The latest figures show a further fall in manufacturing and construction output in November 2012. An improvement in oil and gas output provides some modest offset to the bad news. Many forecasters now think the UK economy fell again in the fourth quarter of 2012.
This is quite a contrast to the USA. There they have made bigger cuts in public spending at the state level and have agonised over the fiscal cliff at the Federal level. Levels of debt and deficit are not that different between the two countries. They have continued to create more money through the Fed, just as the UK has done through the Bank of England. The US economy is growing at around 2% per annum.
There are three big differences between the two economies that probably account for the better US performance. The first is the state of the banks. The second is the price of gas and general fuels. The third is technology.
The single most important reason why the US is making more progress rests with the banks. The US banks took more action sooner. US property prices fell further faster. More of the bad debt was sorted out and cleaned up. US banks were made to take more capital, and most have now repaid the special money they received from the authorities. US money supply and credit is growing at a better pace as a result. Property prices have started to rise again after a very large correction. There are more mortgages available.
The UK has still not worked through enough of the bad debts and the difficult property lending. RBS is far from fixed. Such a large bank in such a condition retards the UK economy.
Cheaper energy is giving a big boost to US industry which is lacking in the UK with dear energy baked into EU and domestic policy. Quicker exploitation of shale gas is also adding to US output.
The US is still the world leader at applying the technology of the digital revolution to the products and services of the world.
The UK needs to catch up. Mending RBS would be the single most important thing to speed that up. Asset sales and controlled break up, creating new better financed banks that can compete and offer loans would provide a big boost to the UK economy. Cheaper energy is also vital for success.
January 13, 2013
Mending RBS would be the single most important thing to speed that up.
I disagree. Exploiting the vast quantities of shale gas to allow cheap energy would be the most important thing (this goes hand in hand with abandoning these ridiculous green energy policies), followed closely by the selling off of RBS.
There was no political will here to see the house prices fall too far – even though the government should really stay out of it and let the market decide – thus the death spiral took far too long, knocking confidence.
The US is still the world leader at applying the technology of the digital revolution to the products and services of the world.
This is because the Americans are more free to do things like this. They have more freedom. We are subjected to never ending diktats from the EU about the internet and commerce e.g. cookies on computers (this was pointless – anyone who was really bothered could easily stop/monitor cookies), Google’s search results, industrial red tape, etc
January 13, 2013
Shale gas is reducing prices in the USA because the USA cannot export this gas, so prices have to fall to encourage more consumption. As the UK can export this gas to Europe ans Asia expect any reduction in prices to be minor.
Your example about Internet and commerce shows you don’t have any understanding regarding what the digital revolution is about (hint it involves software, not what websites can download onto your computer).
January 16, 2013
uanime5: “Shale gas is reducing prices in the USA because the USA cannot export this gas … ”
What you mean is .. they have huge domestic demand and don’t need to export gas.
Cannot is factually wrong.
January 13, 2013
“This is because the Americans are more free to do things like this. They have more freedom.”
Unfortunately, our electronics industry was subject to massive constraints and interference from government well belfore the EU came on the scene. For example, ICL our ‘champion’ to take on IBM was created by Tony Benn who forced the incompatible English Electric and ICT to merge. The GPO was not permitted to enter the electronics age therefore nor were its suppliers because government would not sanction the costly investment. GEC which never performed a pennyworth of R & D which it could not charge out, was allowed to charge the taxpayer cost plus for all its products, many of which did not work, whilst also hoovering up all its competitors till it had consolidated a multiplicity of successful businesses into one duff badly run conglomerate. Meanwhile in the States successful businesses were spawning new ones in a continuous cycle.
France and Germany, particularly, are a lot more successful in electronics hardware and software than we are.
January 14, 2013
The US government interferes as well on a massive scale by supporting and promoting their own industries, our government and companies on the other hand couldn’t give a toss about our industries.
I worked for ICL for a while and while there was undoubted government interference, it’s failure was mostly down to management not it’s technology or innovations. ICL was even the market leader in some sectors in the US once it discovered market segmentation. As for France and Germany I wouldn’t say they were or are more successful in software. Maybe they are in electronics hardware these days but then they don’t buy foreign if there is an indiginous supplier regardless of technical or financial differences. If you do bid then it is used solely to assist the local supplier adjust their pricing.
One of our main problems is that our competitors in the EU and US and Asia all favour indiginous suppliers where they exist whilst we buy from anybody. The excuse is that there is a free market but the UK seems to be the only one adhereing to it and actively penalising our own suppliers.
Everything is for trade by our barrow boys – resources, companies, technology, IPR. You name it they’ll put a price independent of actual value on it, make their bonus on it then go and relax in the BVIs.
January 13, 2013
Mike really I think you exaggerate a little… I work in a technology company and have never felt that EU rules have stopped me doing anything I’ve wanted to do… I did have to spend a few hours working on the cookie stuff, but really that’s neither here nor there in the scheme of things.
If we aren’t making the most of it, we have only ourselves to blame (skills, education, training, support)… it’s a little too convenient to blame the evil EU which really has little to do with it.
January 14, 2013
@Richard
Spot on.
