Economic Resurgence and Roadblocks

I don't think anyone in the Conservative Party is in any doubt that if we're going to win in 2015 the main reason for this will be the economy. We've got to make sure the economy is healthy or well on the way to being so by 2015 or we have no chance of victory. Since my last economic post the picture has got a lot rosier but what are the big roadblocks to a stronger economy.

UK economic pigs on the increase.

The good news is that we are predicted to grow more than anyone thought this year. The OCED, who said that we would grow at most by 0.8% this year, has massively increased their prediction to the UK growing by 1.5%. Indeed it gets better when you look at the annualised rate of growth which is 6% meaning we're growing faster than France, Germany and America (pretty good going). Of course we shouldn't be too optimistic because these are predictions we must wait for the results until we starting patting each other on the back and celebrating an end to a depression. 

The UK in real terms is out preforming Germany and probably will continue to in the future.

This growth is also pretty sustainable, built on the increases from all sectors of the economy. Factory production is seeing a boom that could only be compared to one that took place 20 years ago. Car production is soaring as well (which Top Gear has tooted a lot). The Service Sector is really getting some pace now on the back of increased high street sales (despite threats from the interweb and out of town shopping). Construction figures are the best they have ever been for 6 years. And most importantly Lego has seen a 17% rise in sales. All sectors of the economy are growing, which, apart from last month, has only happened in 1991.

Lego is on the increase.

The best news however is twofold. Unemployment is down and will continue to fall. Expect an increase in the 1.3 million jobs that that have been created in this country since 2010, a good record for the Conservatives in government. The growth in the economy also means tax revenues are up for the government which is good for deficit reduction because the shortfall of tax has led to the deficit falling less than expected by the Chancellor in 2010. Perhaps we will pay off more of the deficit than expected?

All areas of the economy are growing creating more jobs in ares like the car industry.

But this actually leads onto the start of the bad news because the days when cheap government lending is over. The small window we had to pay back or debt with the least cost has virtually closed because yesterday the cost for the UK government to borrow reached over 3%. This is an international rather than a purely UK problem and is an inevitable shift where bankers and other countries realise that governments are not very good at paying back loans. So now each Pound in debt is a bigger weight on the future of the UK. 

Interest Rates are likely to be at an all time low for a very long time.

Also we may see a problem caused by the Bank of England keeping the rates of interest at 0.5% for 3 years (despite some caveats). This move is good for stability as businesses have a pretty clear picture of what to expect of the future, but it's not as brilliant a move for lending as people may think. Although we have started to create more wealth with economic growth, we have a capital problem still in the UK. Cutting taxes would aid this partially but we really need to be encouraging people to save so their money can be leant out, this can be done by raising interest rates. Although a low interest rate will make people want to borrow more it is impossible to do so when there is very little money. If I was Governor I'd start thinking about raising interest rates sometime in mid to late 2014. 

Inflation is something to watch out in case there is a big increase.

Inflation may become a big problem too because the government is going to start trying to get rid of as much as this debt as possible by decreasing the value of money. It has already done this quite a lot with almost 25% of the deficit that paid off by printing more money. With more quantitative easing possibly on the way, the government increasing energy bills and interest rates remaining at a standstill inflation is likely to increase. Bad for business and for people's buying power. Inflation is not something that any government wants to increase and especially before an election which Labour will fight on the cost of living.

Cue Union Flag piggy bank surrounded by money.

So there we are, lots of good news about growth, profit, jobs and deficit reduction but things to watch out for in the next coming years and possibly some mistakes made by the Bank of England and the Government.

Also, what do you think to the new look of the Blog? If you like it then good, if you don't well you'll just have to put up with the blue, red and white combined with a new logo.

Weekly Poll Lowdown

 'And now its time for a result, I can see the returning officer move to the front'

"As the future returning officer for the constituency of the United Kingdom I declare the results are as follows:

What do you think will be the outcome of the next general election in 2015?

Conservative Majority.	31%
Conservative Minority.	14%
Conservative Lib Dem Coalition.	7%
Labour Lib Dem Coalition.	12%
Labour Minority.	5%
Labour Majority.	31%

Total votes: 42

Therefore a Conservative Majority or a Labour Majority (which ever way you like to look at this one) has been duly elected to serve."

This was quite close actually, very much like how 2015 will be. Just more of you think that during the 2015 General Election the Conservatives will win in some shape or form rather than the Labour Party. This is a vast improvement in optimism for a Conservative Majority compared to the last time I conducted this poll way in the dark old days post Eastleigh by-election and before the Budget (see http://thingselliottsays.blogspot.co.uk/2013/03/weekly-poll-lowdown.html). Back then only 5% of you thought the Conservatives would win an outright majority.

 Things are looking better for the Conservatives than in February and March.

