Anyone coming within shouting distance of a television screen today will be confronted with a flurry of journalists anticipating eagerly the ‘unprecedented’ triple-dip recession that the economic figures released this morning seem to harbinger. Their macabre relish for what is at least three months away is quite misplaced, even if the indicators offer little prospect of relief in the short-term. The big picture seems to be a series of very minor fluctuations around the zero growth mark, and, in that context, the journalistic hysteria is somewhat over-exaggerated.
Responding, the resort to citing capital infrastructure expenditure is trumpeted by our political opponents, and it seems an increasing attractive concept for the Treasury. Yet the lead-time for most, if not all, of these schemes will do almost nothing for economic growth in the immediate term. What we need – and have needed for some considerable time – is a package of measures that will stem the crisis of confidence in the economy, stimulate private sector demand, and drive export growth.
For those of us who have been pressing the Chancellor for several years to take the first two of those issues more seriously, there is much disappointment, but little surprise, in today’s figures. It pains me that what I have been predicting since at least the time that the Coalition came to power, continues to happen. Small businesses are the engine of growth in any market economy, and have been hampered in accessing credit. Business investment is depressingly low, and the Government’s effort to ease access to credit has been frustrated by the toxic combination of an apparent intransigence of banks alongside an unhealthy hesitation causing businesses to defer investment decisions. Many small businesses are deeply anxious about taking the plunge and promoting their products in ever more challenging international markets – and the objective of an export-led recovery appears just a lofty ambition.
But as Mr Osborne soaks up the exuberance of Davos, I would like him to reflect upon the emotional aspects which today’s statistics conceal. One of the biggest issues holding us back is a psychological disposition: a collective anxiety is provoking people to retrench rather than invest. Nowhere is this more apparent than in the housing sector. Yes, we have a shortage of supply – which is set to get worse unless we can accelerate the construction of new homes – and there are challenges around affordability (exacerbated by supply).
People who own their own homes are in a position to invest in their homes; home improvements make people feel better and generates an infectious upsurge in well-being. Levels of confidence can only be improved through this virtuous cycle of economic stimulus, and the construction sector gets a boost that it has lacked since the crisis exploded. Many small businesses stand ready to deliver, and there would be a multiplier effect rippling through the economy. Very swiftly, our entire economic outlook is transformed, and rather than debate which point around zero economic growth we will hit, the mood of the nation changes.
Big gestures with long lead-times are not the answer to today’s numbers; yes, a programme of infrastructure improvements has a contribution to make to our recovery, but the immediate priority must be to address the challenge of business and consumer confidence – and the emergency triage demands appropriate measures to stimulate the private sector.
So come on, George, why not use that Alpine air to change course? The arguments are well-worn, but the approach needed is new. And the potential rewards for us all are truly transforming.