Thursday, 12 August 2010

Forecasts negative, outcomes positive

We in the Liberal Democrats are used to predictions (in the form of opinion polls) falling short of actual figures (numbers of Liberal Democrats elected). This continues. In spite of ratings reported in the press seemingly entering negative territory, we are continuing to hold our own in local by-elections since the coalition came to power in Westminster. Indeed, if one counts town council by-elections, we are showing healthy gains. We are holding on to the increase in membership we made at the time of the general election.

So it is no surprise that the general air of doom in the media is lightened by what is actually happening where it matters. Property repossessions are down on last year, whereas they were expected to rise, and the Council of Mortgage Lenders is revising its forecast for the rest of this year. The employment rate is rising fast and the claimant count is continuing to fall. Given that the redundancies in the private sector announced last year should still be working themselves out, and that there is evidence that employers have endeavoured to retain key employees during this depression (having learned their lesson from 1996/7 when they let too many skilled people go, and were caught short in the recovery), I find the former statistic surprising as well as gratifying.

There is an interesting contrast in today's "Independent". The front page and the five pages which follow, largely written by Sean O'Grady, the paper's economics editor, lead on "The Gathering Storm: Britain's Faltering Economy". On the other hand, associate editor and principal economic commentator Hamish McRae lists reasons to be cheerful.

My guess is that, as in 1997, the recovery is going to be faster than predicted and that growth will be slightly above the Bank of England's forecast. However, I am expecting that banks will be cajoled or, as Vince Cable threatened in a recent interview, ultimately forced, to lend to small and medium enterprises. The trouble is that, as last week's half-yearly reports showed, the banks continue to make larger and faster returns on their "casino" activities.

I have a modest proposal for the government. Rather than go down the legislative route and slap extra taxes on the big banks, why not threaten to remove government business from them? Government departments, including the Treasury itself, must give the clearing banks billions of pounds worth of business every year merely to carry out their normal functions, no doubt spread evenly across the market so as to be fair to everyone. That business could be withdrawn from banks who did not have a good SME lending policy, or which unnecessarily put basically viable businesses into receivership for the sake of quick profits.

1 comment:

Frank H Little said...

This is not to say that there are no repossession hotspots, and, sad to say, some of the worst are in Wales, as Peter Black points out. He calls for the Welsh Assembly Government to tackle them.