Thursday, 21 February 2013

The British economy remains a riddle..

Good Morning. The economy continued its tour to parts unknown yesterday. Jobs were up - some of them even went to Brits this time - productivity was down again, Sterling was down even more and the Chancellor's prospects of hitting his deficit target this year were called into even greater question. The good news first.  ONS data for the three months to the end of December found a record number of people in employment, a rise of 154,000 on the last quarter. The number taking unemployment benefit also fell by 12,500, smashing analyst expectations of a 5,000 drop. As we report, two of every three of these jobs went to a British worker. That may not sound a great deal but in the context of the figure since 1997 (on average three in four jobs have gone to someone born abroad) it's an improvement. It also suggests that positive reports earlier this month about a private sector revival in northern England were on the money, and that the recovery is not being driven solely by the transient workforce found in London and the Home Counties - good news on the rebalancing front.
But all is not rosy in Britain's garden. Rising employment has been tempered by a continued fall in the value of wages. Average weekly earnings rose 1.4pc in December, CPI sat at 2.7pc. Living standards are the big battle ground in fiscal policy at present, and real wages have now fallen every month for the past three years. Likewise productivity was also down - in December we worked longer (0.3pc) and produced less (-0.2pc). There's precious little feelgood factor in the British economy, despite shortening dole queues.
This hasn't been helped by Sir Mervyn King's one man war on the value of Sterling. The minutes from his penultimate Bank of England meeting as governor revealed that he was foiled in his attempt to create yet more QE money (by six votes to three), but as the FT (£) reports, this was enough to cause a Sterling crash. The Pound fell to a 2010 low against the Dollar and a 2011 low against the Euro. As the paper explains, this might mean lower gilt yields - a boon for the Government - but it will also trash the currency and therefore import inflation, meaning more misery on the high street.
All this suggests George Osborne has yet to get a grip on the situation. But if the OBR can't get it right on 4G (there's an excellent Independent spread on how this hurts his deficit targeting), the Bank of England is set on creating the Great British Lira, and employers want more for less, what's he to do? Peter Foster says we shan't be able to rely on a shale boom. Fortunately, Peter Oborne has a suggestion - concentrate! The Chancellor should give up campaign duties, he argues:
"It is unforgivable that the Chancellor of the Exchequer should take advantage of the extreme weakness of a useless opponent (Labour power brokers are now discussing the possibility of Alistair Darling or, intriguingly, David Miliband as Mr Balls’s replacement). George Osborne is fortunate in his enemy, but even so, he has no business discussing trivial election issues at Chequers this afternoon. His place is in the Treasury."
The row between Michael Gove's SpAds and education journalists on the Left continues unabated. The Independent runs a story this morning quoting an email sent by Dominic Cummings to their journalist Richard Garner in which he suggests that Mr Garner consult an FT education journalist about finding a good therapist, a reaction to this piece last Friday in which Mr Garner accused the department's SpAd's of riding roughshod over opponents to education reforms.
Having seen the full correspondence, there's more to it than the Independent suggests. On the 16th February, Mr Cummings issued an eight point rebuttal to Observer editor John Mulholland over allegations of bullying in the department which culminated in a civil servant leaving the department and Mr Gove being accused of misleading parliament. This was circulated widely on Fleet Street. Earlier, he had emailed Mr Garner privately, writing "Just seen your piece. My PS. email = 'Wrath'!? Wow." Mr Garner wrote back saying "I don't understand what you're trying to say." This prompted Mr Cummings's longer email as reported today. You can have sympathy with departmental frustration at the way the policy and the man is played by those broadly sympathetic to the Left. Even so, the whole exchange is indicative of the lack of a fear factor present in the Coalition's press operations. Can you imagine a (frequently far ruder) Alastair Campbell note ending up as a story in quite the same way?
Dave is proud of the Empire, we learnt yesterday, much to the Mail's delight. Of more pressing concern for the moment, however, are the modern vestiges of empire - international military commitments and international aid. Dave hinted yesterday that part of the £10bn international aid budget would be used to support the military when it was involved in peacekeeping operations, the Guardian reports. A sneaky bit of accounting, but I suspect the backbenchers will approve.
Mayor of London and darling of the Tory rank and file, Boris arrived in Eastleigh yesterday complete with an entourage (of sketchwriters) so large he would not have been out of place at the Brits. He lost no time incontinuing his war of words with Nick Clegg whom he called a "great bigvacillating jelly of indecision" when the latter refused to hand out Romanian and Bulgarian immigration estimates. Afterwards he dispensed leaflets in typically idiosyncratic style - muttering to himself about "sodding Lib Dem voters" by the Mail's account, exclaiming "have some bumf!" and thrusting campaign at all and sundry according toMichael DeaconQuentin Letts found him failing to entice an eight year old from her computer game. Even star power has its limits.There's no doubting the Tory effort in Eastleigh -  but in the Independent, Steve Richards draws an interesting moral from their selection of the off-message Maria Hutchings:
