IS THE ONLY WAY UP? The boldest signs yet of an economic recovery were reported last week but will an uptick in GDP leave us feeling better off and will it be enough to save the coalition's skin? Political editor David Williamson takes a look under the bonnet of the economy.
Q: Do the latest figures pointing to an economic recovery mean that George Osborne is really the ER-era George Clooney of UK politics - a dashing doctor with a roguish grin who can resuscitate a patient in a critical condition when others would give up hope? A: There's a good chance that the Chancellor may feel inspired to enjoy a glass of champagne with his Sunday roast today. The UK economy grew at its fastest pace for three years in the third quarter of the year with gross domestic product (GDP) shooting up by 0.8%.
Q: Hang on. Does that really qualify as "shooting up"? I think my hair grew by more than that this month. A: Ah, but the economy was 1.5% up on the same period last year.
Q: Am I really 1.5% better off than when I was jumping on the sofa as I watched the Olympics? If anything, I feel pinched - and not just because the pet lobster is on the loose. A: You've identified a key problem for Mr Osborne, about which he will be painfully aware. Many Tories were stunned when voters backed New Labour in 1997 even though the economy was zipping along quite nicely.
This proved that even when a recovery is clearly under way, voters are now prepared to take a chance on another party if they are fed up with the present lot in power.
The electorate may be inclined to send the Chancellor and his friends packing if they do not feel (a) significantly better off and (b) optimistic about what they would do with another term in power.
Q: Should I feel richer than I did last year? A: If you are one of the many workers in Wales who has spent recent years enduring a wage freeze, the grinding effects of inflation will have whittled away your real wealth.
If you have lost your job and found new employment but with poorer terms and conditions you may well feel less affluent - and will therefore be less likely to pump any spare earnings back into the economy.
And unless you happen to somehow have your own sources of gas or electricity, your income will have almost certainly taken a pummelling.
Q: Are we really in a cost of living crisis? A: The average annual gas and electricity bill in South Wales in 2010 was a hefty PS1,102. Now, according to statistics obtained by Shadow Welsh Secretary Owen Smith, it's PS1,310 - an increase of nearly 19%.
North Wales, which is grouped together with Merseyside in the findings, has seen a similarly whopping hike from PS1,092 to PS1,298.
Pontypridd MP Mr Smith claims that under "Labour's plans to tackle soaring energy costs, over a million homes in Wales would see their bills frozen... That's why a Labour Government will put living standards as our number one priority.
"We'll start by taking on the rip-off energy companies and freezing energy bills."
Q: If the energy companies know that Labour is going to freeze bills if they get into office in 2015, won't they push up prices as the election nears. A: This is the Conservative argument. David Cameron is contemptuous of the policy and likes to remind people that Mr Miliband was Energy & Climate Change Secretary in 2010.
Q: But what's he going to do about the soaring prices? He can't pretend there aren't millions of decidedly grumpy voters out there, can he? A: He knows he has got to do something. Sir John Major, who knows something about both winning and losing elections, cranked up the pressure last week when he called for a windfall tax on the "Big Six" energy suppliers.
Meanwhile, Shadow Chancellor Ed Balls is telling everyone who will listen that "working people are, on average, over PS1,500 a year worse off since David Cameron came to office".
There is something of an existential crisis brewing in Conservative circles. It used to be the case that they could paint Labour as tax-raising profligates and themselves as the party that would boost your disposable income.
But now people aren't necessarily obsessing about income tax but instead worrying about how they will pay their latest energy bill or cope with the rising cost of train tickets.
In the post-privatisation world in which we now live, many of the biggest drains on our finances are apparently beyond government control.
Q: But David Cameron didn't manage to win a majority last time around.
He's not going to increase the number of Tory seats unless he comes out with a pretty bold policy, is he? A: At Prime Minister's Questions last week, he announced a review of competition within the energy market.
Q: Is that supposed to set the pulse racing? A: And he signalled he wanted to "get to grips" with green regulations which were driving up energy bills.
Q: You mean that nice chap who celebrated winning the Tory leadership contest by cuddling a husky in the Arctic is now running around with an axe, determined to cut green tape? A: A range of policy options is under consideration in the run-up to the Chancellor's Autumn Statement in December. But, electorally, this may be far from nuts.
Green levies could rise from the current PS112 to PS194 - or 14% of the typical household bill - by 2020. Powerful voices in the Tory grassroots have warned that working class families are being hit by green policies, and the party watched Australian conservatives romp to victory in this year's election with a campaign that was unashamedly hostile to key environmental policies.
In the United States, Republicans regularly declare that "man-made" climate change is unproven. However, Downing Street is unlikely to adopt such overtly sceptical language when Mr Cameron knows he cannot afford to lose elections in Tory-Lib Dem marginals, where more than a handful of swing voters do not want to bequeath to their grandchildren a world that resembles a fried egg.
Q: But maybe a feel-good factor will spread through the country if the GDP continues to climb? A: Perhaps. Janet Jones, of the Federation of Small Businesses in Wales, said that "small firms in Wales are at their most confident in three years" but pointed out that GDP figures "tell us little about the performance of the Welsh economy".
She wants "proper economic statistics for Wales", warning that such data "will be essential should the Welsh Government ever get fiscal powers".
Q: You can't measure the wellbeing of a nation just by looking at its economic output, can you? A: No, and there are periodic calls for new measurements to gauge our happiness.
But even if we focus on economic indices, there are plenty of people warning that this could be a recovery that shows up on the UK's balance sheet but which does not result in a rise in living standards.
Plaid Cymru Treasury spokesman Jonathan Edwards said: "The recovery is very much centred in London and the south-east of England though, because, in Wales, house prices continue to fall and unemployment is still more than 40,000 higher than before the crash."
Labour's Mr Smith has a similar point to make: "While millionaires have had their taxes cut, average living standards have fallen in thirty-nine out of the forty months David Cameron has been Prime Minister and the wages of Welsh workers are down by PS1,700 a year."
Mind you, Cardiff Central Liberal Democrat MP Jenny Willott takes a more optimistic stance, saying: "Fixing the economy was always going to take time, but these figures are further evidence that the coalition's plan is working. The Liberal Democrats are building a stronger economy and a fairer society, enabling everyone to get on in life.
"Getting growth going and creating jobs is at the heart of that. We have helped businesses create a million jobs, now we want to help create a million more."
And Chris Williamson, chief economist at Markit, said: "Britain is booming again with the economy showing the most sustainable and robust-looking upturn since the financial crisis."
Q: So, you could say that we're not out of the woods but we can see a shaft of sunlight through the trees? A: Yes. There's always the risk that a new eurozone crisis, a US debt-opocalyse or some terrible distortion of China finances could set fire to the whole forest, but just as Britain heads into winter, its economy is escaping the deep freeze.
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|Publication:||Wales On Sunday (Cardiff, Wales)|
|Date:||Oct 27, 2013|
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