bargain in anyone's language for the essential services rendered (sometimes frustrating, more often invaluable.) Two months ago my wife gave birth to a baby girl, this after months of hospital appointments with specialists and consultants, blood tests and bloodwork, nuchal-fold and chorionic villus sample tests, umpteen ultrasound scans... After two nights in a hospital bed she was home and then received a dozen midwife/health visits. For these services we received no bill. (If we lived in the USA and didn’t have maternity insurance we might have been stuck for $10,000.) A bargain, and a precious one, simple as that.

I might say that on the second night of my wife's post-natal hospital stay we decided to get her one of the little private bedrooms on the maternity ward so she could be assured of the peace that would aid restful sleep. That cost £100 - perhaps a little over-priced, but that was our choice, and it did the business. I can't say I have any quarrel on paper with the extension of other such chargeable choices through the NHS system. (I can well remember Boris Johnson's idiotic complaint in public about how he'd been unable to procure an extra slice of toast on the ward after his wife was resting up post-labour. Oh, how the free market wept! Clearly Stalin stalks the halls of London's hospitals! Putting a price on toast would be worth it if only to give a further reason for Boris to shut his gob.) Charges, made transparent at the point of access, merely supplementing what could and should otherwise be a good-enough 'free' service, seem hardly a cause for controversy - rather, a solidly good idea.

Our not-quite-‘free’ service isn’t always a good one, but that’s not the main reason why we can’t go on funding comprehensive health care through taxes alone. It’s because even the not-always-good not-quite-‘free’ service could die the death of a thousand cuts unless one makes some strategic incisions now, permitting extra infusions of private-citizen money into the bloodstream. The ongoing duty of care to the elderly and infirm, most of whom will have paid into the system all their lives, is precisely why the rest of us need to look at how we keep the system functional before we ourselves are old and infirm and at its mercy.

The money is the thing, because the NHS now faces the direst financial straits since its establishment, according to The King's Fund and the Institute for Fiscal Studies. The costs allegedly run at £105 billion a year. What are the greatest drains within that? Admin and management consultants? Big Pharmaceutical drugs? Doctors and nurses? Foreign nationals nipping in for IVF treatment, non-tax-paying economic migrants bringing the kids? Timewasters, the obese, smokers and drinkers, even if they be tax-payers too? All these play a part, I’m sure, but percentage-wise the chief layout is salaries, isn’t it? Pay and pensions for 1.5 million employees, plus the pensions of those millions who have worked in the system over the last three or four decades.

Our present deficit is such that no-one seriously denies the need for some public spending restraint. We won't go broke, but we can't stay this indebted. The tragedy here, as Phillip Stephens of the FT noted, is that of course the NHS really needs to spend more: ‘Given its demographics, Britain will need to devote a rising share of its income to health.’ But if the state must cut back, there is only one other option, right? As Stephens put it, ‘One way or another, patients are going to be asked to contribute directly to their care.’ I can't really see any other way round it, myself, call me myopic - and so I would like to hear a good and reasoned argument about how and where that charging would operate.

There are some things about the NHS that are sacrosanct. I don't think staffing levels are one of them - or rather, not current staffing levels, or, if you like, allocation and distribution of human resources in the grand scheme of the organisation... We need more qualified doctors, that's for sure. And anyone who lays hands in order to cure should be considered pretty well essential in a hospital. Even though it puts me in company with all those pitiful boarding-school-educated Tories, I'd happily see the return of ward matrons, keeping good order. On a related note, I wouldn't want to lose any cleaners.

So who is deemed expendable? McKinsey filed a report in the summer arguing that 110,000 NHS posts should be cut, including those of "frontline health-care staff." That's too frightening for words, and neither the Government nor the Tories backed the suggestion. Indeed health minister Mike O'Brien got his gloves on: "We have created 80,000 nurses jobs and 40,000 doctors jobs and you think we're going to cut them? Labour created the health service, we want to see it improve." That was classic from-the-gut (or knee-jerk, if you like) Labour/NHS tribalism. So where did O'Brien think the needful savings would be found? 'Focusing on quality, focusing on innovation, focussing on the way in which we improve service will reduce the overall cost without reducing the number of staff.’ No, I don't think he really believes that will do the trick either. But the alternatives are not palatable, even for the Tories, with their Party's traditional hatred for what it sees as the unforgiveable mediocrity and inadequacy of everybody else.