“British medium-sized firms face quite distinct problems. Oddly, red tape is less of a worry than it is in other European countries […] The main challenge for British firms, by contrast, is getting hold of workers with the right skills […] The high cost of local housing makes it harder to bring in workers from other regions.”
http://www.economist.com/node/21556971
January 13, 2013
Shale gas in the UK? Fantasist.
January 13, 2013
I agree fully, the government owned huge RBS/Natwest is a machine clearly virtually designed to kill any growth. Pulling back funding from businesses all over the place. Why on earth has it not been sorted out they own it? At least sort it for business lending in the UK.
We all know what is needed:-
Banks that actually lend to business on sensible margins rather than just demand cash back.
Cheap energy (with no expensive fake green religion involved)
A smaller largely parasitic state sector which does so little of any real use.
Lower pay in the state sector by about 1/3 to make to comparable to the wealth creating one.
Lower taxes so the money can be far better spent privately than it would by the state.
Fewer and more sensible regulations, relaxed planning rules and building control rules.
More real science, technology and sound economics.
Fewer employment restrictions.
Less EU.
An optimistic pro growth, small tax, smaller state vision and the £1M IHT threshold promised.
The UK is only really a base for rich nondoms with the current absurd tax rates & laws.
But alas we have Cameron (and the wrong on everything Libdems with the loopy Huhne and Hughes types) then we have Milliband coming very soon for perhaps even for 3 terms? We also have Lord Patten at the BBC dripping socialism, pro EU and global warming scare propaganda over the nation.
All this thanks to Cameron throwing the last sitting duck election away with his fake green, pro EU, equal TV billing for the Libdems, caring sharing and ever bigger state “electioneering”.
January 13, 2013
As I have said before Dave Cameron is just John Major, but without the excuse of being very dim. He may well bury the party for many terms as Major did, or even for ever at this rate.
One wonders if it was cast iron’s clever plan, all along, to deceive the voters on the EU and bury the UK in the EU and bury the Tory party at the same time?
The only positive thing I can say about him is that he has not taken the country into wars on a blatant lie. Though he has continued with expensive and totally counter productive wars for no reason.
January 13, 2013
The war against climate change is more destructive to the future of the UK and Europe than any other war we are currently fighting. And David Cameron has embraced that with wide open arms.
January 13, 2013
It’s getting interesting on EU matters with all these ‘helpful’ interjections from Heseltine, ‘business interests’, the EU great and good…..I wonder what our dear leader, Cast Elastic, is cooking up in his speech. It will be really interesting to see how he plays this one…..the latest interjection from his fellow quad member, Mr Alexander, is that no ‘responsible leader’ could ever contemplate leaving the EU….He also said on the news that it would be ‘mad’ to do so…..I’ll just get the popcorn….
zorro
January 13, 2013
RBS/Natwest is not only refusing lending to business customers it is deliberately preventing them from borrowing elsewhere by refusing to allow second charges to be given on assets. This in order to encourage the customer to repay their existing long term facilities. Must be doing wonders for UK growth and customer relations.
Natwest “Helpful Banking” as they advertise themselves.
January 13, 2013
Well, I suppose that they think that it’s very helpful to their bank balances….. God forbid that RBS is actually working in anyone’s interests apart from themselves. I find it very difficult to trust banks now that they have been calling in these loans for no good reason….
zorro
January 13, 2013
“No responsible leader could contemplate leaving the European Union, Chief Treasury Secretary Danny Alexander has said, days after George Osborne threatened an exit from Europe.” reported by the DT.
What an absurd thing to say – no responsible leader would rule out leaving the EU in “all” circumstances. Especially as the EU shows every sign of becoming an undemocratic and evil empire of decline. He would never contemplate it even if it turned even more evil and undemocratic? Surely he must be fired just for being so dumb, – but then Cameron is in charge, alas, who probably agrees. I can see the negotiation is going to be a complete PR farce just as I expected.
January 13, 2013
We are all human. Some of us (not all) want to succeed in our society. We want to build things, design things, help people, feed people and give them nice houses to live in.
In return, we want to be thanked and recognised. We want to make money and get on in life. We want our children to get a really good start in life too. We also want our parents to be looked after properly in their old age.
People who do not want to join in (in their own way) need to be excluded from recognition. They should not be given the same as the ones who conform and excel in making other people’s lives better and more comfortable. They should get just enough to scrape by. They have not contributed, so why should they be carried along? Why?
That is exactly the opposite to what is going on at the moment.
And if you say anything, you get howled down.
January 13, 2013
@Mike Stallard
Why not go the whole hog and demand that there should be forced labour and executions for anyone who doesn’t meet your standards. As long as the UK is a place where everyone cannot “join in” regardless of how willing they are punishing people for not joining in is simply immoral.
January 14, 2013
I don’t believe Mike was advocating punishing people at all, simply not giving them the same rewards to those who refuse to contribute as those that do.
January 13, 2013
This is the key factor for economic performance:
“Cheaper energy is giving a big boost to US industry which is lacking in the UK with dear energy baked into EU and domestic policy. Quicker exploitation of shale gas is also adding to US output.”
So why is it that our government cannot bring itself to stand up to the EU and Whitehall bureaucrats and scrap the Climate Change Act?
Why are they still so extremely cautious about exploiting our shale gas reserves?
