Consumption is the main point of economic policy

 

           Growth in the UK economy is producing its fair share of discontents., They are often the same people who claimed there would be no growth under policies designed to cut the deficit. There is no pleasing some people.

            The new moan is that the growth is too dependent on consumers, without enough investment and exports. Let’s examine this a little. It’s a kind  of moral mantra – we must have the right kind of growth.

            The point in exporting is to sell goods and services we are good at for good prices, so we can buy goods and services that foreigners can produce better and cheaper with the money. An export is not especially moral or worthy. It is someone else’s consumption, rather than consumption for ourselves. The  only point of it is to earn us foreign currency which we can then spend on consumption of goods and services from foreigners.

            If we are unable to sell enough to pay for goods from foreigners, then we have to sell them our assets or borrow from them. We have been quite willing and able to do that for many years, so we have run a balance of trade deficit. The rules of the EU are especially difficult for us, reinforcing a permanently large deficit with the rest of the EU. They made it easier to trade in the things France and Germany were good at, and less easy to trade in the things we are good at.

             Saving and  Investment means buying things that can help us consume more in the future. An individual saves so he can buy a dearer item later, or so he can have more income in old age than he would otherwise enjoy. A company invests those savings in an extra factory or a new product, which means we can consume more once they have made that investment. Investment is only worth doing if you are using all your current investment capacity, or if new investment can produce to a higher quality and lower cost. The whole point of saving and investment is to consume more later. An investment will not be made in additional capacity unless people do plan to consume more and are therefore likely to buy the additional output.

           The big collapse of 2008-9 led to a shortage of demand . This led to people losing their jobs, to factories not having full order books, and investors being put off committing more capital to risky projects. It does take more consumption to put this right, which is now beginning to happen. Now is not the time to go all puritanical about the wrong kind of growth. As demand works through, then we should expect investment to pick up. Higher house prices and more mortgage finance is leading to a pick up in housebuilding. People buying more cars is leading to more investment in car capacity. The purpose of providing more homes and cars is so people can consume them, use them, enjoy them. That is not against the laws of economics. Those who dislike it have a very austere outlook.

 

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99 Comments

  1. Mike Stallard
    Posted December 20, 2013 at 6:55 am | Permalink

    This is a very well thought out article: thank you.

    A wrong sort of growth, however, would be if people simply borrowed money to pay for things. Credit cards make this very easy. As does the government deficit. If a broke person simply carries on with their lifestyle anyway until disaster strikes, do you know what? Disaster strikes. Several of my friends would support this, I can tell you.

    Reply In a free society with plenty of financial service there will always be some people and companies who over borrow, but the opportunity to borrow is part of our freedom. Most of us would never have owned a home with being able to borrow what were large sums to us at the time. My first mortgage of around £10,000 to buy a modest home in Didcot, the nearest I could afford to London that suited me, was a huge commitment at the time but I am still glad I was able to do it. There is no evidence that today there is an unsustainable credit card boom buying consumables people cannot afford. Buying assets they need is usually more stable.

    • Posted December 20, 2013 at 11:40 am | Permalink

      Mike Stallard objects to “borrowed money to pay for things.” Perhaps he can tell us how he reconciles that with the fact that (as pointed out by Positive Money and others) about 95% of money comes into existence as a result of a commercial bank extending a loan. I.e. money itself is a loan.

    • behindthefrogs
      Posted December 20, 2013 at 3:31 pm | Permalink

      Many of the older generation like myself have never borrowed money for personal finance other than as a mortgage.

      There is a lot of difference between borrowing money based on assets that can be redeemed to pay off the loan and borrowing where repayment will be very difficult if not impossible. It is this latter sort of borrowing that needs to be discouraged.

  2. arschloch
    Posted December 20, 2013 at 7:08 am | Permalink

    There nothing wrong with consuming your way to recovery as long as consumers are not saddled with debt, which you failed to mention as they are in the UK at the minute. Another fault in your piece, as evidenced by the unemployment figs from the other day, is that national average earnings are falling. The Mail had an interesting piece yesterday about Cambridge and Bristol grads working as parcel packers for Amazon. If people of this calibre cannot make big money, how can you keep on spending more in the shops to make good the fact that nobody is buying your exports? Remember these kids are also the ones that have not yet to experience the big debt load that come s with 9k p.a. fees. Osborne has a few bits of data which say things are rosy but they are insufficient for him to keep the plates spinning in the run up to 2015. I will have a more benign view of politicians when they begin to admit we are in a depression. They have nothing but Keynesian solutions to our problems but they refuse to admit what a continual period of sub-trend growth actually is as Keynes himself defined it.

    Reply I have done fruit picking, retail assistant, order clerk etc in my time – we all have to start somewhere and work up. In a growing society with a growing output some increase in debt is likely. It’s fine as long as the people and companies adding to the debt are not themselves borrowing too much. When a new generation reach the point of becoming home owners, of course they will add to the mortgage debt of the country, but that does not mean collectively we have borrowed too much.

    • zorro
      Posted December 20, 2013 at 9:00 am | Permalink

      Reply to reply – Oh please John, Cambridge graduates unable to find jobs and being saddled with huge student loans but not being able to pay them back is storing up problems for the future. No one is talking down growth but I am sorry, another consumer credit boom with unsustainable prices will not help. It will only help carpetbaggers in a couple of years. The definition of a free society us not to encourage the weaker brethren to borrow beyond their means and then rip opff their assets later at knock down prices!

      zorro

      • Hope
        Posted December 20, 2013 at 3:05 pm | Permalink

        Or to use their child benefit as a means to secure pay day loans that will not benefit the children who the money is actually intended for. Instead of calling lenders to parliament, create a law that people are not allowed to use benefits to obtain loans full stop. Child benefit should be for food and clothes nothing else.

        • Bazman
          Posted December 20, 2013 at 5:13 pm | Permalink

          One way would to be to make anyone on benefits who is lent money to be exempt from repaying it like those are below 18. Or bookies paying out to under 18′s if they win or trying to collect debts if they do not. Putting the onus onto the loan comanies to establish if they have some form of income other than this, but they can spend their benefits on what they want including fags and booze. Many employers would like to tell you what you can spend your wages on, arguing they pay enough, but you are not responsible with what they generously pay. Count on it.

