Please take the opportunity to read the full article, but some of the main debating points are as follows:
- At the end of last year, UK businesses were sitting on a £65 billion cash surplus – the difference between profits and capital expenditure – and are on course to replicate that in 2010. By comparison, in the early 1990s, corporates were on their knees. Once more certainty is achieved, corporates will want to do something with all that money and the UK could be on “the cusp of the mother of all investment booms here."
- The Budget delivered businesses £7bn of tax cuts – shifting the burden of the net £8bn tax increase on to banks through the new levy and on to shoppers through higher VAT. The message was clear: creating jobs is more important than individual living standards.
- Between 1994 and 1999, Canada, Sweden and the UK each tightened fiscal policy by about 7 percentage points of GDP – roughly the same as the 8 percentage points the Coalition intends to shave off spending by 2015. As a result, over the five years to 1999, public sector employment fell by 50,000 in Canada and Sweden, and by 294,000 in the UK. But, at the same time, private sector jobs increased by 1.7m in Canada, 250,000 in Sweden and by 1.95m in the UK.
- The Treasury expects 490,000 public sector jobs to be lost in five years – with the bulk being cut at the end of the consolidation period. But they will be more than offset by the 1.8m jobs the Office for Budget Responsibility (OBR) expects to be created in the private sector.
- Britain's recovery is all about jobs. More jobs mean faster economic growth. More jobs mean greater income for the Government and less outlay through the benefits system. More jobs mean a more stable social and political system. David Blanchflower and others arguing for larger Government stimulus, make exactly the same point – but they see the public sector as the job provider.
- Official employment numbers have also been encouraging. According to the ONS, some 308,000 jobs were created by private business over the three months of the summer – which more than offset the 22,000 public sector job cuts. The good news was, however, tempered, though, by the fact that 166,000 of the new jobs were part-time and that there are now more people in part-time employment looking for full-time work than for many years.
- Merfyn King noted that more than half a million jobs will probably need to be created in businesses producing to sell overseas – compensating for fewer employment opportunities serving UK consumers or the public sector. According to the Ernst and Young Item Club, exports are picking up and will add 1.3pc to GDP and another 0.6pc in 2012.
- Growth has outstripped all projections this year. Just three months ago, GDP was forecast to rise by 1.3pc in 2010. Expectations are now for 1.6pc. This week, the ONS publishes third quarter growth numbers that are expected to reaffirm the strength of the recovery – a robust quarterly rise of 0.5pc.
- There have been four consecutive quarters of growth, and none of the leading forecasters are predicting a double-dip – not the Bank of England, not the OBR, not Item, not Fathom, not the National Institute of Economic and Social Research.
- By the time the cuts start to take effect, the UK will be about 18 months into the recovery – not dissimilar to the gap between the end of the 1990s recession and the start of the subsequent fiscal consolidation that set Britain on course for the boom of the past decade.
Given the focus on public sector spending and employment, it is good to finally read a very different viewpoint that focuses on the role of the private sector in leading the UK out of recession and into growth.