It is very disappointing to see that government and especially the Whitehall mandarins have been so enthralled by the green ideology that they completely disregard the effects on and the damage to our economy and the country.
January 13, 2013
Americans work harder for a start and get and expect fewer handouts. American businesses do not have to carry the dead weight of EU over-regulation. They have more natural resources and when it comes to banking, though I am not up to date on this following the changes in the Interstate Banking Laws, there are or certainly used to be a host of Local banks–the Regionals have largely been taken over I believe. When I was there I formed the view that these Local banks were absolutely fundamental to the American Dream and way of life. Every City and Town had its own banks, often many of them. Crucially, these banks had local businessmen on their Boards who were, naturally enough, willing to go the extra mile in support of and to attract local business. An extra layer of competition was thus added. It was not just City against City but a City plus its banks against the rest. Unfortunately we do not have anything like that here, nor even close. Policy, mostly wrong, and not helped at all by contradictory Government policies, is set remotely in the smoke by people who are too big for their boots.
January 13, 2013
As a result of fewer handouts the USA has more people living in poverty or homeless. Something that all the welfare cutting right wing nuts seem to ignore.
Germany businesses have to comply with rules fare stricter than EU laws and yet have companies that are more profitable that those in the UK. Perhaps the reason why UK businesses are doing badly lies closer to home.
January 13, 2013
Leslie ,
I would agree that the US has a much better network of local suppliers providing services .
In the UK the middle class is brainwashed to think that the ultimate achievement is being an employee for a big company . In the US the middle class is entrepreneurial .
From a very early age it is drummed into British state school kids that risk is bad and to be avoided . I guess that’s a victory for the establishment’s education policy .
The middle class in the UK is hostile towards entrepreneurs and generally pretty vomit worthy.
The real entrepreneurs in the UK are predominantly working class : “White Van Man” .
Few Briton’s are even capable of thinking big .
January 14, 2013
Risk is bad, that’s why successful people minimise their risks rather than increase them.
If the middle class in the USA were entrepreneurial then the US would be mostly composed of small businesses run by entrepreneurs with a few large companies run by the wealthy and staffed by the uneducated. Just because the USA has some entrepreneurs doesn’t mean everyone can or wants to start their own business.
January 15, 2013
In a sense many people do have their own businesses they either just sell their labour to employers for x per hour or they sell it or goods and services to very many customers.
The latter is often safer and more profitable as you are not so dependent on one customer.
January 13, 2013
I’d suggest that Liam Halligan’s article this morning is worth a read:
http://www.telegraph.co.uk/finance/comment/liamhalligan/9797932/At-last-question-time-for-the-money-printers.html
He argues that continued QE has allowed the banks to recapitalise on the cheap, so that they have not had to recognise the extent of their liabilities. These “zombified” banks are failing to act in the interests of anybody but themselves, and so damaging growth prospects. Added to this large problem is the fact that QE has allowed the government to borrow on the cheap, removing the incentive for them to get to grips with deficit reduction. QE is the root of our current lack of growth as it leads to highly inefficient allocation of capital, so damaging the wider economy. Some of us have been saying this for several years, but it seems that only now are the supposed experts realising that we are right.
January 13, 2013
Liam is correct in his analysis. However, this is what QE’s main aim was….i.e. to facilitate current government spending and allow the banks access to free money so that they could recover their losses without having a true reckoning on their assets. However, we have been saying this on this site for ages……
zorro
January 13, 2013
There is an argument for QE, but I think that it should be in the terms of debt free money being issued to finance major infrastructure investment. It should, however, be counteracted by the government getting to grips with other non productive spending.
zorro
January 13, 2013
LOL. The US is bankrupt! Anyone can have a great time getting credit cards and maxing them out. At some point they are going to have to make good, otherwise hyperinflation will completely destroy their currency which in all honesty is their chosen path. After all it’s happened twice before. No one is buying US debt anymore because it isn’t worth anything. Hence you have the FED “buying” up $85 BILLION/month which if in the private sector would be seen as a scam. You have unfunded liabilities of of about $80 TRILLION, there is an exposure to more than $1 QUADRILLION in credit default swaps. And then you have to take on an additional 10,000 baby boomers retiring every DAY with all the costs of social security and medical that brings.
You can see with all the laws Obama is bringing they are preparing for total collapse of their monetary system. All the political spin in the world can’t hide the fact that the US is headed for some extremely tough times ahead and this is another reason why he wants to take their guns before the implosion starts.
The trouble is and why they have got away with it for so long is people are obsessed with watching mind mushing tv instead of knowing what’s going on in their own country.
Who knows if the debt limit which will be reached in the next few weeks will be the crunch point or weather that can will be kicked again down the road. If the Republicans refuse to kick it further about half the US population will go without getting a pay cheque in one form or another. Let’s face it almost 50 million are already on food stamps. As with ramping up any credit card you can’t pay off, putting it off will only make it worse however hard it appears to be at the time to bite the bullet.
I would be surprised if their ponzi scheme lasts another 12 months. The most stupid thing the UK did was putting VAT up to 20%. Yes we need to reduce the deficit but this is so noticeable to people when they are spending they just decide not when they dont have to.
Reply: The US is a long way off hyperinflation and the refusal of world invesotrs to buy US debts!