So what does this tell us? Because this blog is of the Tory persuasion its shows a heightening in the mood of the Conservative Party and guess why that is? Yes the economy, see last General Election weekly poll lowdown for my prediction that the economy was key. If the economy does particularly well George Osborne is in for a real treat as well because it means the deficit goes down faster with greater tax revenue. However, we are still nowhere near removing it by 2015, as he said in 2010. Many in the party will say the best laid plans and all that. I on the other hand think we should still start pushing for these bigger cuts to free up business even more.

 Things are looking better for Gideon and his economic plan.

But there is a word of warning over this 'economic boom'. It's not actually here yet and is likely to be smaller than everyone at the moment is seemingly making it out to be. Perhaps, during silly season, the Tories are a bit too optimistic. The polls are getting better and Labour are losing argument after argument but we haven't got the full public confidence which is needed to start thinking in positives. I now believe we can get a majority in 2015 but we really need to have a greater amount of positive economic figures. Growth is good, but to be able to solve the main crisis of deficit and debt would be better. This is one of the things that could convince the doubters in the country that the Conservatives are up to the job, these are the people who are supposed to be our core voters as well.

Please vote in the new poll on the sidebar.

Top Manufacturing

The BBC is biased against the Right. Time after time it reviews itself and surprise, surprise finds bias on the issues of immigration, Europe, economic news and much more. But there is one programme that seems to be bucking the trend. Top Gear as about the only programme that doesn't have this bias with its news section promoting freedom on the roads, visits Spain to show what happens when you mess up the economy and now shows something a 'little bit special'.

UK manufacturing has been on the rise since the Coalition took power and the fastest growing area in British industry is with cars. Today it was announced that every single area of industry in the UK is growing, the first time this has happened since 1992. Top Gear shows quite well what is going on with the car industry since 2010.

Weekly Poll Lowdown

Here are the results of the first weekly poll of the month on the health of the UK economy. Well it's clear that with over 50% of the vote most people things are going to get worse in the next months. It seems that half of you have either taken to pessimism or left wing negative politics where they try and make out that things have gotten worse under the government.

How do you think the UK economy is going?

Things are on the up.	21%
We are slowly but steadily getting to growth.	13%
No change for a while, yet.	16%
It is very bad and getting worse.	50%
Unsure.	0%

Total votes: 38

For all my lambasting of certain economic government policy for not doing enough they have done some key things to make the UK economy better. All we seem to be getting at the moment is news about how we are starting to get some acceleration in growth. Only today PMI (Services Purchasing Managers Index) for the service sector is the highest it has been since 2006; with July, June and May's PMI combined for all sectors there has not been better economic growth results since the 1998 boom. 

The effects of cuts in corporation tax and to the 50p tax rate has led to higher investor capital which is creating jobs in manufacturing for people. But more importantly for people there has been a positive feeling in consumers from a post Olympic feeling and targeted tax cuts in the budget. Aspiration Nation is the phrase of the moment. Also I think there is a real point of people are tired of going nowhere and so are spending money more often because they just want the doom to be over.

Of course there is much more the government could easily do as I have pointed out many a time to really start having sustainable economic growth, but my ideas haven't yet been taken on by the Prime Minister. My own personal musings is that we are about to see a period of steady economic growth but not a massive spurt. However this is a possibility, many experts are saying that next year we could start seeing 2% of growth. Its only the Left of this country, who know growth means less votes for them who, that paint a picture where things are getting worse. Indeed this government has at worst presided over a stable economy where nothing has changed, there has been no recession since the dark days of Gordon Brown. 

Gordon Brown never managed to control the economy so I've no idea of how badly the rest of the Left would do if left in charge. 

Watch this space to see how far things grow.

 Things are about to get going, but by how much?

  

Vote in the next poll on the sidebar.

Privatisation and the Delivery of Success

Today we are about to witness the biggest privatisation in decades. Royal Mail will soon be floated on the stock exchange at the value of billions of pounds. Like the vast majority of privatisations people from the workers to the consumers are left better off than they were when nationalised.

Royal Mail is set to be privatised and be a boon for customers.

Royal Mail at this moment is in a good place for privatisation as it is seen as a safe business prospect. Last year Royal Mail managed to make a profit of £44 million which is good. But this is hardly going to be sustainable for it will need to meet the constant costs of depreciation. Private money can provide for the capital to combat this and innovate to have a better postal service. It is likely that the Royal Mail will see a greater deal of mechanisation and an increase in robots to make for a more efficient, quicker, and much easier service for postmen. And will this lead to job loses? Well if the history of industry is to go on then mechanisation job loses have not been the case as staff are relocated to other jobs that are more technical and thus higher paid with better quality of life following. This coupled with the 10% share deal with workers will lead to a better productivity and a much wealthier workforce.

