Oberon Houston: Britain is not working

This Christmas day, after the turkey and bubbly have gone down, take a short stroll outside before the light goes. During your walk, the chances are that the only others you’ll see are children lucky enough to get bicycles from Santa. I remember a Christmas ten years ago, when my son was six and we got him his first ‘proper’ mountain bike. It was a big present and we had to save up to afford it, however it is probably one of the most important moments in a child’s youth, and we can all still remember spending a joyful afternoon, despite the grey and drizzle, in an empty car park teaching him to ride his shiny new bike.

Today, that bicycle won’t be such a costly present. A Mountain bike that would cost you £400 a decade ago, can be bought today for less than £100. The only difference is that they are now imported from developing countries for a fraction of the cost of one made here a few years ago. Globalisation is here, and it is benefiting us all in remarkable ways. The cost of goods is falling, we get more for our money, interest rates are low, meaning cheaper mortgages and credit for consumers. The slight downside is that to fuel the expansion of manufacturing capacity in the east, the price of natural resources have risen. However, on the whole, we are better off now than we’ve ever been. Things are good, and why shouldn’t it continue? Well after your stroll, as you settle back in the sofa to enjoy the special edition telly programs, you might want to ponder this, if the rest of the world is working so well, how do we compare?

Gordon Brown boasts today that there is no need to worry about this; he has, and is, achieving for Britain. Before Labour were elected, Gordon Brown said that he wanted to create a ‘classless society with equality of opportunity’. He believed that to achieve this, the poor would need access to education to allow them to participate in the opportunities that they would need to succeed in life. This would be done through the ‘University for Industry’ and ‘Individual Learning Accounts’ (ILAs). This would then create a ‘new society based upon learning, skills and a work ethic’. Markets could be improved by the state, Brown believed, by introducing regulation. He would scrutinise company directors to make markets work more effectively, ‘where they create external costs that are not fully priced in the market’. Heady stuff this, for the former student of history, a potent mixture of meddling in markets and social engineering on a grandiose scale. So how is his project going so far?

Not good. Brown has pushed Britain from fourth to fourteenth in the world competitiveness league. Because of the waste and bureaucracy Brown has created, workers in Britain will have to work the equivalent of ten years longer than their counterparts in France, Germany or the States during their lifetime, just to achieve the same results. In manufacturing the growth in productivity has fallen back to the level of 1974.".

Brown boasts that his ‘New Deal’ created thousands of jobs, unfortunately there is nothing new about this deal, virtually every country has tried this form of job creation, despite the evidence that it is ineffective and expensive. In Brown's case £3.5 billion worth of ineffectiveness. ILAs were not new either, they were considered by the Tories in 1994 and rejected as ineffective. Undeterred, Brown forged ahead and 2.5 million people signed up for training in new skills, 3 times more than expected. By October 2001, the scheme was in crisis. Corruption and fraud was rife, phoney companies and phoney students were stealing hundreds of millions from it. Estelle Morris tried to get the scheme abolished, the Chancellor refused, and therefore she had to stand up in the commons to announce the ‘temporary stop to this successful program’. Ivan Lewis, the parliamentary under secretary of state admitted that ILAs were ‘one of those glossy strategies that do not lead anywhere’. Meanwhile the number of researchers working in Britain is falling and the closure of university physics and chemistry departments is sky-rocketing and our universities are facing a funding crisis.

That’s the result of Gordon Brown's education revolution. What about the business environment? In a CBI survey, 75% of members complained of Governments poor understanding of business and 80% blame increased regulation for inflicting ‘significant damage’ on their performance. Brown boasts at the health of Britain’s economy, but the strength he cites is illusionary.  Expenditure as a percentage of Gross Domestic Product, 35% under the Conservatives, through taxation, has soared to 42% of GDP today, and is still increasing. This is fuelling a public sector boom that has masked a sharp reduction in the country’s manufacturing output. Two million public sector jobs have been created by Brown, yet the manufacturing jobs that pay for them have decreased by one million since he came to power. Public spending increases are at record highs under Brown, yet the benefits to frontline services have been so poor that the Prime Minister wants to re-introduce policies that were in place when Labour came to power and were scrapped, by Brown after he was elected. On top of this, most public building programs have been financed with private money but do not show on the books as debt. Our future generations, outside on bicycles from Santa on Christmas day, will have to pay for it. Brown has mortgaged this debt to them.

Economic growth, again, is lower under Labour that it was with the Conservatives and Britain’s trade gap is the highest it has ever been. To top it all off, Brown has had to recently break his own ‘golden rule’ and is spending more than he gains in tax receipts, thus fast accumulating debt that must be paid for by future generations. Despite this, he plans to accelerate spending until 2008 and further increase taxes and public debt to do so. Yet despite the money he has poured into the health, because of his strangling central control structure, the NHS struggles to improve front line services and many are deeply in debt.