          • Edward2
            Posted December 20, 2013 at 7:16 pm | Permalink

            I agree with you Baz,
            In addition there needs to be restrictions on the amount of adverts on TV which are encouraging people to get into debt with instant access to casino gambling using credit cards.

          • JoeSoap
            Posted December 20, 2013 at 10:06 pm | Permalink

            Not a bad idea, but more obvious answer is to give out food not money as benefits.

          • Bazman
            Posted December 21, 2013 at 10:09 am | Permalink

            Not real and a right wing fantasy. Who are you to tell anyone what they should spend their entitlements on?

      • Tad Davison
        Posted December 20, 2013 at 4:02 pm | Permalink

        Absolutely! Look who made fortunes from the last crash, and could do the same again if we create another bubble!

        The system is skewed. We need growth, and a vibrant economy, but there are inherent dangers that we must never loose sight of, as we have in the past. I’d love to live long enough to see the day when debt in every context is a thing of the past, but it won’t happen with the present system. It was created with the soul intention of keeping some people rich, and a lot of other people poor.

        I support a capitalist system and the principle of wealth-creating free enterprise, but it has to be equitable. Everybody must have a bite at the cherry. A system that helps but a few is not one that we should subscribe to. I am all in favour of a decent standard of living for all of humanity, and maybe then, we can eliminate, want, famine, disease, and pestilence once and for all.

        Tad

        • Tad Davison
          Posted December 20, 2013 at 4:04 pm | Permalink

          *sole (blame the Christmas spirit!)

      • David Price
        Posted December 20, 2013 at 4:50 pm | Permalink

        I think youv’e defined in part, a civilised society. The problem has been that some people have exploited the freedom available in our society and made it downright uncivilized.

        Our problem is that those people have included those we elected and employed to keep it civilized.

    • lifelogic
      Posted December 20, 2013 at 9:07 am | Permalink

      What about debt at 4000% + APR to the already poor, is anything wrong with that?

      • MickC
        Posted December 20, 2013 at 10:07 am | Permalink

        With respect, the interest rate is too crude a parameter to judge small, short term loans.

        If I urgently need £50 now, I would willingly repay the lender £75 next week, in order to get it. That interest rate is 2600%-which looks extremely grim.

        However, nobody would loan such a small amount at normal interest rates-it would not be worth it, especially for a business with overheads it incurs.

        The problem is the penalties which are incurred if the £75 is not repaid on time. That is what needs to be sorted out.

        • lifelogic
          Posted December 20, 2013 at 6:55 pm | Permalink

          If you are that desperate short term loans often become rather long term ones and at 4000% APR rapidly strangle you.

      • Leslie Singleton
        Posted December 20, 2013 at 11:13 am | Permalink

        lifelogic–This propaganda based on %tges makes me want to cry for the lack of numeracy you are usually the first to bewail. The large %tge you mention is meaningless, representing as it does peanuts in terms of interest and/or a very reasonable all things considered minimum charge–for absolute strangers to borrow money immediately on request. The other side of the coin, equally depressing, is companies being criticised for making “excessive” profits when their capital invested is such that in fact said profits are unexceptionable in %tge terms. I gather that Arithmetic is no longer taught as such. If a number is divisible by 2 and 3 is it divisible by 6 and can you prove it? Basic Victorian Integer Arithmetic.

        • lifelogic
          Posted December 20, 2013 at 8:15 pm | Permalink

          I know perfectly well how APRs work short or long term.

          If someone is so desperate as to need to borrow £300, for say a week at 4000% APR then they are clearly better off without the loan almost without exception.

          It is bordering on a fraud against and the dim and desperate and a cause of a huge amount misery.

          • Leslie Singleton
            Posted December 21, 2013 at 9:40 am | Permalink

            lifelogic–As I remarked last time round on this subject you clearly have no understanding of what it means to need to borrow in an emergency. The fact that the £300 you mention is small change to you is slightly irrelevant. The service provided by Payroll Lenders, with money in your account in five minutes, is wonderful AND reasonably and transparently priced. I have no angle BTW.

        • Bazman
          Posted December 21, 2013 at 10:22 am | Permalink

          It’s exploitation of the poor and desperate as business model. Pure and simple. That is how the jobs run. Not as you and they would have us believe that they are just ‘helping out’ as friend lending a tenner. A service? As if. The adverts are also subtly aim at children to get them to ask their parents to take these loans. The APR or fees are extortionate and designed to draw the person often young or old into further debt. What are you going to defend next one wonders?

          • zorro
            Posted December 21, 2013 at 2:44 pm | Permalink

            Absolutely – I have seen victims of this who are driven to despair. It takes advantage of people who cannot manage their money and hooks them like a drug….Immoral, credit unions are far better in the short, medium, and longer term for money management purposes.

            zorro

      • Hope
        Posted December 20, 2013 at 3:06 pm | Permalink

        Benefits should not be used to secure loans. Ths is greed pure and simple.

      • Bazman
        Posted December 20, 2013 at 3:23 pm | Permalink

        Why don’t you tell and why? It’s all legal and why should the state interfere in a free market? You only seem to have qualms about this but no other ways the poor are exploited by companies and employers leading to think you have some sort of vested interests? Ho Hum!?

        • JoeSoap
          Posted December 20, 2013 at 10:19 pm | Permalink

          Why? Because employers aren’t generally in the “something for nothing” business with their employees. Most work hard themselves, and are subject to some pretty harsh rules and taxes on their businesses.
          In dodgy loan businesses however, desperate people are promised something for nothing, as in John Major’s state lottery, which is an equally repugnant exploiter of the poor.

          • Bazman
            Posted December 21, 2013 at 10:27 am | Permalink

            Selective exploitation of the desperate is OK? Have think why we need the minimum wage, health and safety laws and rent laws. It’s to protect people and the state against this and themselves.