A more efficient service means one that is better for customers of the Royal Mail.

Shares also bring me onto the second part of why privatisation has been such a success because it has lead to competition to drive down prices and increase quality. 90% of these shares will be floated on the stock market where individuals can buy them. As well as a force to make profit, which is essentially a force to make a better service (see above), there will be a greater deal of competition. This competition will mean a battle on Britain's streets between parcel companies and the revolutionary post companies, such as TNT, for a service that is better or cheaper or both. The mantra of the day will be faster, better and cheaper. Better service for customers is the result of competition in the market place.

TNT and other companies will be seen more on the road delivering us mail with a much better service.

But what of the most major criticism of the reforms which is that it will leave isolated communities, say in the Scottish Highlands, without any mail because they at the moment are not profitable. I would like to highlight the at the moment bit because many areas will be able to be profitable and receive service when Royal Mail and competitors become more efficient.

Isolated communities will still get their post as so long as they are willing to pay, as they do now, someone will do it.

And for those areas that are still not profitable to have a red van visit every door the future still looks bright. It is easy to envisage localised mail companies doing the deliveries who don't need such large costs or big margins. Community mail boxes in easily accessible areas may become a thing and there may be a innovative teenagers, like when doing a paper round, to deliver the mail. I can envisage this because this is exactly what happens in Germany with their privatised postal service where mountain villages are equally cut off. People power will make a better service and solve the problems.

So Privatisation of the Royal Mail is going to lead to very good things so long as Capital, Innovation and Competition are all achieved.

Growing Optimism

Optimism in the UK is up whether you're in business or in the Conservative Party. The IMF and recent consumer confidence data is starting to show the start of an economic recovery. Because of this, Labour's woes and the Referendum Bill the Conservatives are also feeling a boost. But should both Tories and the general public feel good about the future?

First to the economy and yes things may be about to start to pick up. Business and Consumer Confidence is at an 8 year high and the IMF has said that 0.9% of growth is coming our way this year which is much better than last year's 0.2%. And this year there has been a bit of help from the government with the 1% decrease in corporation tax and a freeze in capital gains tax. But more importantly in boosting confidence there has been some pretty targeted cuts, where alcohol and petrol is now a lot cheaper than it would have been under Labour.

We are back at pre recession levels with consumer confidence but still a while to go before we reach the point the crash actually happened.

The bad news on the economy front is that the confidence from people isn't based on something totally solid. There hasn't been as many tax cuts by the Government as I have would have liked to see. This isn't the case with the Coalition Government which seem to be relying on positive words and a feel good factor, explaining the for the longevity not of recession of going nowhere and then a sudden pick up. The repetition of 'Aspiration Nation' is not necessarily a bad per se but if things go badly or not as good as the small amount of confidence predicts then the economy will be flat again. But then again most economies have a problem like this.

Overall however the economy has made the Conservatives moderately happy and rightly so because it is because of them putting pressure on George Osborne to add these specific tax cuts that we are seeing some sort of change in the economy. The Conservative Party has been on a roll recently to dictating the amount of spending that will happen in the next parliament to pushing the issue of a referendum on Europe.

What does the opposition think at the moment? Well nothing useful as Labour says it wants to match spend the same but wants to borrow more and will not back the basic principles democracy. What's even worse for Labour is they screwing up massively in Falkirk and day by every single constituency in the UK seems to have Labour candidates selected by Unite in a way that is bordering/maybe illegal. The Conservatives are united and aiding a recovery whilst Labour is anything but. No wonder the poll ratings show a decrease in support for Labour.

The Conservatives are really uniting around the EU Referendum Bill.

So all in all good times. But hold on, the Tories should be weary just like the public. The economy is yet to be confirmed to be definitely on the up, the 1st quarter of this year saw only 0.3% of economic growth. Divisions on Europe are unlikely to come back with the Referendum Bill but if it fails tensions may creep up again. Also what if Ed Miliband suddenly supports it? Falkirk could go two ways now. Ed could look strong and shun the Unions to help Labour or look weak and want their money, although either way it is not good for him really.

Labour is still more popular than its leader will ever be.

In general things are looking better though. Red Ed is too dithering to decide whether he should have jam or butter on his toast and things getting worse for the Government seems a distant prospect now. The only major worry is not to make everyone too over confident. The austerity isn't over yet.

One thing we can rely on is the Red Ed will still be weak.

Let's Get Fracking!!

Yesterday came probably the best news the country has seen this year, if not this decade or even millennium. The government have announced that they will begin to start fracking. Huzzah, finally!

The Lib Dem opposition to drilling for shale gas has lasted a long time. There has been 3 surveys ordered by the government of the Bowland Shale Basin, the geological name for the North now, because the Liberal Democrats think this goes completely against their green message. They are quite happy for a large proportion of the country to live in fuel poverty whilst they pretend they are doing something to save the environment.

