Pork barrel economics

And still this Government does not get it.

We are, most would agree, in the middle of the deepest recession for 30 years. Business confidence has collapsed, the banking system has frozen and our currency is sliding against those of our major competitors.

A traditional response in such times – other than the entirely predictable flight into public spending – would be to seek to encourage business confidence and, through that, new business start-ups.

Even though one in three new businesses will fail within its first two years, there is no escaping the fact that every new start-up delivers what the country’s economy most requires: jobs and economic activity.

The economic impact of 10,000 new start-ups, each employing four people, would be far greater than supporting 40,000 jobs in established industries – and the same is true for growing SMEs. And yet the Government’s policy towards the private sector, if it can be said to have one, appears to be to support only industries and large companies which fall within the radar of the media.

As for smaller businesses, they are all but ignored. The Government (and to some extent the Opposition) seems unable to grasp that the speed at which we emerge from recession will be almost entirely down to the speed at which this sector recovers its confidence.

It is easy to ridicule the Government’s box-ticking approach to enterprise – only recently it launched high-profile schemes to help female and disabled entrepreneurs – or to heap scorn on the money being poured into the Business Link organisation to offer “counselling and advice” to entrepreneurs.

If Business Link advisors knew what made an entrepreneur tick, they wouldn’t be working in the public sector.

All this nonsense is what we have come to expect from a Prime Minister obsessed with economic micro-management.What is unexpected is the Government’s determination to plough on in introducing higher taxes and more red tape at the very point at which these can do most damage.

These include the introduction of empty property rates, new health and safety legislation, proposals for more “family friendly” legislation (what is family friendly about the breadwinner losing their job?) and the swingeing rise in employers’ national insurance planned for 2011.

It is as if the Government is determined that in this recession it will be the public sector – guided by it – that pulls us through. It is an economic policy grounded in ideology and electioneering and it is profoundly wrong.

German efficiency

The news that a multi-trillion bail-out of the Western economies was not going to happen caused some distress around the world’s stock markets, but the reality is that the decision should mark the turning point in this recession.

The acceptance within the G20 that the underlying cause of most of our economic ills is the debt that has been built up around the world can only be seen as a step forward.

Seeking to extend and even increase the debt was a policy of utter desperation that carried with it the risk of introducing long-term inflationary pressures into the global economy.

That it took the thrifty Germans to finally recognise this is no surprise – in German folklore nothing is as feared as inflation. Similarly, it is no surprise that the UK is in denial.

We have already spent the money – the hope of Gordon Brown was that the currency would not be left naked as others joined in the spree. As a consequence of G20, the future of sterling does not look healthy.

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