Up until now, we have benefited from globalisation, but it’s a false dawn that we cannot afford to ignore any longer. As the capabilities of developing countries grow, the next generation of Britons will need to rise to the challenge and participate at the leading edge of the process. To help them succeed, it is vital that there is full participation from Government. From education, to business and health, every level will need to participate. But, just as Britain should be gearing up to face the future with optimism and strength, Gordon Brown is dragging it back into the 1970s. Thanks to Gordon Brown, this disaster of a man, Britain is not working.

If you would like to know more about our Chancellor and Future Prime Minister read the book “Gordon Brown” by Tom Bower.

Comments

[Martin Smith]

Very well summarised. In short I think term one was the inheritance term, when Labour started doing damage but the type of long-term damage that is only felt a few years down the road, and the inheritance from the Tories kept the economy strong. Term two was the term where the economy ran on tick, borrowed cash keeping an ever less productive and ever less competitive economy afloat, while term three is the one where all the problems come home to roost.

Such a pity the Conservatives have ignored the economy for eight years. In Osborne's response today he should not let Brown point the finger at the oil price, he should focus on productivity growth, link it with economic growth and note how it improved under the Conservatives and has fallen every year under Labour.

[malcolm]

A fine piece Oberon.I hope you submit it to the Grauniad and the Independant and most importantly the BBC for publication.It deserves to be seen by the general public and not just commited Conservatives like us!

[wasp]

Really good Oberon, don't suppose you fancy being Shadow Chancellor???

[Deckchair of despair]

A very well written essay. I second your nomination as Shadow Chancellor. Seriously, though, it's a damn' depressing business, isn't it, with all that wealth and potential going to waste.

[Oberon Houston]

As usual in macro-economics there are many factors at work, and one needs to sift out what is pulling where. Previous forecasters have not fully accounted for the benefits of global markets, or Brown pouring funds into public services, and this has meant that Browns earlier forecasts were right – not by Brown knowing economics – the man has never had a proper job outside Labour politics in his life, but by pure luck. Therefore he has been able to create a certain amount of chaos in the economy and get away with it, but only up until recently. We need to start attacking him now, again and again and again – he is the key. I would strongly urge you to read Tom Bowers book “Gordon Brown” – it’s a gold mine of information.

Btw – has anyone noticed that Ed Balls is being thrown at the media at any opportunity. Is Brown grooming him for his job? God help us.

[wasp]

Ed Balls will be Chief Secretary in the first Brown Cabinet under Alistair Darling, you read it here first.

[wasp]

Actually I take it back Osborne can stay as shadow chancellor, that was a fantastic speech.

[Oberon Houston]

I agree, very good. I’ve been a bit hard on George since he took over, but he is beginning to redeeming himself.

Brown gets very irritated when people attack him, and underneath the dogmatic shouting he is actually quite insecure. He is the key; as soon as we topple Brown, we are back in power, and it won’t happen until we do.

Its up to us though, the longer things go on, the more he will become exposed. But we cannot let him bluster his way out; we need to lay into him every day of every week of every year until the next election. This should become every Conservative’s favourite pastime.

[Sean Fear]

A very good article. If a few of our frontbenchers were to keep hammering home that sort of message, we might win back a few of those AB voters (many of whom own and/or run their own businesses).

[wasp]

Oberon I agree which is why I think Cameron can get away with his agree with Blair strategy.

With Osborne pinning Brown down on a regular basis and Cameron dangling Blair's reforms on a string it will help to split the Labour party even further.

The longer Blair stays on the harder it will become for Brown to initiate the sort of party renewal he will need to have a functioning government.

[Oberon Houston]

You might be right. When I wrote the education white paper piece I was just trying to stimulate debate on the issue, however it seems to be an issue most are ambivalent about. Whatever we do it must involve bashing Brown. He deserves it, he is, as Blair says, "psycologically flawed".

[Matt Wright]

Good summary of the issues. Agree with most points. I also very much like the line we are taking as a Party that we must look at genuine ways to deal with the rise of China etc. However this is where we have to show we genuinely do understand if the ABs are to get behind us again and the article makes too many assumptions. What do I mean by this? Well the pattern of decline in innovation in our businesses has been steady under both parties, there are fundamental problems here that need addressing in bold ways rather than just sniping at Labour.

[Red Ron]

Utter tory crap. Piss poor. Must do better

[Oberon Houston]

Glad you have taken the time to read the piece Red Ron. If you could expand on your comments that would be really good too.

[Oberon Houston]

In the few days since I have written this article a few things have arisen:

1. Today’s FT front page shows that the level of long tern unemployed among youths has returned to the level of before the New Deal was implemented. A correction though - it has cost £5bn, not £3.5bn I quoted above to run so far.

2. The online Tax Credits system has been shut down due to fraud. This underlines the similar problems with ILAs I mentioned. In essence Labour cannot implement new policy effectively.

3. The Observer published an article last Sunday which shows that only 2.5% of increased spending for the NHS has gone into improving frontline services. The rest has been spent on rising wages, drugs bills and reduced efficiency (partly due to the implementation of the European Working Time Directive, but mainly due to the increased burden from central Govt.).