    • Arschloch
      Posted December 20, 2013 at 11:08 am | Permalink

      John in all fairness the lad who wrote the article fancies a career in the Navy so presumably he is waiting for his ABI while at Amazon. However I was served by a couple of waitresses from UCL who again say the chances of landing a graduate job are pretty slim at the moment. This article from the FT says only 50% of graduates get suitable work and of that the pay for “graduate career” is diminishing on a year on year basis. At the other end of the spectrum the recent unemployment figs also recorded the high number of over 60s who are still working. Presumably this is because their crappy money purchase pensions that they have will not give them enough to retire on? Politicians should acknowledge that for most of us life in future will get tougher as time goes by. It would not surprise me that at some point that the UKs social fabric rips itself shreds

      http://www.ft.com/cms/s/2/ed70d986-5048-11e3-9f0d-00144feabdc0.html

      • Bazman
        Posted December 21, 2013 at 11:04 am | Permalink

        A soon as it effects the middle classes its a disaster. The millions of average kids who can’t find work on the other hand are just bone idle benefit cheats. Just wait until the MCSSS is further unravelled by immigrants and the lower classes doing professional work at cut prices. Unlike the working class ‘skills shortage’ which in reality is a pay shortage, this will end in revolt among the middle classes already feeling their entitlement undercut by tradesmen charging similar prices as they do for their ‘professional’ work. It cannot be right that some live in better houses and have more money than them as they see it.
        Ram it.

    • matthu
      Posted December 20, 2013 at 1:31 pm | Permalink

      John: did you engage in your fruit picking, retail assistant, order clerk occupations after you graduated or while you were still a student?

      I think the point here is that these are university graduates working as packers.

      All part of the great government plan to get as many as possible through university regardless of whether there are sufficient truly graduate-level jobs at the end.

      And all hand-in-hand with the great dumbing down of education to ensure that grades kept on going up.

      Reply Whilst still a student

      • ian wragg
        Posted December 20, 2013 at 5:15 pm | Permalink

        There’s no fruit picking jobs for graduates now John as you keep flooding the country with unskilled immigrants. As for growth, there are over a million more in the workforce (mainly immigrants) and GDP is still below 2008. This means the cake has more to feed and is smaller making us all worse off. We are not entirely stupid you know. Some of us have real jobs and can both read and write.

        Reply I myself do no such thing.

      • lifelogic
        Posted December 20, 2013 at 8:28 pm | Permalink

        One of the problems is that there are a lot of rather dim graduates often with degrees in rather nonsense subjects. Many are almost unemployable, in many ways they are even less employable as graduates because they now have silly delusions of grandeur too.

        I have given graduates with good degrees simple maths & logic tests, many are completely hopeless. University may give people a few skills and a little knowledge but it does not make them think or become any brighter in my experience.

        • Bazman
          Posted December 21, 2013 at 10:40 am | Permalink

          You should try your own tests as all evidence of your your grasp of basic science and of facts relating to on this is as you you say alas sadly lacking… Having married or inherited wealth does not enable you to own your own facts. I speak as a person with minimal education and an internet connection no more.

  3. Posted December 20, 2013 at 7:17 am | Permalink

    But consumption” depends on the public having cash in their pockets. That is not being helped by the energy companies increasing their prices as they did last month, at a time when the UK landed price of oil, which we are constantly told governs the cost of supply, has actually fallen by 18% since July.

    Reply The EU has effectively banned us from burning oil in our power stations, preferring much dearer ways of generating power.

    • lifelogic
      Posted December 20, 2013 at 9:09 am | Permalink

      “The EU has effectively banned us from burning oil in our power stations” all supported and encouraged by Cameron and Clegg, but why?

      • Hope
        Posted December 20, 2013 at 3:08 pm | Permalink

        I hope everyone who votes will remember these idiots who created the mess including Miliband who Clegg and Cameron copied and gold plated! Why would you on a weekly basis at a Punch and Judy show called PMQs would you shout at a man whose policies you emulate? Only Cameron.

    • Leslie Singleton
      Posted December 20, 2013 at 11:19 am | Permalink

      wizard–Did I read recently that before Labour got going last time there were 17 (I may have that slightly wrong) Energy companies? Given the enormous and crucial benefit of competition in this sphere why was that number chopped back and what can be done to unchop?

      • REPay
        Posted December 20, 2013 at 2:07 pm | Permalink

        I was told by a senior civil servant about ten years ago that the previous government liked only having to speak to a few big companies in each sector to make policy. It was “easier” apparently. energy and financial services are the casualties of this approach. (My civil service friend approved of it as being efficient!)

        • Tad Davison
          Posted December 20, 2013 at 4:13 pm | Permalink

          And no wonder Labour are so pro-EU if they only listen to big companies. The corporations would just love to have a one-world globalised economy (and I have a recorded interview of a VERY wealthy man saying just that if anyone doubts me!)

          That shower lost touch with the people they say they represent years ago, but then make such an awful pig’s ear of running he show. Utter incompetence and dishonesty doesn’t even come close to describing the Labour party, but evidently they ain’t alone!

          Tad

    • behindthefrogs
      Posted December 20, 2013 at 1:37 pm | Permalink

      The EU banning the burning of imported oil in favour of using more expensive home produced fuel is just what this country needs. We have a balance of payments problem and if we can’t increase exports we must reduce imports. The government needs to be a lot more active in this area using the tax sytem in particular where ever possible to correct the imbalance

  4. margaret brandreth-j
    Posted December 20, 2013 at 7:44 am | Permalink

    Disagree John. We need the right type of house and factories in the right place. When putting up buildings better town design and planning needs to be taken into consideration to improve areas. Desirability is an important factor. People don’t want corrugated iron factories on their main roads, they don’t want new shanty towns being built which will look derelict in 20 years. Long term considerations and the consequences of throwing up tack is boom and bust mentality.

    Reply We have a very expensive and complex planning system to deal with these matters. Many of the new homes being built for sale are attractive and people aspire to own them.

    • lifelogic
      Posted December 20, 2013 at 9:59 am | Permalink

      a very, very expensive and complex planning system that is hugely inefficient and often totally irrational, delaying or damaging sensible developments and yet allowing absurd wind farms and other lunacy in all over the place.

      • Bazman
        Posted December 22, 2013 at 11:18 am | Permalink

        Demolishing a nice family house and having 20 flats rammed into the area the size of a garage forecourt, demolishing a number of small houses to enable mansion to built or just allowing building by anyone anywhere with roads or infrastructure requirement as the property can be sold or rented is not sensible and I suspect that any confrontation of this is lunacy.
        How ‘sensible’ will flaring and large number of lorries be in the case of fracing? Yes there will be as there cannot be.

    • ian wragg
      Posted December 20, 2013 at 5:20 pm | Permalink

      We wouldn’t need any more houses if both labour and these idiots would stop flooding the country with foreigners. I see Cameron is asking for tougher controls on free movement of labour for new entrants to the EUSSR. This won’t make any difference as our government will welcome them anyway.
      We are ruled by a bunch of chancers and I think the writing is on the wall.

