Michael Fallon’s message for the Bank, the Government, Europe and everyone else: we really must do better

By Peter Hoskin
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Michael Fallon gave a speech last night. In many respects, it was exactly the sort of speech that you’d expect from a minister of state for business. It gambolled through many of the measures included in last week’s Budget, from the “£2,000 jobs tax cut” to the Heseltinian initiatives for local growth. It brushed into Mr Fallon’s specialist subject, and the subject of a speech he delivered last month, which is deregulation. And it landed on well-worn topics such as infrastructure and apprenticeships. All very normal, all very easy to ignore.

Expect – hang on a second – there was actually something quite unusual about this speech. Placed throughout it, with some regularity, were little baubles of pessimism and grim realism. This wasn’t the usual “everything’s great under us” that we hear from politicians. It wasn’t even the platitudinous “times are difficult” and “we must do better” that they sometimes deliver. This was something else, with specific areas of strife and disappointment noted. Five stood out to me:

• Inflation. This was perhaps the most ear-catching of Mr Fallon’s Eeyore-style groans. “It’s painfully slow progress,” he said of the Government’s efforts to fix the economy, “made worse by the deepening problems in the Eurozone which takes half our exports, by unexpectedly high commodity prices, and by the persistent failure to meet the inflation target.” Not many ministers have referred to the “failure” – presumably the Bank’s – to “meet the inflation target”, and they’re even less likely to do so now that George Osborne has loosened it. These are words to treasure.

• Employment and apprenticeships. Given recent labour market trends, you might think that Mr Fallon wouldn’t have anything gloomy to say about employment – but you’d be wrong. “Youth unemployment here,” he emphasised, “is far, far too high at 21 per cent compared to 8 per cent in Germany.” And what about the apprenticeships designed to tackle such unemployment, and which ministers tend to present as an unalloyed success? “We know that quality is not consistent across the programme.”

• Lending. As with apprenticeships, Mr Fallon wants to fine-tune the various lending schemes that the Government is currently promoting. For instance, “Because [the Bank of England’s] Funding for Lending is indiscriminate, covering all different types of lending, there’s no distinction between its usefulness as lending for mortgages and lending to small firms … we are working with the Bank of England to review how Funding for Lending might work better for SMEs.”

• Trade and businesses. Mr Fallon began the section of his speech on trade with a disheartening statistic: “it is striking that in the five years since the financial crisis, and despite the depreciation in sterling, we have rated no better than 16th out of the G20 in balance of trade.” And he went on to question businesses themselves: “Too few firms in fact export, and our competitors still do so much better … Why is that three quarters of those SMEs that export only did so first in response to external inquiries?”

• Trade and Europe. And don’t think that Europe escaped criticism, either. “Too much of the single market remains incomplete,” argued Mr Fallon, “in energy, in telecommunications, in services, especially in digital services, what we are encouraged to call the single market remains a series of highly protected markets.” And he continued: “Europe is too inward-looking. Why isn’t it championing free trade across the globe?”

This isn’t to say that this was a disloyal speech. Quite the opposite: Fallon stated the Coalition’s case as well as he always does. Wherever he aired his dissatisfaction, he generally attacked Labour’s record in that area. And, as I said above, he highlighted the policies and measures that the Government is implementing to make this better. “Our reforms mean there has never been a better time for companies to do business in Britain,” is how he put it in his peroration.

But the low-spirited parts of the speech were still striking, and may, I suspect, represent a new template for these things. What David Cameron calls the “global race” – a phrase that Mr Fallon used twice – is tough, and the Coalition wants you to know that. “Good news” no more.