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Greg Clark high resolution 2Greg
Clark is Financial Secretary to the Treasury and MP for Tunbridge
Wells. Most Tuesdays he will be writing this new 'Letter from a Treasury
Minister' for ConservativeHome readers. This – his third Letter – reflects on last Wednesday's Autumn Statement.
Follow Greg on Twitter.

Last
week’s Autumn Statement confirmed that progress has been made towards our key
economic goals. Despite conditions which have been more severe than anyone
expected, we have brought the deficit down by a quarter from the disastrous
level we inherited; over a million new jobs have been created by growing
businesses; and we are currently on track to haul back the State’s share of the
economy from the ruinous 47.7 per cent of national income it reached under
Labour to 39.5 per cent within 5 years.

It
is headline figures like these – the high-level analysis of the whole economy –
that have predominated in the commentary on last week.  Yet an overlooked – but very important –
section of the Autumn Statement looks beneath those headlines, and it reveals
an economy much of which is more resilient than many think.

If
you look at the British economy in terms of the industrial sectors that
comprise it, it is apparent that two – financial services and North Sea oil and
gas – have had a particularly torrid time.  The financial sector has contracted by 12½ per cent in real
terms since the economy’s pre-crisis peak, while the North Sea oil and gas
industry has shrunk by a brutal 38½ per cent. Both of these sectors are crucial
to Britain’s future prosperity and in forthcoming Letters I will say something about how we can help revive them.


But
if you strip out these two sectors from the economic data, then the standard perspective
changes somewhat.  The UK economy, when
these two sectors are excluded, has grown by over 4½ per cent in real terms
since the beginning of 2010.  Not
spectacular, not by any means full pelt, but nevertheless real growth averaging
about 2 per cent a year.

The
source of this growth is broadly spread: manufacturing, for example, has
expanded by 4½ per cent since the beginning of 2010, and non-financial business
services have grown by 11½ per cent.

Furthermore,
finance and energy aside, the growth of the UK economy from 2010 has been consistently
ahead of Europe.

The
international environment in which we operate is very uncertain and we can’t determine
the future from the past.  But two
truths are revealed by this analysis. 

The
first is that, for all the headline numbers about the low average growth rate,
in practice, no-one ever experiences the average. A few parts of the economy
have undergone a major reverse, but much of the economy has been quietly
growing.  Very many real businesses
have been expanding their production, taking on workers and selling more goods
and services.  To do this needs
investment. That’s why it was important to support that growth in the Autumn
Statement by helping growing companies to fund their expansion.  That is the reason for the tenfold
increase in capital allowances, the cut in corporation tax and the £1½ billion
of export finance. All of these measures release more cash to growing companies
to fuel their progress.

The
second is that, as well as pursuing the right macroeconomic policies, a focus
on the average is not enough: the competitiveness of particular industries
matters. Acting on Michael Heseltine’s recommendations in his recent report,
which was endorsed by George Osborne in his Autumn Statement, we must ensure
that there is the fullest possible understanding of the opportunities presented
by individual industrial sectors, and a bespoke approach to seeing that the
Government does everything in its power – regulatory, deregulatory, fiscal and
promotional – to make the most of the contribution of each distinct industry.

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