  5. lifelogic
    Posted December 20, 2013 at 7:53 am | Permalink

    Well houses and cars do have a real utility, you can live in one and drive to work in the other. With an increasing population we will need more houses and more cars.

    But is there much advantage in the endless growth of lawyers, tax advisers, government departments doing little of any value (and often far worse), 5000%+ APR pay day loan companies, lotteries/gambling, HR experts on the latest mad employment laws, or experts at getting round the insane gender neutral insurance regulations, or growth in subsidised green crap or HS2? Or indeed the BBC state propaganda outfit.

    This is surely the wrong king of growth. Growth in mainly parasitic activity encouraged by absurd regulations or mad government subsidy, using tax payers money to do absurd things.

    Reply You know my views on the growth of some public sector regulatory and subsidised activities.

    • zorro
      Posted December 20, 2013 at 9:04 am | Permalink

      Reply to reply – yes, we know that you support subsidies to prop house prices at unaffordable levels thus going against your stated aim of promoting a home owner democracy. Look at average age buyers and home ownership rates…….

      zorro

      • Leslie Singleton
        Posted December 20, 2013 at 11:23 am | Permalink

        Zorro–I think Andrew Tyrie (not sure of spelling but clearly one of the good guys) said it all when he said the Government were adding vodka to the punchbowl just as the party is warming up (or something very like). Seems unarguable to me.

        • Tad Davison
          Posted December 20, 2013 at 4:31 pm | Permalink

          Leslie,

          Andrew Tyrie says a lot of things I agree with. Last month, he was on the BBC’s Newsnight programme talking about the proposed new banking regulations. He said those charged with the responsibility couldn’t even determine what a bank actually was! It’s just nuts! And these people are running the show!

          Tad

          • Leslie Singleton
            Posted December 21, 2013 at 9:55 am | Permalink

            Tad–You are so right–As I know to my cost, and very much for my sins having once been taken over by one, the American so -called “Investment” so-called ” Banks” are nothing of the kind nor even close. The one I had the pleasure of experiencing had given up lending because they had lost so much money with bad even silly loans, weren’t interested in running Current Accounts (which used to be a requirement if memory serves) or relationship banking in any meaningful sense but of course what they were interested in was huge derivatives. I am not even particularly against derivatives (though very hard to control blah blah) but what they have to do with banking I have no idea. I didn’t last long.

    • lifelogic
      Posted December 20, 2013 at 9:21 am | Permalink

      To reply:

      Yes indeed, your views we know and I agree with in the main. But what about Cameron’s views and the Tory parties views? What about the 299 tax increases, the 17? agencies that failed totally in Rochdale, the endless increase in the absurd complexity of tax laws,employment laws, the green subsidies and the endless growth in essentially parasitic (or just pointless) areas of activity by the state and the EU.

    • Bazman
      Posted December 20, 2013 at 9:43 am | Permalink

      Its a good point that gambling, pawn and money lending tax avoiding companies paying minimum wage using zero hours contract is not growth or certainly not the growth we need. You have yet to tell us which employment laws are ‘mad’ or ‘absurd’. Presumably any that does not allow exploitation by hire and fire at will under the guise of free negotiation, as if a cleaner on a zero hours contract is a self employed accountant. Basically wanting the poor to compete with each other for lower wages and worse conditions without government interference and pretending this will improve their lives, by creating more of the same worthless jobs. As if. No reply as you have no idea like other married to or inherited wealthy fools we could name and their sniggering supporters. Cats well out of the bag there. Charity not welfare in political terms. Except for them selves and their companies. .As if we didn’t know. Ram it.

    • ian wragg
      Posted December 20, 2013 at 5:23 pm | Permalink

      You have views John but we want action. If at work when something broke down I said to my boss I have a view on what is wrong with it but I can’t fix it then I would be sacked. This is what’s going to happen to large swathes of the ruling classes at the next 2 elections.
      Jam tomorrow is finished.

      Reply I and like minded colleagues have been providing action – the veto on the Fiscal Treaty, the cut in the EU budget, the pledge for an In/Out referendum and now changes in approach to migration and benefits. Anyone outside the Commons can offer more, but it is winning the votes in the Commons that delivers.

      • ian wragg
        Posted December 20, 2013 at 6:42 pm | Permalink

        All smoke and mirrors John. Our EU contribution has risen dramatically. The fiscal treaty was a mirage and the Romanians are still coming on 1st January. As I said, we are not entirely stupid and for an educated person like you to make such crass comments is sad.
        There’s nowhere to hide, the internet has blown the cover for self serving politicians. We can now read Der Spiegel online and see Merkel stitching us up whilst Cameron roles over and has his tummy tickled.

      • JoeSoap
        Posted December 20, 2013 at 10:34 pm | Permalink

        Reply to reply

        Tinkering at the edges. Civil Servic-ese.
        Changes in approach to migration = suggesting the possibility of a future reduction by mechanisms yet to be validated.
        Changes in approach to benefits = a cap at a level many people aspire to earn working 40 hours a week, and flagging the possibility that our taxes won’t be chucked into the gutter of supporting immigrants from ex-Soviet satellite countries…
        The pledge of an EU referendum subject to a party at 30% of votes suddenly winning an outright majority…

        This is all whistling-in-the-wind stuff, I’m afraid. I’d put more money on a mass move to a new party than the existing Conservative party winning with this mealy mouthed approach

  6. Gary
    Posted December 20, 2013 at 8:36 am | Permalink

    So many faulty assumptions here imo.

    GDP, as measured, only increases with increased consumption. It takes no account of the quality of consumption. Innovation replaces and improves existing goods and the quality of life can improve with the same amount or less consumption. The current GDP is a banker construct to reap more debt repayments by the unsustainable ever increasing GDP.

    The only reason prices increase in the future is because bankers inflate the money supply to enrich themselves off savers. The natural order of increasing innovation and efficiency is a gentle deflation of prices. The correct way to fund investment is not to print money to lend, but to save money to lend. That way you don’t inflate and distort prices and misrepresent supply and demand.

    In an efficient global economy you must trade because specialization and division of labour means that no one country can make everything. We all stick to what we are good at and swap those goods for goods from foreign specialists. Selling each other houses and burgers won’t help us live a comfortable life.