"It might be that Hutchings’ outspokenness and blunt authenticity will have a populist appeal, but, whatever the outcome, some voters will note the discordance between the messages from the national leadership and its candidate...There is a clear and – for the national Tory leadership – disturbing reason for what has happened. The leadership is no longer in control of the party. At a local level, the Conservatives are discovering assertiveness more familiar to Labour in the 1970s and 1980s."
Mail report this morning highlights a poll suggesting that 90pc of NHS staff want Sir David Nicholson to resign over the Mid Staffs scandal. Dave has also taken time out in India recently to demand that someone takes responsibility. Heads will roll, it seems. But is that a good idea? Sue Cameron is not so sure:
"Changing the culture in a huge organisation like the NHS, and deciding where blame lies when long lines of accountability stretch over many years, is never going to be easy. Offering up Sir David’s head to the clamouring crowd will make things even harder. Instead, the politicians would do well to start with what is doable, like sorting out the system that discourages whistleblowers."
Danny Alexander has urged Iain Duncan Smith to think again on a proposed change to housing benefit administration which would see money paid by central government to the tenant, not the landlord as currently happens. The Guardian reports that Mr Alexander worries that those with money management problems will simply spend it before rent day. Irrespective, wasn't the whole point of welfare reform that it would make the system simpler? Adding another pair of hands to the process hardly seems to help.
While Dave has found himself praying in a Sikh temple on his tour of the subcontinent, Ed has been soaking up the opiate of the Scandinavian masses while in Stockholm - social democratic politics. Indeed, so impressed has he been with his brush with a brave new world full of strict corporate tax avoidance laws and fathers pushing prams, Bloomberg's Rob Hutton reports that when his aides lost him at Stockholm airport, they assumed he had gone to claim asylum. It's not a new Jerusalem you can expect from a Miliband government, it's Stockholm-on-Thames.
The "pointless" nature of British foreign policy when it comes to posturing at the expense of the Chinese will lead to diplomatic and economic penalties, our man in Shanghai reports. An editorial in the state run Global Times singled out William Hague and Nick Clegg forpunishment, explaining that China's might was such that Britain could "hardly bear the suffering" and threatening to fund dissident groups in Northern Ireland and Scotland.
Was the advice given to one Call Clegg listener yesterday, after he complained that his house in St John's Wood had risen in value to £5m since he bought it 20 years ago, and that a mansion tax would leave him unable to pay his children's school fees. Nick explained that making a "pure profit" on your house was unfair and suggested that he remortgage it to cover any mansion tax, the Times (£) reports. Paying a debt you can't afford by borrowing even more? Perhaps Mr Clegg's influence on the Chancellor's economic policy has been stronger than previously thought.  
You have to feel for the nation's 17 year olds. Dave's determination that India's brightest and best should come to Britian and compete for precious university places meant there was already a fight on their hands. Now they will need to fend off Grandma, too. David Willetts, higher education minister, has suggested that not only are age based loans "great value" for the older generation, but they will need to retrain as they will be working longer, as we report.
While the Government's December announcement that rehabilitation contracts within the prison service would go out to private tender by the end of 2012 won it few friends, wrapped up in this statement was one implying the end of whole-prison contracting out. This morning, Reformhit back with a policy paper highlighting the Ministry of Justice’s own figures which show that privately run prisons have lower reoffending rates and perform better on the Government’s performance measures than comparable public sector jails. Awkward.
Chris Huhne's ex-wife Vicky Pryce will be retried after the jury was dismissed by the trial judge having presented him with a list of frankly astonishing questions. The new trial should begin on Monday.
Tonight's Question Time comes live from St Paul's Cathedral. The panel consists of Vince Cable, Michael Heseltine, Diane Abbott, Peter Hitchens and Giles Fraser.

Stella Creasy and the Mail's Peter Hitchens - an unlikely double-act, but apparently a succesful one:

@stellacreasy: "Fair play to Peter hitchens for telling people here they are 'fat liberals’. Fair play to walthamstow for saying they still welcome him!" 


In the Telegraph
Best of the rest

Martin Kettle in The Guardian - Make no mistake, Eastleigh is a pivotal political event
David Aaronovitch in The Times (£) - Now we know why it was right to invade Iraq

09:30 am: Public sector borrowing figures for January from the Office for National Statistics.