January 13, 2013
Fixing the economy is a bit like the decision you need to take to resolve a toothache.
You have a choice of going to the dentist, putting the fear of treatment to one side, accept the treatment, and then move on.
Or
Refuse to go to the dentist because it may hurt, continue to pay out for painkillers, and suffer for years until you cannot stand the misarable existance of constant background pain, then you pluck up courage to visit the dentist to get it resolved to find out the problem has festered, and requires more drastic and expensive treatment.
Option 1 Act to resolve immediately
Option 2 Put off the inevitable, which lengthens the pain timescale, in the hope that it will go eventually go away.
So far the UK has chosen Option 2. WQe have not yet plucked up enough courage to go for treatment we are still messing about with so called pain killers (increased taxes).
Given that most of us now have less disposable income, we spend less, so how do you expect growth
January 13, 2013
Oops sticky keyboard.
January 13, 2013
I see that our balance of Trade deficit (reported in the Sunday Times today) as being at its worst for more than 2 decades.
Shame we do not see these monthly trade figures published any more, they were the basis of government information in the 1960’s and 70’s and were a very simple ,although perhaps crude method, of showing our true trading account/position with the rest of the World.
Given that the economy is flat at the moment, the fact that we are at our worst trading postion in 20 years (after a 30% devaluation) and we are still sucking in imports, it is surely very, very worrying.
Is this the price you pay when you no longer manufacture much here that people want to buy either here, or abroad ?
January 13, 2013
It’s the price the UK paid for focusing on finance (mainly the City), rather than manufacture.
January 13, 2013
Probably why the trade figures aren’t published in such an easily accessible fashion now!
zorro
January 13, 2013
I don’t think we should hold America up as an example of the way we should go, nless of course you’re a follower of the Great Economist frae Kirkcaldy.
What we are seeing played out in America is what would have happened if Prudence had continued in office.
Kicking the debt/deficit into the long grass, printing presses at the BoE running overtime and funny business with his favoured banks north of the border.
The single biggest boast to the UK economy that could come from this Coalition is to leave the EU before 2015.
January 13, 2013
Quite. The US is not out of the woods. Because it is the world’s biggest economy it can borrow to fund its budget deficit in a way other countries are not able to, but at some point it will have to face a reckoning. There is no easy way out of high structural deficits.
There was much talk at the start of the recession about its shape (‘U’, ‘V’ or ‘W’) but it’s clear now it is going to be a ‘bathtub’: a dramatic drop followed by a long period bumping along the bottom before the economy picks up.
January 13, 2013
I wonder if even the scenario you describe there might not be better than the one we currently have!
zorro
January 13, 2013
As long as you sell half of the RBS off at a profit. As long as the profits are then used to bring down the deficit of the government. The government borrowed the money to bail it and its Directors out on behalf of us taxpayers so if you are to sell them please make sure their are proceeds are used productively and not to set up another pet project.
January 13, 2013
I support your view on RBS, it should be broken up and any viable bits sold off.
Wouldn’t be popular with the Scots Nats though, but if they objected, the debt should be transferred to Scotland as a Scottish debt, to be which would be on their books should they become independent.
January 13, 2013
Another difference is that the US – in spite of Obama – remains a broadly business-friendly environment. There is not constant talk of the need to regulate and how bad it is when anyone makes a success of themselves. Profit is not a dirty word. Of course there are left-leaning commentators, economists etc who are prominent in the US media, but the broad mass of the US population ignore them.
January 13, 2013
I watched a Newsnight discussion a while ago where, from memory, every guest in the studio agreed that breaking up RBS was the only sensible solution. JR has been saying this from the beginning.
I don’t know why they don’t just get on with it. This country’s governors (and I use the term loosely) seem to be in the grip of a terrible inertia.
January 13, 2013
“This country’s governors (and I use the term loosely) seem to be in the grip of a terrible inertia.”
They seem to think their job is just to present, good PR, and to put a spin on issues – not set a sensible direction. Whatever spin you put on it, if you are heading over the cliff you will go over the cliff. Everyone will know you have gone over it too and John Majors may have noticed, with his ERM cliff that he steered us over – and even failed even to apologize for. The same people, politicians and business people, who pushed that policy and now pushing again for the EU – wrong then and wrong now.
January 13, 2013
In the US the housing bubble seems to have been their main problem and as I understand it when a borrower defaults on a mortgage it is the lender who becomes wholly responsible for the property – the borrower simply walks away from the problem with no comeback.
This of course has hastened the clean-up of the whole system as the lenders, with government help, have moved quickly to get themselves back on an even keel and hence the rapid fall in house prices.
In the UK we have numerous “zombie” households hanging on to unaffordable mortgages, partly with government help, and as a consequence the return to normality and cheaper housing will take far longer. The lenders do not want to take a loss on the deal and if a borrower walks away and there is a subsequent loss on the sale of the property then that debt stays with the borrower.
January 13, 2013
Yes, the US system is slightly ‘cleaner’ in that the householder walks away and the lender (quite rightly) is left to sell off the asset. This does have advantages in that it enables the market to correct itself more easily, and doesn’t put the householder in never ending debt.