    We had a crash and recession because of PRIOR debt fueled over-consumption, the remedy is not to get out of the hole by repeating the mistake by taking on more debt . This is insanity. This is just more heroin for the addict.

    This is going to end badly. Whoever is running this economy is economically illiterate.

    “The issue which has swept
    down the centuries and
    which will have to be fought
    sooner or later is the people
    versus the banks.(and the politicians, I might add)” – Lord Acton

    • Arschloch
      Posted December 20, 2013 at 11:17 am | Permalink

      I do not know why LL worries so much about Miliband becoming PM in 2015. Doing a bit of economic history you could attribute the Conservatives as being the “party of economic incompetence”. Remember the Barbour boom, Lawson, ejection from the ERM with Lamont and now a bubble from the former Sky Sports journalist Osborne

      • lifelogic
        Posted December 20, 2013 at 3:57 pm | Permalink

        Well Labour will surely be worse, due to the influence of the state sector unions and the absurdity of most of their lefty tax borrow and piss down the drain ideas, but not that much worse.

        Cameron largely has the same ideas too alas.

  7. David Hope
    Posted December 20, 2013 at 8:42 am | Permalink

    This strikes me as complacent. Yes saving is deferred consumption but all consumption requires production. Before 2008 this was nowhere near the required level given our trade deficit. 2008 was a reality check. So I believe there is clearly a wrong type of growth. Let’s not forget that consumption on debt will cause capital allocation to be directed towards more consumption in future. E.g more shops, malls restaurants, estate agents. This won’t fix the trade deficit

    Just because the criticism of the type of growth often comes from the left doesn’t make the point untrue. Obviously there policy would only widen both trade and government deficits though.

    • Posted December 20, 2013 at 3:26 pm | Permalink

      No, you have it the wrong way round – it’s production that requires consumption.

      Consumption above all else is what’s needed.

      JR is right.

    • Anonymous
      Posted December 21, 2013 at 12:10 am | Permalink

      Nice to see Ed Balls squirming though, isn’t it ?

  8. petermartin2001
    Posted December 20, 2013 at 8:43 am | Permalink

    I like the theme of this post. It’s good that we should think about the fundamentals of economics from time to time. ‘Exports are good – imports are bad’ is more the conventional wisdom, but it is always a good idea, IMO, to question these kind of assumptions. I would argue that both are good -providing the imbalance between the two is not too great.

    It may be a step too far for some readers of this blog, but I would also apply the same scepticism to the conventional economic wisdom that government budget deficits are bad but surpluses are good. I would argue that either could be good, or bad, depending on the prevailing economic conditions of the time.

    • oldeconomists
      Posted December 20, 2013 at 11:08 am | Permalink

      You are right, in a way, to say that ‘exports good, imports bad’ is a kind of conventional wisdom. What is amusing however is that Marx, Schumpeter and Friedman all agreed that exports were foregone domestic consumption, ‘lost’ consumption as it were. Especially if the assets obtained in return could be depreciated at will by the consumer. Quite a trio of dead economists!

  9. alan jutson
    Posted December 20, 2013 at 8:43 am | Permalink

    From my experience of dealing with the general public for 40 years, a slump, depression, or a recession, you can call it what you like.

    In general terms, for the majority there is no lack of money, but simply an unwillingness to spend what they have.

    Human nature works in many ways, but spending is all about confidence in the future.
    For the majority, if they feel that they may not be able to replace savings, then they tend to hold back on spending.
    For the majority, if they feel that they cannot make future debt repayments, then they tend not to over borrow, or borrow at all.

    Yes of course there are those who do have a genuine money shortage, and again those who will overborrow, but the figures show that there are many more savers than borrowers, and always have been.

    The crime that Government has committed, is to actually encourage and reward debt with low fake interest rates, whilst at the same time punishing those who have invested for the future with the same low interest rates, and a taxation policy which has reduced disposable income, which could have stimulated the economy.

  10. Brian Tomkinson
    Posted December 20, 2013 at 9:18 am | Permalink

    I see, you loyaly support policies designed to create a housing price bubble and a debt fuelled consumer boom. Gordon Brown come back all is forgiven.

    Reply Silly response.

    • Brian Tomkinson
      Posted December 20, 2013 at 10:32 am | Permalink

      Silly was it? S&P are quoted in the Telegraph:”The rating agency said Britain’s economy was recovering on the back of private consumption and residential investment but said the outlook remained negative, reflecting its “view of risks to the sustainability of economic growth”.

    • Brian Tomkinson
      Posted December 20, 2013 at 11:07 am | Permalink

      More comments from the Telegraph- are they silly too?
      ‘ More data that came out this morning is on the UK’s trade deficit which has been described by many as “disappointing”.
      The trade in goods deficit in the third quarter was £29.4 billion, compared with £25.4 billion in Quarter 2 2013.
      Exports fell by £3.1 billion (or 3pc), while imports rose by £0.9 billion(or 0.7pc)
      UK current account deficit balloons to highest since 1989.’

  11. Bazman
    Posted December 20, 2013 at 9:25 am | Permalink

    Where does banking fit into this when they are basically just profiteering from taxpayers money and skimming off the top of companies in the form of bank charges and high interest rates? Smaller banks cannot compete with larger banks being given free money the car industry it should be noted sucks in about four times what it exports in the form of parts to build the finished product.

    • Posted December 20, 2013 at 3:27 pm | Permalink

      Set up in business and show us how it’s done.

      Put your money where your mouth is.

      Do it!

      • Bazman
        Posted December 20, 2013 at 4:56 pm | Permalink

        What has that got to do with banking? Nothing. Ram it.

      • uanime5
        Posted December 20, 2013 at 8:05 pm | Permalink

        Why would Bazman have to start a bank to show that small banks can’t compete with large banks? Why not just examine how the current small banks are competing?

  12. John Eustace
    Posted December 20, 2013 at 9:55 am | Permalink

    Surely a corollary of your argument is that the growth will only be sustainable when our balance of trade is back in balance. This is the important structural deficit that is little commented on. When collectively we are earning our way in the world, then we will have cause to celebrate with a few glasses of quality English bubbly.

  13. Posted December 20, 2013 at 10:01 am | Permalink

    Sorry John, but much of the ‘success’ is built on sand in my view.

    Shares are going up on bad news. Markets are no longer markets when they are hanging on the words of politicians.

