NATIONAL > Strong medicine never tastes good
Published: Wednesday, 26 Jan, 2011
To hear some of the media, you might think that the fourth quarter performance of the UK economy was the first step to hell. The overall economy shrank by 0.5 per cent and that is never going to be a cause for celebration but hang on, why are we being told that the problem stems from government cuts not stimulating an economic recovery. Certainly, from where I am sitting, a number of previously well funded public bodies are now unable to add to their funding committments
To hear some of the media, you might think that the fourth quarter performance of the UK economy was the first step to hell. The overall economy shrank by 0.5 per cent and that is never going to be a cause for celebration but hang on, why are we being told that the problem stems from government cuts not stimulating an economic recovery. Certainly, from where I am sitting, number of previously well funded public bodies are now unable to add to their funding committments and a number of the private sector businesses that claimed to rely on public sector driven work are suffering as a result: however, it is not altogether clear that those private sector businesses were all acting in a businesslike manner. Andrew Gilligan's excellent article in the 24 January Daily Telegraph reveals that overcharging is an endemic feature of the PFI deals on which Gordon Brown relied to keep public expenditure off the books. Indeed, most public sector bodies routinely overpay for products and services. So, one has to ask, if, in order to 'stimulate' the economy, the government has to overpay for products and services that it needs then could not a case be made that the private sector companies supplying those products and services are simply not up to the job and have no place in the economy? Or is it the case that, with less public sector money to hose at projects, private sector companies supplying the market will start to become competitive in those terms with which businesses competing for private sector contracts have become familiar - price, service, flexibility, etc.
The bright notes in the economy were that exports and manufacturing (both firmly private sector matters) saw growth while , on a less bright note, services saw falls. It may be that the fall in the service sector relates to the overall decline in economic activity and that, as value creating activities start to lift the future economy, services will once again improve, albeit with less public sector work. But what is certain is that an economic recovery based on the hard value creators of the manufacturing sector and the stringent budgetary realism of serving the private sector will have much more long term substance and sustainability than economic growth based on the confidence trick of taking money from people's back pockets (pension funds, savings, etc) and stuffing it into their front pockets (salaries, consumer spending, etc). It should also encourage investors into the economy. Tough times are around the corner but, if the government has the ability to see through the necessary economic developments and weather the storms of protest and worse from vested interests, it should create an better founded and more resilient UK economy for the future.
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