The Government didnt cause the current problems but as they are in the driving seat they need to do something about it...

As yet more statistics hit the street proclaiming further economic gloom and doom some of us, me included, are inclined to scratch around for straws of comfort rather than to simply accept the implications of the evidence that some would say is staring us in the face. Burying our heads in the sand? Maybe, but on the other hand what’s to be gained from burying our heads in our hands? In any case, is relying upon these traditional indicators of financial health helpful?


In recent years, largely as a result of incredible technological changes, the world has moved on at a pace that few would have thought possible ten years ago. It was only 15 years or so ago that email was regarded with suspicion, that websites were rare in the extreme and that social media was not even a twinkle in some ‘techies’ eye. As the use of technology has become more widespread customer practice and demand has changed dramatically.

Was it only a few years ago that people maintained that internet sales wouldn’t take off claiming that before purchasing buyers would need to be able to touch and feel whatever it was they were buying. Nowadays we can reflect, not only upon how wrong they were, but also upon the wider impact of the online revolution. One could write volumes on the subject; demands for greater convenience, lower prices, that most white goods are now regarded as being disposable to name only a few of the outcomes.

Simultaneously attitudes have changed in other areas. Remember the heady days when our houses earned more than we did and, for those who had any, cash deposited in the bank grew in value with little or no effort. Those were the days when, if servicing debt became difficult, we just borrowed more; happy days, when water was cheaper than milk and diesel was cheaper than petrol. Weren’t those the days too when the experts decided that it would be more cost effective to send manufacturing processes to parts of the world where they could be carried out more cheaply while we would thrive on ‘high value’ processes alone.. What crazy times they were.

My point? Well we can bemoan rises in public borrowing, widening of the balance of payments, reduced standards in education, the wrong type of leaves on the line, and any other thing that takes your fancy, but the fact is that, unless somebody is prepared to do something as a result, such indicators are of little more than academic interest. In any case, given the way the world has changed in recent years, I would question whether the traditional indicators are as pertinent as they were in the past. The one thing I am sure of is that the time for simply sitting with our heads in our hands has long passed we need action, energy and direction leading to growth in the economy. This government didn’t cause the current problems but as they are in the driving seat they need to get on and do something about it.

Economy!!

It is frightening to think that we live in an age where it seems that the country is being driven by those who can shout the loudest and shout the longest providing sound bites for the press and applying pressure on politicians.

The publication this week of the inflation figures attracted just such a response from the city hoping presumably that press and politicians alike would ‘lean on’ the Bank of England. “Inflation must be brought under control, interest rates must be raised to do so”. It seems to me that many of those making such assertions are several places removed from the realities of every day business life and, in any case, are pursuing a very narrow agenda.

I cannot believe that anyone would argue against the view that inflation needs to be brought under control but I have serious concerns for anyone who suggests that interest rates should rise. Our current levels of inflation are not driven by domestic business nor do they result from consumers entering a new age of profligacy. Inflation is higher than we would like because indirect taxes and world commodity prices have risen. Quoting figures published by the BBC, if it were not for these factors, domestic inflation would be below target at 1.9%. It is difficult, therefore, to see what difference raising interest rates would have on inflation in any case.

In difficult economic times businesses and employees (except those working on London Underground) have displayed incredible levels of restraint, the former absorbing as much cost as it can and the latter resisting the urge to make impractical wage demands. Few would be able to continue to do so if the cost of borrowing rises too.

The last thing any business needs is an increase in borrowing costs (assuming of course it can get it) and an increase in the cost of mortgages, etc. hitting their employees and customers could be catastrophic.

As confidence in the economy grows I acknowledge that the Monetary Policy Committee will have to carefully manage a rise in interest rates but I cannot see that being justified in the foreseeable future. In the meantime if the powers that be are going to listen to those that shout too much I hope they listen to me.