    Have you noticed that real stuff like gold and silver are heading East while we are left with paper and electronic bits and bytes?

    I believe we rely too heavily on pen-pushing and paper trading and we are forgetting that we have priced ourselves out of much of real world goods trading.

    The response is always that we should go for high quality; high tech; high margin. This is the tail wagging the dog: we are forced to think in those terms because we are running such an unproductive economy. It’s also arrogant if we consider how quickly the Chinese and others are advancing in these areas.

    We must compete on all levels. We must rid ourselves of employment legislation and welfare payments that are pricing people out of work and preventing us from competing.

    If we do not get ourselves competitive again; if we continue to arrogantly assume that low cost manufacturing is ‘below us’ and only fit for foreigners, it will all end in tears when we realise – and world realises – that we are trading worthless paper.

    • uanime5
      Posted December 20, 2013 at 8:09 pm | Permalink

      We must rid ourselves of employment legislation and welfare payments that are pricing people out of work and preventing us from competing.

      Unless you expect people to live in third world conditions they won’t be able to survive on third world wages and working conditions. It’s idiotic to expect someone in the UK to be able to compete with someone in China in a race to make things as cheaply as possible.

      • Posted December 21, 2013 at 10:12 am | Permalink

        Nobody would work for less than they could live on otherwise they would starve.

        It is attitudes like yours that is leading to poverty and misery and unemployment.

        All I am asking for is a free market

        • Bazman
          Posted December 21, 2013 at 3:32 pm | Permalink

          They would starve slowly, without working they would starve faster. Are we to compete with five to a room/car making the poor compete on who can take the least pay in a race to the bottom? It’s attitudes like yours which will take us into the second world like Russia. At least there is enough land to be a peasant. there. The average British person will not tolerate this in such a rich country and quite rightly so. As he says. Idiotic. No reply as you have no idea. Ram it.

        • uanime5
          Posted December 21, 2013 at 11:12 pm | Permalink

          No Kenneth you are asking for people to work for less than they could live on because that’s the only way the UK can compete with China when making low cost goods. It’s also your view that employers should be able to exploit their staff as much as possible to reduce prices that’s causing increasing levels of poverty and misery.

  14. Neil craig
    Posted December 20, 2013 at 10:21 am | Permalink

    A boom based in rising house prices, in turn based on a government produced artificial shortage and government subsidy of mortgaging, is not real growth – it is a misuse of the money system to persuade people they are better off than they are, and thus to spend.

    A “sustainable” (in the correct use of the word) boom is one that involves the country producing more real wealth. Such a boom would require that the nation use more energy (rather than more bits of paper), something which all 3 Westminster parties are resolutely opposing. We could have real, at least world average (6%) growth any time our ruling class wanted it.

  15. PayDirt
    Posted December 20, 2013 at 10:39 am | Permalink

    Investment is not just for future consumption, investment is needed to replace aging infrastructure, of which there is an awful lot in the UK. Stopping our systems falling apart will not lead to more consumption but will help us simply to survive, that is the more fundamental aspect of investment than facilitating more consumption.

  16. Atlas
    Posted December 20, 2013 at 10:45 am | Permalink

    Any recovery based on artificially low Interest Rates is going to end in tears.

  17. Mark
    Posted December 20, 2013 at 11:17 am | Permalink

    A succinct explanation of the economic basics that underlay recent history: we borrowed abroad some £800bn via mortgages and inflated house prices, and sold off industry and prime London property to foreign interests to pay for our imports. At the same time we insisted on closing down large chunks of industry and energy supply through aggressive regulation and taxation. When foreign loans were withdrawn (not rolled over) in the banking collapse we simply printed money to replace them.

    The question is what is different now? Mortgage lending is up 30% year on year and house prices are rising at an annualised rate of 15%. We continue to insist on making energy expensive, investing in high cost sources rather than low cost ones, increasing our cost of living and hobbling the competitiveness of industry as Jim Ratcliffe the head of INEOS recently pointed out. This does not provide incentives for productive investment. Instead the government is championing HS2 as another way to destroy value.

    Today the English Business Survey was released. The data suggest that growth is strongest in “Education, Health, Public Administration and Defence” – which seems odd in the light of supposed cutbacks in Whitehall and defence. Perhaps it’s all those extra students whose degrees will never pay for themselves?

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/267676/13-P132J-October-2013-english-business-survey-data-tables.xlsx

  18. Martin
    Posted December 20, 2013 at 11:25 am | Permalink

    ” They made it easier to trade in the things France and Germany were good at, and less easy to trade in the things we are good at.”

    What are these things that are less easy to trade? Pawn shops? Pay day loan companies?

    My experience was different to yours. Before the single market it was customs paperwork/forms for the countries the company I worked for could export to.

  19. lojolondon
    Posted December 20, 2013 at 11:41 am | Permalink

    Excellent article – especially “The rules of the EU are especially difficult for us, reinforcing a permanently large deficit with the rest of the EU. They made it easier to trade in the things France and Germany were good at, and less easy to trade in the things we are good at.”

    This is why the whole “Financial Services Tax” and Legislation is so bad for us. It is well known that the effect will have a disproportionate effect on the British economy, thus taking away one more thing we are good at, and (our enemies hope) damaging our independent spirit and making us more dependent on EU handouts.

    You would think we had learnt by now – why are we still in the EU, as we re the second-largest contributor and the smallest beneficiary of the whole system, and amazingly, almost every law passed is Anti-British in some way?
    The answer, of course, is to be found in the self-serving politicians, especially those who should be retired, who enjoy many years of earning (many ed) Euros, (words left out ed), with a gold-plated pension, just for trotting out the party line. The Kinnock family is the best example of this.

  20. Anonymous
    Posted December 20, 2013 at 11:48 am | Permalink

    Why aren’t interest rates at normal levels and what will happen to growth when they are ?

    The growth prior to 2007 was obviously not good growth. We are being austere because we have recent experience of what bad growth looks like. Bad growth is based on the notional value of houses and loans borrowed against them.

    “The whole point of saving and investment is to consume more later”

    The whole point of saving and investment is security and maintaining one’s ranking. As it happens savers and investors often happen to be the most frugal of consumers.

  21. Posted December 20, 2013 at 11:49 am | Permalink

    JR is right to promote consumption. That point is actually an implicit attack on interest rate cuts and QE as a means of escaping recessions. I.e. given a recession, it’s hard to see the point of encouraging more borrowing and investment: why not encourage consumption – and if businesses thing that extra consumption warrants more investment, then fine.