David Cameron has - quite sincerely, I'm sure, and by wisdom dearly bought - been most insistent that the NHS is safe and beloved with his Tory party. MEP Daniel Hannan's embrace of the Fox News platform need not be blamed on Cameron. But he is responsible for this parliamentary party of his and what they'd do in government. Andrew Lansley, the Shadow Health Secretary, tried in rebutting McKinsey to nonetheless applaud the projected slashing of ‘the bloated health bureaucracy.' Yes, I'd be for that too, if I thought it would make such a vital difference, rather than just playing the game of kick-the-faceless-bureaucrat. But no, it's going to take a sight more than reductions in admin costs, isn't it? Tough choices all round.

What proposals have you heard for charging? I’m already paying a whack for my prescriptions these days, such as the tendonitis I’ve got from over-carrying my kids, or the intestinal infection my GP diagnosed that, it turned out, I didn’t actually have… But nationwide these sorts of charges must be throwing more into the pot? There could be a separate budget column labelled Unnecessary Antibiotics for the Middle-Class.
I know the Social Market Foundation suggested patients should be charged £20 to see a GP. Wrong on the face of it, if it deters the poor or the anxious elderly, but then isn’t there a way to make such charges reclaimable? Isn’t that an element of the French system? The vulnerable allure of it is that it would help to get shot of Those People who needn’t really go to the doctor. And shot of them we need to be, somehow… McKinsey reckoned 40% of patients in any given hospital didn’t need to be there. I know... which 2 out of any 5 would that be? Me? Thee? Or Them? You can look around a surgery waiting room or a hospital ward and form your own opinion. Of course, it’s the medical professionals who’ll know better, and it's their time that is of the essence. I’m assuming most of them would naturally want to be part of this debate too, and I personally am really keen to hear any and all opinions - other than the one that goes ‘It’s OK just as it is...’

Alistair Darling: Do You Really Want To Hurt Him?

I looked at all the headlines today for the first time in about a fortnight, and everybody's pretty well sick of the government. Those who aren't, seem to be grasping for something else to talk about, to waste the jury's time. PoliticsHome offers the 'first poll since the Budget' and it suggests that most people found most of the measures reasonable, but they don't believe anything the Government predicts, and the biggest issue on their minds is the stupefying scale of our debt. Hence, the return of a 20-point Tory poll lead is cantering up to the horizon.
The public don't seem to bear too much of a personal grudge against Darling, though. Perhaps they find him largely pitiable, soon to be out of a job like so many of us. Perhaps they're just relieved it's not Fred Goodwin who's keeper of our nation's purse-strings.
Anatole Kaletsky in the Times has defended Brown once or twice in the last 12 months, a form of seppuku in certain social circles, so I read a piece of his deriding the Budget from top to bottom with great interest. Somewhere near the top, he tossed away the merest notion that Cameron didn't have any better ideas, and one was slightly interested to see that all the comments his piece had attracted were from a gaggle of little Tory-Boy online invigilators crying 'How dare you? Prove it!' etc etc.

A Fool and a Knave

I believe we have the Financial Times to thank for the image to my left, forwarded me by a friend earlier today. Of course - as more than one cornered and humiliated weasel of a banker has bleated before a Commons Select Committee of late - no single individual could and should bear the entire blame for the blazing catastrophe we're all currently living through. Sadly, more of us have helped to stoke the fires in our own meagre fashion than we'd like to think - so-called good men doing nothing.
But, to be fair, generally, we had our own jobs and businesses to attend to; and I reckon if we'd had 250-year-old banks to run, then I think most of us would have managed not to run them into ruination, spending and loaning money that wasn't ours, pursuing vainglorious visions of endless growth built on imaginary foundations.
Moreover: the public has need of an embodiment of the third-rate evil besetting us - a pig's head on a stick, to pelt with calumny. And sometimes there is an individual at hand who happens to fit the bill handsomely - a fat pig of really gruesome proportions.
One has to observe that the ostensibly non-porcine qualities for which Fred Goodwin was (briefly) admired, and possibly even liked - coldness, self-assurance, contempt for those beneath him - were on display for all to see in today's letter to Lord Myners (and the blogger Guido Fawkes appears to have a vicarious admiration for selfsame traits.) In the face of such a performance, on some level one has to say 'Bravo.' But I don't think this show is over yet.

