Lord Bates of Langbaurgh was the Conservative Member of Parliament for Langbaurgh 1992-7, and Paymaster General 1996-7. Last Sunday he argued that the recovery was underway. He returns to his theme in the article below.
Sir John Major gave an excellent interview on the Andrew Marr programme yesterday, but one sentence stood out; after citing some of the economic indicators he said,
“My guess—and this is something that ministers can’t say, but I can—that in due course we will find that we have passed the bottom [of the recession].”
When I heard it I began to think why must minsters be reticent about calling the recovery?
Ever since Norman, Lord Lamont famously observed the ‘green shoots of recovery’ in October 1991 – based on a CBI Survey – there has been a collective ‘Macbeth-like’ paranoia amongst ministers from ‘calling it’ too early for recovery. This is understandable as there is a natural fear of not wanting to appear out of touch with the everyday experience of the people as did Labour Treasury minister, Baroness Vadera when she observed ‘green shoots’ in January, 2009 – remarks which were immediately disowned by Gordon Brown's No 10. But this is different. This is not wishful thinking. The recovery is underway.
Following Norman Lamont’s remarks in 1991 a Sunday newspaper began a ‘green shoots’ index to try and spot the nascent recovery but needed to scrap it because they couldn’t find data to back it up (although later figures showed that the longest sustained period of economic growth we have ever recorded began in the final quarter of 1991.) If that same Sunday newspaper were to re-introduce the graphic then we can point to many, many indicators to insert onto each blade of new growth…
- Employment levels in the private sector are now at all-time record levels. There have been over 1 million new private sector jobs created since the 2010 General Election, more than replacing the 489,000 jobs lost in the public sector. Unemployment has fallen for the fifth successive month in a row.
- Industrial output rose by 2.9% in June—its fastest rise for twenty-five years.
- Manufacturing output rose by 3.3% in June—its fastest rise for ten years.
- Business start-ups in 2011 were the highest for decades: There were 471,466 new private sector businesses started last year compared to 16,621 business insolvencies.
- Exports from the UK reached £39.2 billion in June, 2012 close to all-time record levels—the record level being set in November, 2011.
- Key market exports China exports are up 74% in the past year; exports to India up 94%; exports to Russia up over 100%.
- Domestic house prices rose for the first time since 2009 in July, up by 0.8% on the month.
- UK balance of payments deficit narrowed from £4.3 billion in June to £1.5 billion in July confirming a trend which showed that between May and July the overall trade deficit of the UK narrowed from £10.5 billion to £8.6 billion over the previous three months.
- Central government receipts increased by 3.6% in June over the same period in 2011.
- Real incomes set to increase in 2013 according to the Centre for Economic & Business Research. Moreover, incomes will rise fastest for the lowest income earners (1.5%) and least for the highest earners (0.5%)
That isn’t a ‘green shoot’ it is more like an economic green field. So why are we so reticent about the recovery?
The patient came out of the emergency room in 2011 where it had been on the critical list for the previous three years and has returned to the ward. Now the patient is back on its feet, a bit shaky, but beginning to walk. What is required at this stage is not to keep denying the patient’s recovery, or warning them they could pick up a fatal bug or stumble and fall at any minute but to encourage the patient on its way to a full recovery so long as they continue with a strict regime of physio (controlling reducing debt, reducing burdens on business and raising productivity). This motivational role is critical for full physical recovery and so it is for economic recovery too.
There are three areas where we still need to see clear evidence of improvement: bank lending, house building and retail sales. All these areas of economic activity are overwhelmingly driven by consumer confidence. Confidence is key. People need to hear that and see that from their political leaders. Fear is anxiety over what might be, hype is exuberance over what might be, but confidence is built on what is. This is an evidence-based recovery and the patient needs to be instilled with Olympic sized self-belief by ministers for that recovery to be made complete.