    Simon Jenkins has written several articles since the crisis debunking the fact that we’ve channelled stimulus into the pockets of banksters rather than consumers. E.g. see:

    http://www.theguardian.com/commentisfree/2013/apr/24/if-abenomics-works-leaders-look-like-monkeys

    and

    http://www.guardian.co.uk/commentisfree/2011/oct/18/europe-defunct-idealism-munich

  22. Bert Young
    Posted December 20, 2013 at 11:50 am | Permalink

    I am most concerned that the psychology of having what you want whenever you want it will ( if it has not already done so ) lead to a completely irresponsible society. The idiom of keeping oneself within ones means seems to have gone out through the window ; all around me I see young people spending without due regard and ignoring the true facts of the costs in their lives . Undergraduates are leaving university with enormous debt often without any reasonably paid employment in sight ; their proud parents have supported them during their period of study in the belief they will soon be able to carve their way back to a balanced livelihood . I want to see ” reasonable expectation ” built into the personal loans system and a greater emphasis and incentive to exports and exporters . Its good news that the economy is recovering but it is bad news that personal debt has reached astronomical proportions .

  23. Excalibur
    Posted December 20, 2013 at 12:00 pm | Permalink

    Thank you for the incisive article, John. With regard to exports, we learn that the UAE does not intend to buy 60 Eurofighter Typhoon aircraft in what many will see as an apparent snub to David Cameron. DC recently completed expensive trade delegations to both India and China. May we know what trade deals arose directly from these visits ?

  24. A different Simon
    Posted December 20, 2013 at 12:20 pm | Permalink

    What about the consumption which people would have had during retirement which has already been brought forward in order to pay for overpriced accommodation ?

    Isn’t there going to be a massive hole in consumption in a decades time due to raiding the piggy bank now ?

    It’s not going to be pretty seeing people liquidating everything they own from stamp collections , engagement rings , private transport and getting a pittance for it all because the market will be flooded by others doing the same thing .

    • BobE
      Posted December 20, 2013 at 1:09 pm | Permalink

      Does anybody collect stamps anymore??

  25. forthurst
    Posted December 20, 2013 at 12:23 pm | Permalink

    A better title for this didactic essay would be, “Gread is Good”. Does consumption, particularly of imported goods, lack moral rectitude? When we import goods and services, we, correspondingly, export jobs, and vice-versa. If the imports are of raw materials for which there is no possible substitute, then they are necessary for our comfort if not our survival. When a country has a structural trade deficit, it will almost certainly have an unemployment problem; if a country has a structural surplus, it will either have to lend to its debtors or purchase its debtors’ assets. We have structural unemployment in this country which is however hidden by the fact that millions of people do not deign to join the workforce at all and millions do so for wages on which they cannot possibly survive, in many parts, without substantial taxpayers’ support. It would be better to aim for a balance in external trade so that jobs which do not pay a living wage can be alowed to disappear and taxes for all could be reduced. That would be expedient.
    It could no be achieved, however, by flooding the housing market with cheap money underwritten by the taxpayer.

    • forthurst
      Posted December 20, 2013 at 12:33 pm | Permalink

      ….and I would further add, unemployment is hidden in governmental do unproductive and unnecessary work schemes which could also be removed to reduce taxes.

  26. acorn
    Posted December 20, 2013 at 12:58 pm | Permalink

    Are you taking the piss JR, you’re talking nonsense, and you know it.

    Anyway the transatlantic wires are singing after three poor school reports for Osborne Carney and associates in two days. The “austerity” is starting to show its ugly mug now. Households are topping up to their debt ceiling and having a little flurry of consumption. The UK has a higher than average GDP dependency on consumer spending, hence yesterday’s retail sales numbers were not good enough.

    After six years, GDP is now only 2% below its pre-crash level, I reckon this to be an OECD record for the slowest recovery. Public Sector Finances release can only be described as grim. The ONS boys accidentally defined austerity with the sentence; “The central government net cash requirement for the year to date 2013/14 was £41.4 billion, £25.7 billion lower than the same period in 2012/13.” That’s another £25.7 billion of spending power taken out of our pockets. At least the Treasury didn’t pay itself any interest, via the central bank, on its own debt in November!

    However, probably the most striking aspect of the updated national accounts is the current account balance which, with a deficit of some Stg20.7 billion, was more than Stg14 billion larger than in the previous quarter. Moreover, at some 5.1 percent, the red ink posted its largest percentage share of nominal GDP since the third quarter of 1989. However, only some of the damage was caused by the shortfall on trade which doubled to Stg10.0 billion.

    Confirmation of the buoyancy of domestic demand and remarkable deterioration in the external accounts is evidence that the much sought-after rebalancing of UK GDP simply is not happening. This cannot be good news for the durability of the economic recovery and leaves the pound looking very exposed at current levels. No doubt the BoE will be doing its best to jawbone its currency weaker over coming weeks and months.” (Read this last paragraph again if you didn’t spot the clue first time.)

    • arschloch
      Posted December 20, 2013 at 5:41 pm | Permalink

      Apart from the unparliamentary language I could not agree more. JR needs to write a few articles on the economy with his (professional) head on rather than use the load of old cobblers Osborne sends him. Why does nobody ever write in and say that for themselves things are going great because they cannot, even Albemarle & Bond, the pawnbroking chain, is in trouble!

      Reply I write my own material and research from the official sources. The only times I have reproduced a government case I have clearly labelled it as such, and never about the economy.

  27. Dennis
    Posted December 20, 2013 at 1:26 pm | Permalink

    Quote: “People buying more cars is leading to more investment in car capacity. The purpose of providing more homes and cars is so people can consume them, use them, enjoy them. That is not against the laws of economics. ”

    Unfortunately at the present state of the biosphere it is against the Laws of Thermodynamics.

  28. Tad Davison
    Posted December 20, 2013 at 4:17 pm | Permalink

    John, we need growth, and to constantly bear down upon the nation’s debt, but we also need to protect the most vulnerable in society. I had an e-mail today that says you were among many Tories who voted against a motion on food banks in the House of Commons. As it’s Christmas, and the season of good will to all men, care to give us your take on it?

