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New year column from the Journal
This year the economic and political cycles coincide, with a General Election taking place in May and businesses consolidating the last two years of economic growth. The two are intrinsically linked but – as all politicians know – economics trumps politics.
As election season gets underway we should be concerned by the weakness of political parties and lack of support they have among the general public. The roots of this are within the political establishment itself but too often a sceptical media feeds the narrative and easy populist epigrams become a way of thinking. As an example, Russell Brand – the comedian - has written a widely published book called Revolution. According to reviews he argues that no corporation should be allowed revenues greater than the nation with the smallest GDP. That nation is Tuvalu, which has a GDP of US$37million – in other words this ill-thought and ridiculous policy would result in virtually all the Journal Top 200 companies in the North East closing and economic chaos and mass unemployment on a scale never seen!
Yet, he was granted the privilege of a platform on the flagship BBC Question Time. It is understandable; the producers were only reflecting the public mood, that gadflies and anti-politics are the flavour of the day.
Opinion formers and decision makers need to step up their game in the coming months; holding the politicians to account but not in a way that twists the issues so much that we throw away the much sought gains of the economic cycle. A lot of the arguments are straightforward. The Government spends more than it can afford; profligate politicians will cost us all dearly. Some politicians will seek to buy our votes with tax cuts others tempt us with benefits and extra public spending.
Business wants serious policies that offer economic stability but, in this pantomime season, many politicians are playing to the gallery.
I like the fact that the deficit is down, that it costs proportionally less to service our debt than if it had stayed where it was in 2010. I also think like a job is the best form of welfare; something Gordon Brown said as Chancellor but that seems to have by-passed some Labour politicians today, who want welfare cuts restored. I am not attracted to the fringe of politics. This is where chaos grows and gains the capacity to wreak havoc on our economy. It is at the fringe that the most vitriolic anti-EU policies are forged; it is at the fringe that the most anti-business green policies take root; it is at the fringe that the harshest xenophobic nationalist language is spoken. The centre ground contains the best debate – left or right – between pragmatic people who want to govern within the best British traditional for fair play and mutual respect. For me, what counts is persuading people to stay mainstream in their outlook and for mainstream parties to connect effectively with the aspirations of people and businesses.
As we start the 2015 business year there are real signs that the gains of the last two years can last.
There are more people in work than ever, even here in the North East we have seen employment grow to record numbers. Latest figures also suggest wages are up 1.6% on a year ago, a tiny bit more than inflation.
Turning to the risks, productivity was allowed to slide in the recession. Many employers, myself included, took the view it was better to keep people on with less work to do than to make lots of redundancies. Now things are busier it is difficult to claw back the productivity gains that were lost.
Strikes don’t help. Office for National Statistics said 782,000 days were lost because of Labour disputes in the year to October, compared with 405,000 in the 12 months to October 2013.
Most of these stoppages have been in the public sector but they are bad news wherever they occur. Nobody wins in a strike; workers lose wages, employers lose output and customers are inconvenienced. In the modern economy wage rises have to result from improved business performance, not come about because of time served.
Private sector business growth continues to be the North East’s best hope for a better and more prosperous future. Businesses are watching the politicians and engaging in the debate but we are also tending to the economy. Politicians will have their time in the spotlight during the election campaign but businesses are ensuring they have the resources to pay for their promises!