AUTUMN LEAVES AND GREEN ECONOMIC SHOOTS

 

 

 

The last leaves are falling from the trees but George Osborne will be pointing to the green shoots on Thursday in his Autumn Statement.

 

If there is going to be a turning point for this awkward coalition government, this should be it. Apart from that sunny day in the Downing Street rose garden when the two posh boys (as I called them at the time) did the coalition deal, we have lived through unremitting economic gloom. Business investment dried up, the banks went into their shell, wages were frozen, interest rates went to zero. Only inflation seemed to go up.

 

Now at last the economic indicators are looking up and the North of England will be hoping for some sensible decisions from George Osborne to help our part of the world. Although places like Liverpool have shown more resilience than in the past, the North has suffered under the ConLibs particularly in the haemorrhaging of public sector jobs and the popular squeeze on benefits.

 

Unemployment has actually been slightly rising this autumn in the North West and the squeeze on living standards continues as the controversy continues over zero hours contracts. Youth and graduate unemployment remains a real problem in the North and the shortage of new houses remains.

 

So why might this be a turning point for the government. Simply because it looks as if the Chancellor will have all the economic indicators pointing in the right direction for the election in 2015. The news on headline growth and the deficit will be good. Economists are forecasting the following growth figures: 2013 1.6%, 2014 2.3%, 2015 2.5%.

 

Its expected George Osborne will revise down unemployment and inflation figures. There may even be expectations of real wage growth. We’ll then have to wait to see if there is aresponse in terms of business investment.

 

The Chancellor is likely to make much of new figures showing a reduction in public borrowing forecasts, perhaps down to £80bn by 2015/16.

 

Sweeteners for the voters will follow the already announced free school meals and marriage tax breaks. Petrol prices are likely to be held down again and personal tax allowances are likely to rise.

 

The headline measure is likely to be the transfer of “the green crap” that the Prime Minister referred to from energy bills to general taxation.

 

So will Labour be blown out of the water by all this. Ed Balls can no longer entertain us with his flat lining gestures in the Commons. Well not entirely, the living wage issue has been well handled by Mr Ed. The real wage gap from peak remains substantial and GDP per capita in 2015 will be way below the last good Labour year of 2008. Then there is the psychological issue that the Tories fear. If people think the economic pressure is off may they feel they can vote Labour again and get away from all that nasty Tory economic rigour?

 

The Lib Dems will remain associated with Budgets and Autumn Statements right up to the election but we will increasingly hear from them the message that they prevented even more vicious cuts from the Tories and lifted millions out of paying tax which, they claim, was not a Conservative priority.

 

After his statement, the Chancellor will pray that the polls will start turning like the economic indicators. Realistically all the Tories can hope for is to be the largest party in 2015. However if the voters want to punish them for three years of misery and forget Gordon Brown’s administration, then they will hand over a repaired economy to Mr Ed.

 

 

 

HS2: THE LAST STRAW FOR BALLS?

 

 

Ed Balls is becoming a real liability to the Labour Party. His close association with Gordon Brown was one of the reasons why Ed Miliband didn’t appoint him Shadow Chancellor when he became leader three years ago. It’s often forgotten now that Alan Johnson was Ed’s first Shadow Chancellor.

 

Balls gloomy forecasts about the economy are now seen as over pessimistic. His hasty action, when Children’s Secretary, in sacking Haringey Social Services Director Sharon Shoesmith has led to a massive pay off this week. While that news was coming through, angry Labour MPs told the new Shadow Transport Secretary Mary Creagh that Balls should stop messing about with the HS2 project. This is the issue that is set to be the first big test of the Miliband-Balls relationship.

 

I met Ed Balls in Manchester last week and tried to find out if the negative vibes he had been sending out about this vital rail project for the North was just about keeping costs down or the start of Labour’s disengagement with the project as a matter of principal. Balls told me it was the former, but then failed to reassure me that even if spending was kept within current figures, Labour’s support was guaranteed.