Reason number 12 to vote Lib Dem they want us all to live in fuel poverty.

But importantly every time those surveys have been conducted the gas companies have found hundreds of years more of supply. In fact the Bowland Shale Basin has 1,330 trillion cubic feet of gas which is the largest deposit so far fully measured. Sad times to be a Lib Dem, great times to be a human being (except Seb, my house mate, who I have on good authority is a person).

Map of the Bowland Shale Basin, there are other areas not yet fully surveyed in the UK.

So what does this mean? Well for the North it is a god send as they have had very few successful enterprises since the end of the industrial revolution. The post war industry of the UK was falling apart and not fit for any purpose. Shale gas will surely mean an economic recovery with thousands of jobs from Yorkshire to Cheshire. On that base too follows all the service industries and manufactures who benefit from an economic boom area.

There are also the wider implications that will help everyone. Bigger industry will make sure that our private sector is for the first time in many years larger than the state creating economic growth and increasing living standards. The big tax revenues from shale gas drilling will certainly ease the austerity drive we are having to go through and start paying off some of that debt, although this  doesn't mean we should slack now in cuts.

The Ancient people of Britain used shale to make bracelets because it is very workable. Little did they know that we can get economic success by finding gas between the rocks.

Of course this brilliant news won't stop the critics. You may have seen mad Americans in Pennsylvania lighting up their plumbing in the news and blaming it on shale gas. The thing is they could have done that 20 years ago as, according to the Proceedings of the National Academy of Sciences journal, as gas in water pipes have been 'a long standing public health issue in Pennsylvania' due to localised geology. Oh yes and such gases do not have any adverse health risks in quantities present.

Another person is trying to set fire their house in the Americas. 

Earthquakes too should not be a major problem the highest magnitude earthquake recorded because of shale gas was 2.3 on the Richter Scale. Yet thousands of these occur in the UK every year and are usually not even noticed. A light earthquake, one that is noticeable and could cause problems, occurs at 4.0 which is thousands of times greater than 2.3 because of the funny maths of Mr Richter and Mr Scale. We will not see some tsunami engulf Blackpool soon, nor should the tower and the pier come crashing to the ground.

As for eyesores. Wind turbines are probably worse and devalue a person's house a lot more. There is no open quarry just the odd shed and a tall pylon like structure, which are all over the countryside.

A shale gas drill and all the trappings that follow it. Notably this takes up a lot less space than a wind turbine. 

Let's get fracking!!

Over The Pond

Today the growth figures for Europe came out. What a mess, is the best description of what is going on.

The best news is that Germany received 0.1% growth in the last quarter, although they probably lost 0.2% from serve snow. Essentially it's not going well, the German economy has lost 1.4% growth in 1 year. The Germans should be a lot higher than this seeing as they're the biggest economy in Europe. The recession in  the rest of Europe is going to hit them hard, I wouldn't be surprised if they go into one as well.  

 The German economy narrowly missed recession today. That may not happen in the Future.

France entered its third recession today, which shows how well Hollande's policy of tax the people till 'they're bled white' (to quote Clemenceau) is going. The problem with the French economy is that it is very inefficient and has been so for a long time. Three hour lunch breaks and some of the strictest employment regulations in Europe says it all. There is very little work because of government intervention and no actual desire form the French people to knuckle down. They'll pay for this very hard, 10.6% unemployment is nowhere near the peak.

Hollande's vision of what makes a good economy is rather clouded. My advice is not to be so wet.

And what of the rest of Europe? Nine members of the Eurozone are in recession. Spain has 27% of its population unemployed. Recently Greece has been re-classified as an emerging economy in line with Botswana or Tibet. There is no hope within the Eurozone because countries are reluctant to overcome their inefficiencies which a single currency demands.

The ECB cannot really help much eithe,; earlier this year it lowered interest rates to 0.5%. That's fine if there is credit in a country but there is none in Europe at this moment because of the ongoing crisis. The wacky smash and grab policy of raiding people's savings will not help this problem. I'd watch out for a banking crisis in the next few years.

The European Economy is getting to a point where countries in Europe are doing worse than some in Third World Africa. 

How do we compare then. Well we have just better growth than Germany of 0.3%. We haven't had a recession since the days of Gordon Brown as the one last year was recently discovered to have never happened. The only way is up for the moment. Nor do we have the problems of a single currency or any of the financial controls placed upon us by being in the Euro. So I think we'll do fairly well compared to Europe in the next few years. This is in spite of having a trade policy that makes it so difficult to trade with anyone not on the continent. And Nick Clegg thinks Europe is the economic future, Greece can't even ship in medicine, most African states can. 

Comparatively the UK economy is doing well. Once we get over the hurdles of our debt we will be doing better than the rest of Europe.