Unfortunately, in the UK, the housing situation is the elephant in the room. The inertia in the general housing market is because lenders are scared to repossess houses because they know values will fall and it may have a chain effect in making them lose more money in the long term. At the moment, we have a stand off with banks scared to repossess, householders refusing to realise a ‘loss’ on their asset, clinging on to the hope that it is actually worth what they paid for it in the boom and desperately praying for the next Ponzi victims to climb on the ladder…….
All this is tying up capital which could be used in the wider economy if it was not falsely tied up in bloated property ‘assets’…..It is difficult to see if any of the political parties will tell the truth to people. Their only tactic is to QE away the debt and try and keep nominal house prices steady with slow inflation…….
zorro
January 13, 2013
So if America is doing so well why is its private sector job creation so poor compared to the UK’s. Over Obama’s first term the US economy created 1 million private sector jobs out of a population of 312 million people. The UK economy created 1 million private sector jobs (if the figures are to be believed) on a population of 65 million (again if the figures are to be believed)
So we are stagnant in growth terms compared to America in growth terms yet we are creating private sector jobs at a rate 5x faster. Politicans and economists keep telling us that we need growth but we seem to be doing ok in job creation terms without growth, so something else is going on.
I saw some figures that since the 2008 crisis oil production from the north sea is down 31% and sill falling, financial services are down 12% and still falling so the UK economy is facing two very strong headwinds here especially oil as it is a double whammy when we lose production (which requires very little labour to gnerate large ammounts of produce, hence GDP) we have to import the corresponding amount.
America on the other hand is experiencing a boom in production of gas and oil so seeing the reverse effect lots of extra high value production that requires very little labour (a nodding donkey in Arkansas is self suffcient except for maintenance).
So on your last point that the single best thing to do to stimulate the economy is to break up RBS I disagree, it may be a good thing to do.
The single best thing we could do is to stop all immigration for 2 years except very special cases whilst we rebuild our economy. 90% of the private sector jobs create have gone to immigrants, we will never get the welfare bill down if we just use cheap immigrant labour instead of using our own resources, even id that means forcing them to work.
January 13, 2013
I agree that we need far tighter immigration control, but I am very sceptical of the 1 million jobs created claim……At least I am sceptical about the type of often part time, low paid, service sector jobs which are only viable with government tax credits and other benefits in tow…..I have yet to see any authoritative analysis of the actual type of jobs which are being created.
zorro
January 14, 2013
200,000 jobs were created by reclassifying public sector jobs in education as private sector ones. So only 800,000 new jobs have been created, however a large numbers of jobs have been lost so the increase in jobs available is far less.
http://www.independent.co.uk/news/business/comment/david-blanchflower/david-blanchflower-job-creation-the-numbers-dont-add-up-8211004.html
January 13, 2013
Do your comments get through to Cameron and Osborne? If so, do they agree and what are they doing about it, especially the banks? If not, what is their prognosis and what are they doing about that?
It is very frustrating that the agenda seems to be set by Miliband with his constant waffle about tax cuts for millionaires and pointless class based rhetoric. A cipher like Miliband flourishes in a policy vacuum.
What is holding the government back from actually doing things? Will we ever end the wasteof our inept energy policy? Will we ever run the UK in the UK’s best interests.
January 13, 2013
There are a number of very important constraints acting to depress UK economic growth and recovery. One is the one you have drawn attention to – lack of lending from the banks despite the huge amounts of QE and the very loose monetary policy followed by this Gov (which seems to be the Chancellors only growth strategy). The UK is overly reliant on its lending banks of which there are too few. The UK bond market is very small, and, as with all bond markets requires a credit rating and liquidity for trading so is only appropriate for large businesses anyway. The UK lacks the US equivalent of the private placement market – long term lending by insurance companies to SME’s on a bi-lateral basis. The Gov Gov could do a lot more to stimulate both the bond and the PP markets to reduce reliance on the banks. The banks themselves are still very weak and about to be burdened with the unnecessary costs of ring fencing their retail operations. Requiring the banks to divest of their mortgage arms would help them (by an injection of funds) and also the mortgage market to help housing (by taking mortgage lending from under weak, cash strapped parent companies). Stopping the banks claiming corporation tax relief for their bonuses, which might have shrunk but are still enormous, would focus their attention onto retail and away from investment banking (the UK has too any investment banks). It would also provide the Chancellor with the wherewithal to fund another cut in corporation tax to help all businesses.
The other areas where Gov has failed and which are necessary to stimulate growth are (1) failure to realise that tax needs to be both carrot & stick to be effective – not all carrot. It could do more to close offshore tax havens instead of the ridiculous stigmatising of individual companies; tax homebuilders who sit on land banks, constraining supply to push up house prices etc etc etc (2) cut red tape far more aggressively even without an EU referendum or repatriation of powers (either of which is highly desirable) – what happened to the bonfire of the quangos. The US does not have such extensive & inhibitive red tape (3) cut current spending far more aggressively and invest in infrastructure (4) stop ducking difficult decisions on transport (particularly airports) and energy (5) significantly increase incentives for both apprenticeships and Traineeships to provide a skilled workforce to attract employers.
January 13, 2013
‘Cheaper energy is also vital for success’
Absolutely ,but it has even wider implications when considered with ‘Climate Change’.