    Tad

    Reply Many of us Conservatives objected to the Labour motion and attitude towards food banks, as the Hansard reveals. The Coalition government has welcomed food banks and referred people to them, something Labour did not do when in government. I will be setting out my thoughts on foodbanks in my next local paper article which will appear soon on the local pages of this website. The statements by the Minister and several MPs on the Conservative side summed up much of the case. Of course we need to tackle poverty – that is the point of our many and expensive programmes to tackle alcohol and drug dependence, unemployment, low skills etc, the main causes of poverty.

    • uanime5
      Posted December 20, 2013 at 8:25 pm | Permalink

      John given that you can only be referred to food banks 3 times per year would you mind explaining how they’re going to help unemployed who can no longer claim benefits because of a 3 year long sanction (currently 700,000 people are in this position) or anyone who can’t afford to buy food because of the bedroom tax (up to 660,000 people are in this position)?

      I’d also appreciate it if you can explain how these expensive programmes are mean to tackle unemployment given that they’ve often proven to be less effective than doing nothing. I recommend focusing on how forcing people to work 30 hours per week for months in jobs that don’t give them any skills is meant to help them become more employable, especially when it dramatically reduces the amount of time they have to look for paid employment, because this is what Osborne and IDS are currently promoting.

      Reply Unemployment is falling and many are now finding work

      • uanime5
        Posted December 21, 2013 at 11:16 pm | Permalink

        Unemployment is falling because of all the jobs created over the Christmas period; something that will end in January, resulting in unemployment rising. Just like it did this time last year.

        Also many people removed from the unemployment register haven’t found work but are on government schemes designed to massage government figures, such as the work programme (in training) or workfare (in employment).

        Reply One of your worst! If unemployment falls are seasonal as you say, then if unemployment is still falling on the one year measures as it is that must be a fall on top of the seasonal variation!

    • Tad Davison
      Posted December 20, 2013 at 8:48 pm | Permalink

      Thank you. I eagerly await your comprehensive response. If I agree with it, I’ll support it unreservedly, but I would argue from the outset that food banks shouldn’t be necessary in the first place. It seems to me there’s presently a great big hole in the safety net if we’re going backwards.

      But I agree that the welfare state shouldn’t just be about giving, it should also be about empowerment. People need a way out of poverty, and the creation of many new jobs provides welcome relief – provided they aren’t zero-contract, aren’t part-time, they pay a living wage, and our own people benefits from them!

      I know there are regulars on these pages who are in an unfortunate position and unfairly so, as they would love the chance to work and be self-sufficient. And there are those such as the elderly, the young, and the infirm, who cannot fend for themselves and they all deserve a little dignity.

      I think it is unforgivable that Osborne has used words and phrases that sets people against people, and communities against communities. That is broadly reminiscent of the situation in the USA where the divide between the ‘haves’ and the ‘have nots’ is cavernous and when a person is on skid row, it is somehow seen as their own fault. We as a society need to be more civilised. We simply cannot demonise a whole swathe of the public because they are unable to cater for themselves. (words left out ed )
      So let’s take a step towards a more equal and inclusive society and make food banks a thing of the past by removing their necessity altogether. If we go the other way, it’ll be soup kitchens on street corners, and that reminds me of something I believe the late Lord Hailsham once said – ‘If we don’t give the people social reform, the people will give us social revolution!’

      Cameron has been warned!

      Tad

      • A different Simon
        Posted December 22, 2013 at 8:24 am | Permalink

        Well said Tad .

        I’m sure that one of the reasons the global banking industry treats ordinary people with contempt is that the elites have never had any exposure to ordinary people .

        Obviously they have got away with the economic destruction they have wrought and none of them will be going near a court room (unless it’s to fight for bonuses from insolvent banks which are propped up by the taxpayer) .

        A bit of community service in exchange for those bonuses might acquaint them with the consequences their actions have on other people and even cause them to reform their behaviour .

  29. Lindsay McDougall
    Posted December 20, 2013 at 4:26 pm | Permalink

    Yes, but it should be consumption that is not driven by excessive debt. The State deficit is 7% of GDP, State debt is 80% of GDP, both numbers being double what is healthy. On top of that, average household debt is 140% of average household income, which is unhealthily high, and it may be rising. The Bank of England is deliberately keeping interest rates very low and creating easy money, one of the objects being to make it easy for HM Government to finance its debt. I wonder how long this approach will retail the support of the international money markets; the yields on UK bonds are already creeping up. And investment funds are now chasing higher yields and risky lending is re-emerging. Let us just keep reminding ourselves that the interest that the State pays on its debt is greater than the education budget.

  30. Max Dunbar
    Posted December 20, 2013 at 5:03 pm | Permalink

    ‘Saving and Investment means buying things that can help us consume more in the future’. Why the assumption that this will lead to more consumption at a later date? Do older people with substantial pension provision and savings spend more or less on consumables than younger people?

    Reply Pension assets are only saved in order for people in old age to consume more than they otherwise would be able to!

  31. uanime5
    Posted December 20, 2013 at 8:36 pm | Permalink

    Growth in the UK economy is producing its fair share of discontents., They are often the same people who claimed there would be no growth under policies designed to cut the deficit.

    In the past people pointed out that we weren’t having any growth because of the austerity policies; which somehow involved increasing the deficit in cash terms. It also resulted in the chancellor borrowing more in 3.5 years than Labour borrowed in 13, which is why the national debt has massively increased.

    Now people are pointing out that we’ve only had growth because of the chancellor ploughing huge amounts of money into the housing market and that this growth isn’t producing more jobs or higher wages.

    The rules of the EU are especially difficult for us, reinforcing a permanently large deficit with the rest of the EU. They made it easier to trade in the things France and Germany were good at, and less easy to trade in the things we are good at.

    Can you elaborate on this? Are you referring to the financial services sector being less valuable in other European countries?

    Surely if it was easier to trade in one good than another good private companied would focus more on making these goods.

    Now is not the time to go all puritanical about the wrong kind of growth.

    Well if growth A only benefits business A, then people in business B aren’t likely to benefit from it. So a growth in the housing industry is unlikely to benefit the high street or manufacturing. There may also be concerns if the growth A mainly benefits a small percentage of society, rather than the general population.

    Higher house prices and more mortgage finance is leading to a pick up in housebuilding.

    The only house building you get is for houses that can be sold for as much as possible, not housing that the average person can afford. You also have to pay more in housing benefit due to higher house prices.

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  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
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