Conservative Diary

Economic policy

3 Sep 2013 10:42:48

This talk about the minimum wage reflects the Tories’ growing optimism about the recovery

By Peter Hoskin
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Ahem. Remember when I said, about ten days ago, that it’s worth keeping an eye on the politics of the minimum wage? Well, your acuity will have been rewarded by yesterday’s edition of Newsnight. According to the programme’s political editor, Allegra Stratton, the Tory leadership are looking at ways to raise that minimum. One could be to offer tax breaks to companies that pay above the current level; another could be to lean on the body that sets the wage; another… oh, you’d be better off reading her blog-post for the full list.

If this happens, it would be something of a break from recent political history. Back in 2007, even Gordon Brown was eager to regionalise the minimum wage, so that it was lower in some areas than in others. That idea – as I’ve reported before – was subsequently championed by some within the Coalition, along with more radical options such as suspending the minimum wage for young people. Their concern was jobs; specifically whether the minimum wage dissuades companies from hiring. And it’s still a concern that some have now. As Stratton’s post notes, of the new developments, “this is meeting some resistance inside government amid fears it may alienate business leaders”.

Continue reading "This talk about the minimum wage reflects the Tories’ growing optimism about the recovery" »

28 Aug 2013 11:14:06

The number of households without work is at the lowest since records began - how can we drive it down further?

By Mark Wallace
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Growth ConHomeThe latest ONS report on employment looks at the number of working and workless households. It's an interesting way of looking beyond the headline figures to good and bad news that may lie beneath the surface.

Assessing household worklessness helps us to see the degree to which unemployment is concentrated or diffused. It's a bad thing for anyone who wants a job to be unable to find one, but economically and socially speaking the problem is at least mitigated if other members of their household are in work. By the same token, households who are entirely without work obviously represent greater suffering than a simple headcount of the population will illustrate.

There is good news in the numbers. 17.1% of households with at least one person of working age were workless - still too high, but down on last year and the lowest rate since comparable records began in 1996. 

Continue reading "The number of households without work is at the lowest since records began - how can we drive it down further?" »

27 Aug 2013 08:25:40

Is there anyone left who still supports HS2?

By Mark Wallace
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IoD LogoThings just keep getting worse and worse for HS2. After the IEA's cost warning, the revised financial estimates by Treasury officials and the criticism of the scheme by Alistair Darling and this site's own Tim Montgomerie, now it turns out even its target market don't want it.

A survey of 1,300 business leaders, carried out by the Institute of Directors, shows that 70 per cent think that HS2 offers them no improvement in productivity.

Aha, supporters cry, of course the majority wouldn't expect to benefit directly, as HS2 is targeted at particular regions. That's true, but unfortunately for them only 29 per cent of the business directors polled in the North West think it offers good value for money.

There's also a handy reminder that Yorkshire and the North West are not the sum total of "the North" - support in the neglected North East is even lower. In fact, in no region of the UK do more than 35 per cent of those polled think HS2 is good value for money - and this is from a survey carried out before the IEA and Treasury's higher cost estimates were released.

Continue reading "Is there anyone left who still supports HS2?" »

24 Aug 2013 08:00:33

The battle lines have been drawn over the minimum wage – but will the battle ever be fought?

By Peter Hoskin
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One of the most intriguing political stories in today’s papers is tucked away on page 19 of the Guardian. Apparently, the Government is going to do more to “name and shame” those employers who do not pay the minimum wage. According to Jo Swinson, who announced the measure yesterday, “this gives a clear warning to rogue employers who ignore the rules that they will face reputational consequences as well as a fine if they don't pay the minimum wage.”

Why so intriguing? Because it goes against the grain of what other ministers have been saying, and doing, about the minimum wage. As I reported back in April, the Government has changed the remit of the Commission that sets the level of the wage, so that it does so “without damaging employment or the economy” – a directive that raises the possibility of future freezes or cuts. And, as I revealed in March last year, ideas such as regionalising the minimum wage, or even suspending it for young people, have been floating around Downing Street since 2010. None of this may be incompatible with tougher policing of companies, but there’s certainly a friction between the policies.

Continue reading "The battle lines have been drawn over the minimum wage – but will the battle ever be fought?" »

20 Aug 2013 12:05:20

Let’s look ahead to the Autumn Statement – it could be the first of a new breed

By Peter Hoskin
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Autumn Statement

The dead space of summer is the time for casting forward to the future. What will happen at the forthcoming party conferences? What are the chances of another Con-Lib coalition? Can Ed Miliband hold on to his party’s leadership? But there’s one scrap of politics-yet-to-come that isn’t getting as much attention as these but that is just as significant: this year’s Autumn Statement.

Normally, I’d be wary of over-emphasising the importance of one of George Osborne’s (or any Chancellor’s) statements – they rarely alter the parameters of British politics. But this one is likely to be different. Judging by the current mutterings from the soothsayers, including the CBI yesterday, this one could contain something that has been unfamiliar to Osborne: improved growth forecasts from the Office for Budget Responsibility.