Expensive energy is largely due to our policies on climate change.
Moreover we are busy trying to ensure the developing world adopts expensive energy
policies eg much Overseas Aid goes on ‘spreading the theory of catastrophic anthropogenic global warming’
Aid will not be spent on say coal-fired power stations in India.In fact India has much cheap coal which when developed into cheap energy will help living standards much more than DFID preaching.
I see the NY Times has closed down its ‘Climate change ‘ desk .
It clearly feels that only embarassment lies ahead.
If only the BBC could retire David Shukman,Roger Harrabin and the Guardian could close their desk [poor George Monbiot]
Let’s face it the Met Office haven’t a clue about the climate mechanisms and theit inter-relationships .Neither has CRU of the Uni of E Anglia.We used to be respected as a scientific nation .What are the chances that we end up a world laughing stock ?
The whole green theory has collapsed and is now a distraction from rescuing our economy.
It is high time Government ditched ‘climate change’ with the benefit of cuts for the Aid budget and the cost of energy.
January 13, 2013
Expensive energy is due to a lack of competition between suppliers, confusing tariffs, and a toothless regulator.
Just because you don’t like the science showing that climate change is real doesn’t make it wrong.
January 14, 2013
Uanime5, “climate change is real”
This is a totally meaningless phrase.
January 14, 2013
Its also due to the massive subsidies paid to investors in wind farms. I’m not against investing in sustainable energy, but why just give large amounts of money without risk to often rich individuals and companies?
January 14, 2013
Indeed but the people who have been shown to be wrong or exaggerating hugely and scaremongering on climate change are the ones still in positions of power like the bizarre Ed Davey, Secretary of State for Energy and Climate Change or Sir Jonathon Porritt. Similarly on the EU the ones proved so very wrong on the ERM and the EURO and membership of the EU are the ones still pushing to have UK democracy subsumed into the EU.
Being proved wrong seems to be the way to get on, just keep repeating the nonsense give no logical reasons, and enter no debate merely repeat the lies. Lies such as – all the experts/scientists agree this is the way to go – the EURO is a great success – the ERM was just done at the wrong time and rate – AGW is clearly the greatest threat ever to mankind ……all experts agree – even though they have been proved wrong by events ……….
January 14, 2013
Have you decided how you are going to create Switzerland in Britain on the cheap with few employment laws, taxes benefits or infrastructure? Do tell us when you have. Your view on climate change and many other things are based on similar beliefs of just repeating the nonsense give no logical reasons coupled with fatalism of biblical proportions I should think.
January 13, 2013
I think the primary reason for the US growing is the shale gas revolution – difficult to prove either way but the US pickup does correlate fairly closely with the drop in energy prices.
As regards technology it is worth pointing out that by the index of scientific citations Britain places second in the world behind America and well ahead of them per capita (even further so if we exclude self citations) http://a-place-to-stand.blogspot.co.uk/2012/08/britain-places-first-per-capita-in.html
As with energy costs the only thing holding us back is government regulatory parasitism. We have the potential to be as fast growing even as China any time the government gets out of the way.
January 13, 2013
It’s entirely correct that the US is benefiting from faster resolution of its banking issues and cheaper energy. The banking resolution is dependent on lower property prices having forced the issue. We are unlikely to secure resolution in the UK without going through the same experience. Bank break-up is a necessary, but not sufficient condition.
As to energy, the present Energy Bill going through parliament is a disgrace – designed to entrench high costs for the next 25 years in a government controlled non-market, where the minister will decide who deals with whom on what terms; who will build what capacity and where coal is effectively banned. Meantime the minister reserves the right to hide the facts about any forecasting failures made by his civil servants.
January 13, 2013
The RBS philosophyis that they are committed to manufacturing ?whether the loss of that support would make the state of affairs even worse
January 13, 2013
John are you and you colleges really going to ask for a 20% pay rise!
Reply No I am not. IPSA now have the task of deciding what MPs pay should be for the next Parliament. They have decided to limit MP -pay rises to the 1% of the general public sector for the rest of this Parliament.
January 13, 2013
I didn’t know policemen cared enough to read this blog! 😉
January 13, 2013
It is interesting the BBC talk only of the £65,738 MP’s salary with the very generous pension it is well over £100,000 in remuneration and that is before the expenses and “consultancies” as they like to call them. A very few, like JR, could clearly earn more elsewhere but many are almost unemployable.
January 13, 2013
I thought that it was supposed to be 32%!!…..We’re all in this together!
zorro
January 13, 2013
I think this must be the consequence of having chumps in charge.
January 13, 2013
A bit off subject but still related to growth and a suggestion.
One thing that occured to me was that nowhere does the regulator wish to specify the cost of regulation to the consumer. For investments the industry is required to produce an illustration showing the cost and effect of charges. These are described as advice, investment and provider charges. Interesting that the regulator did not want the cost of regulation to be identified within that.
I think including the regulatory/compliance cost would provide the consumer with a better understanding and may lead to people wanting to know what they get for that portion of the charge.
For example an illustration will quantify the cost of charges in monetary terms. It then quantifies it in monetary terms as an effect on the final investment sum aftr growth. It will also express it as a percentage of that. Lets say the cost amounted to £15000 and had an reduction in yield effect of – 0.7% . But then say £6000 of this is the regulatory/compliance cost.
