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Osborne's Maggie moment....

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26 January 2013

... 'The Lady is not for turning' is what she famously said, I was in the audience at the time and participated in the cheering.....

Now is the time for Osborne to echo her words.   'The night is always darker just before dawn' as they say and the same can be said for the economy.  We can be grateful now for Mrs T's resolution and in 10 years time or even sooner we will be equally grateful if Osborne is also resolute.

There is, however, one thing with which I can agree with Legarde about - the language of austerity is wrong even if the core policies that result in its use are right. Osborne and the government should not talk about austerity, government spending cuts should not be referred to as austerity measures, certainly not in the current context.  They should be referred to as an essential rebalancing, of chopping back the bloated Dracula state that sucks the lifeblood from the economy.

Language is important in the context of the economy simply because confidence is of vital importance.

Now a 'resolute stance' by Osborne does not mean that he should do nothing.  Indeed the current position means that the measures I have been advocating for so long are more important than ever.  Further spending cuts to balance tax cuts allied to supply-side reform will help boost economic prospects.  Osborne knows this but he is facing opposition from the Limpdems but he and Cameron need to defy them and challenge them if necessary.  Osborne, we know, previously advocated many such measures but was over-ridden by Cameron to appease the Limpdems.  Now they must act and tell the LimpDems to knuckle under or see electoral annihilation.

But - what is he truth behind the headline figures.  Bad news is always good news for the media who do not look behind a headline.  The Q4 estimate of a 0.3% contraction looks bad but remember it is an estimate.  Indeed I have previously pointed out the shortcomings of how the GDP figures are calculated.  But there are even more anomalies behind these particular figures than I have identified.  Asset management company, Hendersons, have recalculated these figures to iron out the anomalies and they have found that the underlying figure is 0.5% GROWTH.   Now why should we believe Henderson's - well they are a major investment company looking after £billions in assets and have no political axe to grind.  They are looking for a basis to inform their investment decisions on which their reputation depends and on that reputation and the outcomes they get, people like me will decide whether to recommend their funds......

Perhaps in this lays the explanation for why, in the real economy, unemployment is falling and employment is growing despite the poor headline growth numbers.  An essential rebalancing and correction is taking place, one that is desperately needed.  This is dragging down the traditional economic measures after more than a decade of those measures being artificially bloated by government policies that built the economy on a bubble of government and private debt.  All bubbles burst and as a result a far more robust and sustainable economy will result.  Until then we have to take it on the chin because there is no easy way out of this.
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