Continue reading "Let’s look ahead to the Autumn Statement – it could be the first of a new breed" »

16 Aug 2013 08:07:14

Please, Chancellor, don't be tempted to extend Help to Buy in the Tory manifesto

By Peter Hoskin
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Reading the papers, this week, has been like running into a brick wall. There are just so many stories about house prices and house-building, including:

  • “House prices rose last month at their quickest pace in nearly three years, gaining 4.6 per cent compared with a year earlier, Halifax said.” – The Times, Tuesday 13 August
  • “Industry insiders said an average home will be worth £266,708 by the end of next year.” – Daily Express, Wednesday 14 August
  • “The communities minister, Brandon Lewis, hailed figures showing that housing starts rose to 29,510 in the second quarter of 2013 as evidence that the market had turned the corner.” – The Guardian, Friday 16 August

The common denominator between all these reports – besides the bricks and mortar – has been the Government’s two-part Help to Buy scheme. Why is demand for houses rising? Because of Help to Buy, say expert witnesses. Why is house-building on the up? Because of Help to Buy (or at least the first part of it), say ministers. Help to Buy, Help to Buy, Help to Buy.

Continue reading "Please, Chancellor, don't be tempted to extend Help to Buy in the Tory manifesto" »

13 Aug 2013 17:28:21

Help to Buy isn't just one scheme - it's two very different things

By Mark Wallace
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Growth ConHomeThe Treasury's Help To Buy scheme, which will guarantee billions of pounds worth of mortgages, has raised many concerns. Howard Flight, Graeme Leach and Allister Heath are just three of the well-respected economists and market-watchers who fear the policy will inflate a housing bubble.

Their concern is justified - the scheme effectively commits taxpayers' money to underpinning investments of up to £600,000, fuelling demand without necessarily having any impact on supply. First time buyers and existing homeowners will be eligible, and there is no requirement for the houses involved to be now, so there's no guaranteed focus on the construction sector.

All of which must be a bit irritating for Eric Pickles. For, while "Help To Buy" is generally viewed as one monolithic scheme, it is actually two distinct streams of money, with different conditions attached and very different impacts on the property market. 

Continue reading "Help to Buy isn't just one scheme - it's two very different things" »

7 Aug 2013 12:45:54

Carney's new focus on unemployment may be well-intentioned, but it neglects the danger and evils of inflation

By Mark Wallace
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Mark CarneyMark Carney's first major announcement as Governor of the Bank of England contains the kind of message you would expect from someone standing for election, rather than a technocrat with targets to hit.

His new approach to monetary policy adds in unemployment to the consideration of what to do with interest rates, joining inflation as a priority in the MPC's equation. 

Targeting unemployment not only appeals to popular concerns, but it does make sense as an indicator of spare capacity in the economy. 

However, building in a consideration of the level of unemployment cannot be done in a meaningful way without watering down the importance of controlling inflation. We are in danger of forgetting the dangers of inflation to economic health, and the evils of inflation when it comes to robbing savers, workers and pensioners of the fruits of doing the right thing.

Continue reading "Carney's new focus on unemployment may be well-intentioned, but it neglects the danger and evils of inflation" »

26 Jul 2013 08:46:50

What type of growth does George Osborne want? The risky hare, or the reliable tortoise?

By Mark Wallace
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Tortoise and the HareAs I wrote yesterday, 0.6% growth is good news, but it must be handled carefully by the Chancellor. It also raises the larger question of what kind of growth the Coalition wants. 

Is any growth, regardless of narrowness of base or sustainability, desirable? Or does George Osborne still seek a rebalancing of the economy by region and by sector - preferring expansion in the North and the Midlands to another South East boom, and favouring new manufacturing jobs over those in financial services?

There will always be a contest in the minds of politicians between tortoise growth, which may be slower but brings wider benefits and longer term stability, and hare growth, which happens swiftly and can be boasted about in the headlines before an election comes around.

We now know that Blair and Brown embodied the hare, and the nation is still paying the price. Once upon a time, Osborne regularly allied himself with the tortoise - but that particular theme has fallen silent of late.

In fact, looking at this week's announcements one would assume that hare growth is back in fashion.

Continue reading "What type of growth does George Osborne want? The risky hare, or the reliable tortoise?" »

25 Jul 2013 11:58:49

0.6% growth is good news - but we should be careful about how we use it politically

By Mark Wallace
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OsborneMore good economic news for the Chancellor, following last week's labour market statistics: the UK economy grew in the most recent quarter by 0.6%.

As we discovered from the false alarm over a double dip, there is reason to be a little wary of such figures. Political and media demand for speedy statistics outstrips the ONS' ability to compile them, so first estimates of quarterly growth like this are never based on the full data - in this instance only 44% of the eventual information was available.

That means it is likely to go up or down a bit in the final reckoning, but it is still good news. That Ed Balls has shifted his attack to the cost of living and the decline of real wages shows that the Osborne's credibility on economic growth has been strengthened.

Conservatives would be wise not to holler too soon about "green shoots" and suchlike, though - the Government's language about healing is carefully chosen in order to avoid two risks. The first is the political risk of appearing celebratory while many still suffer - the economy is still 3.3% smaller than it was at its pre-crisis peak. The second is the economic risk that despite these positive signs a new Eurozone or, worse, BRIC crisis could still strike at economic stability - leaving excessive triumphalism looking rather stupid.

What we should point to instead is the character of the recovery. This is growth across multiple sectors, including construction, manufacturing and services, which is a sharp contrast to the previous trend for the collapse in construction to drag down the overall numbers.

If all continues to go well, over the next two years the Government will have built up an economic story to shout about in time for the election. For now, the good news blunts any attempts by Labour to go on a "Plan B" offensive - and that is welcome in itself.