I think that would be a more accurate way of breaking down the charges and better inform the consumer what they are paying for. Regulatory costs always rise and will continue to rise. I think it is appropriate that this cost is shown and why not also in other industries. We need to know the cost and until we do the public can’t make an objective view on its effectiveness.
I think the argument about the cost of regulation is greatly hindered as it is a hidden cost. Something that both sides of the chamber claim they want to address. Well a big hidden cost is regulation and they don’t want it shown.
Reasonable idea?
January 13, 2013
Cut the amount of money you take off us. That’s a major cause of the mess.
Then, you have at least 5,250 bn hidden off the books, and you want to up that debt by creating a new pension. That new state pension apparent results in a windfall for the treasury.
More money for everyone and more taxes.
Outright lies, you can’t have both.
So on the banks, stop taxing their capital. Stop increase regulation. Stop decreasing capital ratios. Allow them to right off debts.
January 13, 2013
There are a host of reasons why growth isn’t going to return under present policies. I think just fixing the banks without providing other incentives for folks to borrow and go into business is a bit of a waste of time. Let’s look at the way this works:
1 Person has an idea to set up a business. It might be because he wants to branch out on his own as e.g a window cleaner, open a shop or he has a new invention to capitalise on.
2 He/she does the market research. At this stage he needs demand, else he won’t start. Well the aggregate money swirling around the economy hasn’t dropped, so there is demand.
3 There has to be a go-get culture around. When the person goes down to the pub and tells his mates he’s set up he doesn’t want to hear them think he’s crazy… and you have to say that compared with 25 years ago, you have to be crazy…
4 There has to be a perception that the risk is worth it in the end. If our new business person does badly 100% of his risk investment could disappear. If he/she does well, does he want 50-63%+ of his income swiped away in tax?
5 The regulatory environment has to be sensible. Our window-cleaner doesn’t need to deal with directives on waste recycling, health and safety requirements and so on. He just wants to go out and do the job. He doesn’t want the risk of lawsuits for this that and the other.
6 His costs have to be sensible to create a decent P/L. So business rates, fuel and heating costs, other property-related costs such as rent are all a factor.
7 He has to be able to borrow money. But frankly if 1-6 stack up, and he can show himself to be profitable, the money will come from somewhere.
I think too much is being made of “the banks won’t lend”. They shouldn’t lend to projects which won’t give a return, and the root causes of lack of return are taxes and regulation.
January 13, 2013
There are three big differences between the two economies that probably account for the better US performance. The first is the state of the banks. The second is the price of gas and general fuels. The third is technology.
You ignored the huge fiscal stimulus by Obama, that welfare for the low paid has been increased not decreased, tax increases for the wealthy, and that the USA didn’t cut the public sector. I suspect you ignored all these because they don’t fit with your ideology regarding what causes growth.
US banks were made to take more capital
Given how often you’ve criticised the laws that made UK banks increase their capital I’m surprised that you’re attributing it to US growth.
Cheaper energy is giving a big boost to US industry which is lacking in the UK with dear energy baked into EU and domestic policy. Quicker exploitation of shale gas is also adding to US output.
The UK has dear energy because there’s no competition in the energy markets, energy tariffs are confusing, and the regulators are useless.
Shale gas is reducing US gas prices because the US cannot export their gas, so they have to reduce their prices in order to increase consumption. Given that the UK can export their gas to Europe and Asia expect shale gas to have a negligible effect on gas prices.
Reply The fiscal stimulus in the UK and US is very similar is size. The UK has also boosted benefit payments much more than wages.
January 14, 2013
The equivalent of c. 85% of Obama’s stimulus happens automatically in the UK – we dont have automatic redundancies at national and local govt level, we have automatic extra borrowing. The size of govt and the tax take in the US as a % of GDP are c. 10% less in the US than in the UK, a major reason why the US is a more competitive economy. Your point on shale gas is complete nonsense. If there was the level of production of shale gas in the UK (and other European countries) such as there is in the US we should expect dramatic falls in energy prices. The hysterical reaction of the environmental Left in the UK and Europe on shale gas is very revealing. It shows that the last thing they care about is actual energy costs and their effect on people and businesses.
January 14, 2013
You assume that shale gas is accessible, economical, viable given the nature of the UK seams and the NIMBY’s will not mind having well heads and the massive construction projects needed to build them think windmills, as well as the environment concerns in France it is banned. Much of this is not clear and comparison with the US are not real. The US does lack export facilities and this is the main reason why the gas is so cheap. More unsustainable free market fantasy.
January 14, 2013
My point about shale gas is accurate and just because you don’t like it doesn’t make this point wrong.
Unless every European and Asian country has shale gas reserves which are as easily extractable as shale gas in the USA and in similar quantities then the prices won’t fall dramatically. If the shale gas is too expensive to extract or is under a major city then it won’t be extracted.
