Graham Robb latest Journal column

By Graham Robb twitter@GrahamRobb

For 21 years orthodox political thinking says that “it’s the economy, stupid!” when it comes to the big battleground issue in elections. George Osborne knows it, Labour knows it too. 

After years of ignoring the urgings of political opponents, the Chancellor’s policies to rebalance the economy and to promote growth are starting to pay off.  The economy is growing with relative vigour; the difference between the amount he spends and the amount he takes in tax (the deficit) is coming down; manufacturing output is up 1.9%; construction has risen 1.4%; and this year so far car sales are up a massive 8%, indicating consumer confidence has started to return!

An American President, Woodrow Wilson, once said 'a political party is of no use unless it is serving a great national purpose.' The Conservatives’ national purpose has been to restore financial credibility to our country. Like thousands of people, I travelled to continental Europe on holiday - it might be sunnier, but the economic weather is much worse. In Greece, Spain and Italy unemployment is stratospheric; higher than even that experienced in the North East during the 1970s and 1980s. In France - home of a socialist president who has much in common with Ed Miliband - unemployment is rising and business investment is falling.

In this newspaper, opposition commentators and MPs often present powerful and articulate arguments against the policies of the coalition, but their own answers are backward looking and when tested, in the dying days of the Labour's government, they failed. Osborne has been sowing seeds that take time to flower, but slowly we are seeing the first signs of success.

The quest to prove the North is losing out is now the number one priority for the Labour Party in this region. But in many cases we are ahead; I have two daughters one works in London, the other in the NHS in the North East, guess which one can afford her first house? The UK is booming in new car sales, which region of the country has the fastest growing automotive supply sector? The Government is beset on all sides for its commitment to renewable energy, but which region is making the parts for new wind farms? The oil industry is much maligned, but when the Government gave tax relief to refresh so-called 'brown field' North Sea wells which region is providing the expertise and engineering? The answer to all these questions is the North East.

We still have problems; unemployment is stubbornly too high, our connections to other parts of the UK are still too slow and too expensive, we need more owner-managed businesses and we still have a skills shortage. However, after last week’s bold statement from the new Bank of England Governor, Mark Carney, we can be sure that interest rates will remain low while some of these important issues are prioritised.

The political debate about the economy will start to turn to the question of living standards. Now we are back from the brink, Labour is suggesting that real wages have fallen as a result of Coalition policy.  The squeeze on living standards is a direct result of Labour’s debt crisis and the consequent need to cut the deficit. Its disastrous economic policy, when in government, has made people poorer today. And if it was in government now, Labour would make hardworking people worse off.  Its policy for more borrowing and more debt – exactly the same old Labour policy that got us into this mess in the first place – would mean soaring mortgage rates and higher bills.

The right course of action was to try to reduce the cost of government, to increase the amount people can earn before they pay income tax, to abolish automatic rises in fuel tax and to freeze council tax. These policies sound simple but have been difficult to deliver because every cut in spending has been opposed by Labour. In addition the policy to cap benefits to the level of the amount earned by the average family was opposed by Labour, if it got back into government I assume that it would reverse it, thus putting up the benefits bill and increasing the deficit.

So, despite it being the least trendy thing to write in a newspaper, I say thanks to the Chancellor for sticking with tough policies to make some of the positive indicators return. We are not there yet but his decisions have put the economy on course to reach ‘escape velocity’ and deliver lasting improvements for the long-term.