 

That’s been the problem in recent weeks. Balls has been sending out signals that its not just the summer cost increases that he’s worried about, but that he might like to use the money on other things if he gets into power.

 

Then there was the removal of Halewood MP Maria Eagle from her job as Shadow Transport Secretary. Labour sources tell me she was “incandescent” at not being told about Balls Brighton conference remarks about HS2.

 

The leaders of Leeds and Manchester councils received high praise from Transport Secretary Patrick McLouglin for their support for HS2 at a conference in Manchester this week. When the city’s leader Sir Richard Leese joined the minister on the platform I asked the councillor for his assessment of what Ed Balls was up to.

 

Leese claimed that Mary Creagh was as keen on HS2 as Maria Eagle, although hours later Creagh was parroting Balls heavily caveated views to that meeting of Labour MPs. However the council leader went on to tell me that it would be “irresponsible” for his party to go into the next election opposed to HS2.

 

It has even been suggested that Balls has been getting some grief from his wife Shadow Home Secretary Yvette Cooper. They have neighbouring constituencies in West Yorkshire. HS2 is planned to run close to the community of Altofts in her Normanton. Pontefract and Castleford constituency and 100 people turned up at a meeting to discuss it with her. I mentioned this to Mr balls who said I’d been staying up too late reading the wrong articles.

 

Reports suggest Balls may not come off the fence till next spring or even closer to the General Election. This is irresponsible. Doug Oakervee, the outgoing chairman of HS2 Ltd confirmed to me at the Manchester conference that all party consensus was vital to potential investors.

 

Ed Miliband should tell Mr Balls to issue a statement backing HS2 if the current budget is kept to. If Balls resists he should be sacked. Labour has suffered before when its leader refused to deal with a troublesome Chancellor.

 

There are a number of potential successors. Two, Shadow Business Secretary Chuka Umunna and Shadow Pensions Secretary Rachel Reeves were at a Downtown Leeds event recently and were very impressive by all accounts.

 

 

 

TORIES CAN BE NORTHERN CHAMPIONS

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I never expected to say this after Eric Pickles destroyed our regional development agencies, but the party has a chance next week to position itself as the defender of the North.

 

The private consensus in Brighton was that Ed Balls was preparing us for a Labour government to scupper HS2. His remarks, and those of other party spokesman after his speech on Monday, went beyond legitimate worries over escalating costs. Balls has got his eyes on the £50bn projected cost of HS2 for other projects. The problem is that in practice that money has been assembled for this scheme and would not automatically be available for health or schools.

 

How depressingly familiar all this is. I thought the Olympics marked an end of timid party squabbling Britain unable to take the big decisions at the right time. In fact we are late with this scheme. The West Coast main line is already over capacity south of Rugby. That’s why places like Blackpool are denied a direct service. North of Rugby HS2 would connect our great northern cities like Leeds and Manchester and crucially allow the existing rail network to improve the service to towns and cities not directly on the HS2 line.

 

There are broadly three groups opposed to HS2. There are the small but vocal number of people directly affected by the line who’s homes are already blighted. We must sympathise with them and compensate them very generously. I know how it feels. My home was demolished for a roundabout in the 1960s.

 

There is the London lobby already campaigning for Crossrail 2 oblivious to the historic scandalous imbalance in transport investment between the capital and the rest of the country.

 

And now we have elements of the Labour Party and others who want to spend the money elsewhere. Their argument ignores the point I made above that £50bn won’t be available to be transferred, and it fails to answer the question of what will happen when we are trying to use a Victorian railway two hundred years after it was built.

 

So in Manchester next week I would suggest the Tories seize the initiative. They will be meeting in a building that symbolises the need to move on when it comes to rail investment. Manchester Central station closed in 1969 and is now their conference centre. The government are investing in the Northern Hub, the Ordsall Chord, and electrifying the Liverpool to Manchester line to dramatically improve services on the existing network across the North.