4. An independent moratorium has been proposed to oversee the controversial PFI initiative.

5. Unemployment has risen for 10 months in a row now, and the number of people on incapacity benefit is 2.5million.

6. Business investment has fallen to the lowest level since records began.

7. Gordon Browns popularity rating amongst all sections od the electorate has nose dived (and rightly so).

Rod Ron? You described my piece as ‘piss poor’. I’m still waiting for your more considered reply.

[malcolm]

I doubt you'll ever get one Oberon.What could he possibly say?

[comstock]

(article read at Oberon's request)

"Economic growth, again, is lower under Labour that it was with the Conservatives " A broad brush statement.... firstly, are you comparing similar points in the economic cycle? And when we have had rapid economic growth in the 80's (and before that in the 20's), well we all know what followed, don't we?

"Two million public sector jobs have been created by Brown, yet the manufacturing jobs that pay for them have decreased by one million since he came to power
"
Cor blimey, you are on *very* thin ice there. Comparative figures for manufacturing employment in 79 and 97 please!! Now some of this decline was inevitable IMHO, and accepting this was one of the hardest lessons Labour had to learn. But to blame Brown for this long term shift from manufacturing to services is frankly ridiculous.

[a-tracy]

Comstock - frankly I'm not interested in a history lesson especially not one from 1979, however, I am concerned about the future both for my children and theirs.

If we cannot grow the economy (excluding public spending) then from where will we get the money to meet tomorrows problems created by Brown?

We have to fund public sector pensions, public sector borrowing, pfi agreements, and a burgeoning welfare committment.

The pensions credit has resulted in many lower earning employees not saving, not putting up into a pension because they have seen their family members punished for doing just that. I can't tell you how many times I hear my dads mates discussing just that!

My husband read an FT article this morning which detailed that the growth generated in the NE of England from 1997 to present day was 2/3 private sector, 1/3 public sector this is an enormous amount of growth from the public purse and what isn't accounted for is how much of the 2/3 growth is based on public sector spending in the service companies that are used to 'hide' the true cost of the public sector now.

At the time of the last election it was reported that 65% of the economy in the NW of England was dependent upon the state, over 70% in the NE of England, NI, and Scotland. How can this benefit the UK as a whole? I'm not sure about the figures for Wales but I suspect they'll be similar. When the chancellor pulls in the reins in a couple of years time I really hope that your faith in the service sector will allow us all to flourish.

Another thing I don't like is that Spain is subsidised through EU subsidies that we contribute large amounts of tax to, then I read that Spanish Companies are bidding for UK based businesses. Does this mean that the profits from these companies will end up in the Spanish exchequers coffers or do they remain in the UK where they are generated?

[comstock]

"Comstock - frankly I'm not interested in a history lesson "

A-Tracey, I was specifically asked by oberon to read and comment on the piece.

There were quite a few historical references in his piece, and (from what I recall from school!) Economics is to some extent about intepreting and analzying historical data to predict the future.

"growth generated in the NE of England from 1997 to present day was 2/3 private sector, 1/3 public sector this is an enormous amount of growth from the public purse "

Sweeden seem to manage OK.

Keynesian economics and high public spending and they are one of the wealthiest countries per head in Europe, if not the world.

[Oberon Houston]

comstock, the point was made that the growth inproductivity os slower today than 1979 - which is a worrying indicator considering the state of the economy in 1979. I agree that its not a sledge hammer to Browns competence, it does however serve to underline that today things might not be good at all. This is also linked to our poor productivity performance since Labour came to power.

Keynesian economics fell apart in the early 70s when we had high spending and inflation and a shrinking economy. It doesn't work and that has been proved. Sweden does not operate a Keynsian economic system - and in many ways has a far more progressive economy than Britain. (ps, in many parts of the UK for more than half of jobs are public sector).

Finally, I'm not blaming Brown for the long-termdecline in manufacturing job, however he is responsible for the poor performance of many high end manufacturing jobs, this is covered in more detail in my other piece on Brown (A Journey Through the Looking Glass)

Its difficult to fully develop some of these arguements in what is a realtively short piece, therefore I can see that many statements might need further discussion to support, however thanks for taking the time to read it!

[Papko]

I agree with the gist of your thread , where i live in Scotland , there is at least as many people working as not .
If half work for the public sector supporting the half that are on Disability/unemployed , where does the money come form to keep it all going ? an ever dwindling enterprise sector , it just cannot continue .
China will continue to rise , buy up all the raw materials , the pacific rim will closely follow , And we will no doubt be borrowing money from them to support our rickety economic frame .
Interest rates will rise higher , to match the inflation caused by oil prices , utility 's /raw materials . And Property will crash as interest rates rise .Straining our entire society who have their money tied up in enormous mortgage' s and personal debt .

I would propose stripping the Government down to its bare essentials , thus halfing teh tax burden , and rely on the great resourcefulness of the British people to lead us out of recession .
rgds
PApko

[The Cowboy Capitalist]

"To help them succeed, it is vital that there is full participation from Government"

Don't you mean its vital that the government stops interfering?

[Oberon Houston]

Posted by: wasp | December 05, 2005 at 14:14

Sorry you seem to be long-gone... but that was a long time ago and we were close!