Aston Martin: Hard Times

For the November issue of Esquire I interviewed the formidable and admirable James Bond producer/gatekeeper Barbara Broccoli, mainly on the fairly rich topic of marketing of and product placement within the Bond movies. Naturally we talked a fair bit about Aston Martin; that firm’s long and fruitful relations with the Bond franchise; and the special enthusiasm for Bond of its current CEO Dr Ulrich Bez, himself a keen connoisseur of speed and gadgetry. The blue-chip, look-and-dream-but-don't-touch lustre of the Aston Martin brand is what has made it such a useful partner to the Bond enterprise. ‘Aston Martin don’t have a huge advertising spend’, Broccoli told me, ‘because they sell every car they make before it’s made, people are so desperate to buy.’
It seems that last year Aston Martin sold 7,300 vehicles. This year they expect to shift 'only' 6,500. Thus today the firm announced it was cutting 300 full-time and 300 temporary jobs, around one-third of its UK staff. ‘Like other premium car brands’, said Dr Bez, ‘Aston Martin has been forced to take action to respond to the unprecedented downturn in the global economy.’ Christmas break had already been extended a fortnight, which was rather a black crow of an omen. Unite has, naturally, pointed out that this spells ‘a bleak Christmas’ for those laid-off.
Is it worse to lose one’s job right before Christmas, or first thing in the New Year? Which has the most piercing effect on one’s personal and familial morale and the management of one’s household finances? I fear a lot of us are about to be told, if not to find out very directly.

UK Recession: Escape Routes Sealed

My paper of choice, the Financial Times, has undertaken a region-by-region prognosis of how old England is faring or liable to fare in this recession of ours. By the by, it serves to remind one of what we actually do for our livings in this country now – or rather, what we soon might not be doing.
This week, 1.82 million British people are officially unemployed. I’m old enough to remember two lurches past the 3 million mark, in 1981 and 1991. But it’s no time for complacency. One David Frost from the Chamber of Commerce recalls what the devastation of the early 1980s claimed on a more or less weekly basis (“It was 4,000 jobs here, 5,000 there”): this because those losses were in manufacturing, where there was so much to be lost. As the Tory economist Ruth Lea said elsewhere today, we don’t do so much of that anymore. The impact this time will be more – how shall I say it? – generously spread around the occupations. Still, you have to worry in particular about the car-makers. As of today even Germany is in recession, even though most people like a Mercedes when they see it. So one can foresee the English making do with whatever is their current ride for a while longer, maybe just giving the old banger a slightly more regular lather-and-vacuum.
London, where I live, ‘has the grimmest prospects of all’ based on its ‘heavy exposure to financial services and to the troubled property market.’ And without a regular diet of property transactions, what do accountants and lawyers and bankers do for their gravy? Clearly London bankers have already stopped buying great swathes of all that flashy shit that they base their lives around, with the inevitable knock-on effect. Meanwhile, Londoners are feeling less enthused – is that possible? – about the 2012 Olympics.
What of the two regions I know best: the North East of England and Northern Ireland? Both essentially sustained by the public sector, as it happens, ‘which gives them a degree of insulation from the turmoil’ according to Alan Wilson, senior man at the Oxford Economics consultancy. ‘That protection may, however, be short-term, as pressure on public spending grows...’ And a lot of ticky-tacky ‘luxury waterside’ box-flats in Newcastle and in Belfast are going to stay eerily empty for a good while longer.

China hungry for meat, the US crazy for fuel

A report in today's Telegraph tells us there is an OFT investigation afoot into possible price fixing by UK supermarkets and some of their major top-brand suppliers (of products such as PG Tips, Andrex, and Warburton's bread, all used and endorsed round my gaff.) Along the way the report notes more generally that "prices in supermarkets have risen by 5.5 per cent since last April, according to official government data... a 500g packet of dried spaghetti has increased by 51 per cent. The price of butter has risen by more than 50 per cent." As a student in the early 1990s I often subsisted on buttered pasta, and students are generally poorer today - massively in debt, like the rest of us - so you do the math, as they say... but the price of food is evidently becoming a problem for the majority in the UK, especially those 'hard-working families' who did so much to install the current government. The crisis - as usual these days - is bigger and wider and worse than we think, but most people have fingered red meat and biofuel as major culprits, the debate usefully summaried by the Independent here. And what action am I taking personally to address the malaise? Tending the moths in my wallet, as usual, and not drinking take-out coffee anymore. (Astounding rip-off. 'Fair trade' my eye.) As in the case of my cousin whose annual New Year Resolution was to give up bobsleighing and ballet-dancing, I'm sure the benefits of my rigour will be striking. (BTW, the photo - by Tim Ellis on Flickr - is of course a figurine of the old PG Tips monkey, before the brand went 'trendy', presumably so as to raise the price.)