 

The Transport Secretary Patrick Mcloughlin should burnish his credentials as a former miner and claim that it is the Tories who have the best interests of the North at heart in backing HS2. They certainly need some arguments after Labour’s conference in Brighton.

 

RED ED.

 

I asked last week for some distinctive policies for Labour to campaign on and to be fair we got some. The promise to scrap the bedroom tax and the energy price freeze are the best indications yet of how different an Ed led party is from how his brother would have run things.

 

These are concrete proposals with a definite left wing thrust. The more the energy companies squeal the more will people identify with Ed. The claim that, in response to world market forces, energy prices go up like a rocket and down like a feather rings true with hard pressed families in the North.

 

The question is how broad this appeal will be? Are there enough struggling voters in the South to join Ed’s crusade or will they be frightened off as they were when Neil Kinnock was in charge?

 

 

 

IT’S NOT GEORGE, IT’S BALLS !

In 1994 in a brilliant piece of conference oratory,Tory Deputy PM Michael Heseltine was describing a complicated speech on economics that had been made by Gordon Brown. It turned out it had been written by his researcher Ed Balls. So Hezza was able to tell the conference the speech wasn’t Brown’s it was Balls.

 

The Autumn Statement was meant to see George Osborne discredited for having to come to the Commons confessing he’s missed his targets for growth, borrowing and debt reduction. He had to do all those things and the country remains in a dire state. But politics is often about mood and presentation.

 

With a string of announcements to help business, scrapping petrol price increases and measures on tax avoidance, Osborne gave a strong performance in a dire situation. Ed Balls meanwhile was left floundering. An uncertain performance in the Commons will be quickly forgotten. It will be less easy for the Shadow Chancellor and his party to respond to the measures proposed.

 

How for instance will Labour vote on the tiny 1% increase in benefits? Will Labour re-examine its critic of the Coalition that it is cutting too far and too fast whilst there is still political mileage in the claim that Labour got us into this mess? The Private Finance Initiative (PFI) is a case in point. The refurbishment of our schools and hospitals was long overdue but it was an expensive way to do it and the Chancellor’s PFI Mark 2 should ensure that the public purse benefits a bit more in the future.

 

There were a number of measures to help the economy in the North. We are shortly to see the plans for extending high speed rail to Manchester and Leeds. Salford is to get ultra fast broadband. Local Enterprise Partnerships are at last going to get some real money to play with. From 2015 they will be able to bid for a single pot of money covering local transport,housing and skills. More money is being poured into the Regional Growth Fund although it has been weakened by resignations and complaints of slow delivery. The new business bank is to have a billion pounds set aside for SME’s.

 

Finally back to the politics of the Autumn Statement. It is quite possible the UK will lose its AAA rating soon but leading economic commentators like Gillian Tett of the Financial Times and Robert Choate of the Office for Budget Responsibility seem relaxed about that. They claim investors have already factored the downgrade into their calculations. They also argue that most countries are struggling at the moment and the UK won’t be that disadvantaged.

 

Nevertheless the loss of our AAA status would be a blow to the Chancellor who must be hoping his package doesn’t unravel in the run up to Christmas. Memories of the aftermath of the Budget with rows over pasty tax and charities were clearly on the mind of key Coalition Ministers in the run up to the Autumn Statement. The senior Lib Dem Ministers involved in this process, leader Nick Clegg and Chief Secretary Danny Alexander are determined to see the economic strategy through and are working effectively with their Tory counterparts.

 

That reassures the markets, but its a very different picture up North. I was talking last week to a senior ex Lib Dem councillor who gained office when the Lib Dems first started to make an impact on northern councils. He has seen all that swept away. His bitterness was tangible. The price for the Lib Dems signing up to this budget reduction strategy is high.

 

May I wish you as happy a Christmas as austerity will allow.