January 14, 2013
Obviously shale gas will only be extracted if it is economically viable to to do so, as well as safe. I don’t dislike this point at all – I’m against any energy subsidies. It is early days (because environmentalists have campaigned against shale gas and the Government has moved so slowly), but if it is economically viable to exploit shale, of course it must happen. Your point is not ‘accurate’ as it is a conjecture by you of future market prices, based on a set of assumptions for which there is no evidence. Perhaps it is wishful thinking by you – because you may be sure that if there is cheap and abundant shale gas, the electorate will not go on voting for subsidies for ‘green’ energy, especially in the absence of evidence of runaway global warming and the catastrophic consequences forecast these last 25 years.
January 14, 2013
Lots and lots of “ifs” there uni,
If the price of shale gas does this…. and if we export all our shale gas this will happen…. etc etc.
The last survey by scientists (and I don’t know if they were peer reviewed, before you ask) claimed the potential size of shale gas in the UK to be 10 times bigger than North Sea gas , so perhaps worth investigating at least.
But I know only too well you are against shale gas for the many reasons you have regularly said on here many times, so there is no need to type away for too long, unless you havn’t got anything better to do.
January 14, 2013
Your point about shale gas pricing is not “accurate”, it is merely an opinion not a fact about something that hasn’t happened yet and it is neither right or wrong, simply an opinion.
As it happens there is an amount of qualified opinion in the US which suggests they may well start exporting shale sourced LNG to get foreign currency. There is also a bunch of major manufactures lobbying the US govt to prevent this export as they believe being denied access to the cheap energy would hamper their ability to grow the economy.
January 14, 2013
Benefits increased at the rate of inflation so they remained the same in real terms. By contrast wages fell in real terms, including the minimum wage which isn’t linked to inflation.
January 13, 2013
There are a number of comments suggesting that EU red tape is holding back British companies. This is true but it has not stopped Germany from pulling ahead.
You say that the US performs better than us. This is also true.
The question that I ask is why do we always have to have excuses for poor performance in this country? The problems are right here. Its because this country is so over-governed, so weighed down with red tape that we ourselves have created, so obsessed with “equality” and “fairness”, where businesses are viewed with distaste and suspicion, taxes are punitive, incentives to create jobs are always controlled by government rather than a hands-off approach, constant interference and hectoring, health and safety overheads – the list is endless.
No, the problem is here in the UK. We need a real Tory government and a leader with balls and the courage of his or her own convictions.
January 14, 2013
http://www.telegraph.co.uk/news/9799261/Wind-farm-contracts-to-increase-energy-bills-for-families.html
Millions of families face higher energy bills because of a “shocking” catalogue of errors made by the [last Labour] Government when it awarded contracts for expensive offshore wind farms, MPs will disclose today.
“Under a scheme agreed by Labour leader Ed Miliband during the last Labour government, but implemented by Coalition ministers, the contracts guarantee that the power firms will be paid even if they fail to deliver energy to households.”
This will impede growth!
John, if the scheme was agreed by Labour, presumably the implementation was inevitable, no matter who was in government at the time.
But why can’t it be made plain where the blame lies? And this is not the only mistake made by the last government!
January 14, 2013
What this article means is that Labour created a policy and the Coalition implemented it without either checking its cost or understanding what the cost would be. The Coalition was free to prevent it from being implemented just like they prevented ID cards.
I suspect no one in the three main parties wants blame to be laid because they’re all responsible.
January 14, 2013
LOL – not posting my comments doesn’t change the facts!
January 15, 2013
Professor Steve Keen’s analysis of our current Financial Downturn – he says – is similar to that of the Great Depression.
A mistake that was made in the Great Depression was a focus on Public Debt, while ignoring that level of Private Debt. After a massive drop in Private Debt and GDP, the Government introduced stimulus in the form of increased Public Spending.
Just like now, the 1930s followed a high leverage speculative period in the 1920s, where people were attracted by “get rich quick” Investments – so Asset Prices rose driven by increased levels of debt. When the panic struck, because the increased debt had been focused on Asset Speculation (like Houses today) instead of productive enterprise, fortunes were wiped out as the Assets dropped in price (not value). Government spending eventually caught up to take up the slack.
After a couple of years, unemployment dropped and GDP rose slightly which was falsely misunderstood as the end of the Depression and a return to the Good Times. Thge Focus was back on Government spending and trying to reduce it. This triggered another downturn in Private Sector Debt which caused unemployment to rise again, and was only halted by WWII as there were no longer any arguments for reducing Public Sector Debt as the focus was now on winning the War.
“Professor Steve Keen Briefing.” – in US Congress.
http://www.youtube.com/watch?v=THelXGcKQd0
Please can we avoid the same solution this time around? Tens of millions of people died.
Public Sector Debt is by far less than Private Sector Debt, so we should increase Public Sector Debt now for a while, and then reduce the Deficit later when the Economic Engine is firing on all eight cylinders again when Private Sector Debt is stabilised.
[Other things we have to do too such as Glass-Steagall and re-introducing a Reserve Requirement around the 20% level, plus Loan to Rentable Values on house mortgages].
Oh, and er… QE is not enough by itself, because the money created does NOT go directly into the Economy, it goes into asset and share price inflation. Government funded speculation investments.
January 15, 2013
A simple analogy would be trying to start a car engine by pumping more fuel into the carburetor, but no fuel is getting into the cylinders as the jets are blocked, and stopping too soon because it seems as so the engine is running, although it’s just turning over due to the starter motor. The engine stops and the driver wonders why?