Chancellor’s Economic Vision Blind to the Elephant in the Room

Chancellor’s Economic Vision Blind to the Elephant in the Room

This week, Chancellor Osborne gave his annual Mansion House speech. In it, he hinted at what lies ahead for the UK economy in the coming year.

Upcoming negotiations with the EU took centre stage in his delivery. Selling public assets back to the private sector will mark yet another major milestone. And, yes – he still believes there’s work to be done before Britain can take its foot off the austerity pedal.

But to bring the Conservative dream out of Never-Never Land into reality, the Chancellor is relying on Brits to get off the sofa and into work.

And here’s the issue. Amongst the coalition’s achievements listed in the speech, Mr Osborne reminded the guests that there are already record numbers of workers in employment. To quote the Chancellor,

Britain must address its poor productivity.

Can you see the contradiction? Britain is already working its butt off, but productivity in the sense of reducing the deficit with increased export? That ship sailed a long time ago.

Britain IS a service industry nation

The CBI has just published its latest quarterly figures for its Service Sector Survey. The service sector is huge, contributing 78% of gross value added in relation to the GDP. That’s a 2009 figure – it’s more like 80% today.

But in his speech, Mr Osborne calls for more:

  • goods for export;
  • more training;
  • greater saving and investment;
  • more manufacturing and construction;
  • and a shift of emphasis of Britain’s wealth away from the capital (no doubt with a nod to HS2 in that one).

In a way, those recent CBI figures support what the Chancellor wants to achieve. Yes the survey said that optimism, profits and employment as mean figures were up, based on the survey’s respondents. But it showed something else.

With 0.77 jobseekers per vacancy, the skills gap is positively yawning

As much as businesses plan to employ more people, there just aren’t the people out there to fill the jobs they’re posting.
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According to ONS figures, there are 1.1M vacancies in the UK right now.

Actual jobseekers? Less than 800,000.

Further research shows that this figure of 0.77 people per job is lower than at any time since the world went into economic meltdown.

Such a high demand for skilled professionals is great for contractors and freelancers. But it’s woeful for the short-term future of the economy.

And its the professional sector – legal, accounting and financing – that will be hit worse. It’s not just the shortage of staff, but the shortage of skilled staff that’s the real issue.

Grass roots change is the ticket (but the train’s already pulling out)

In recent times, many people have called for a review of HMRC. Its role, its power and the way its moving to an all-digital department, but without sufficient funds to keep pace with the demands. With more people in work, this work load will only grow, creating more strain on fewer resources.

The reaction to Mr Osborne’s speech of those calling for the review says it all. With budget cuts across government, it’s not going to happen.

But that’s the least problem. You’ve got to get people earning first, then worry about collecting the tax afterwards. The UK’s growth will be short-lived if businesses can’t find the right people for the 1,000s of jobs gathering dust on agency placards.

Some, perhaps many, of the roles may not be permanent. Indeed, economic recovery owes much to Britain’s growing flexible workforce. But the roles mean nothing if they go unfulfilled.

Yes, fundamental change is needed. But it’s at grass roots level. By grass roots, young adults need to learn about running a business in school. They need to understand the importance of paying tax themselves, what it’s used for and the right way to do it.

This will take the burden off the state; showing will always get better results than telling. But, yes; in order to show enthusiastic would-be solopreneurs what the taxman does with their money, the system has got to be transparent, stable and fair. Like I say; this could take a while.

SME doesn’t mean Student’s Mature Education

Marketing, networking, building relationships – all are key to building a business. With SMEs contributing 99.9% to GDP, don’t you find it strange that none of these skills are on the curriculum?

Intellect means little when it comes to carving out a space in a niche that begs for your talent, whatever that may be. The training Mr Osborne is calling for will come too late for the current next generation (Y? Z? AA?) to sustain growth.

And the manufacturing expertise the country is looking for? We sold that down the river when we decided we were going to become a service industry nation.

The Chancellor’s speech was bold. And even he acknowledges that the work the coalition started is far from over.

But to think that manufacturing can turn on a switch that the Thatcherite government turned off thirty years ago overnight? I fear we’ve got more chance of a review of HMRC before the EU referendum or LinkedIn marketing appearing on next year’s school curriculum than production and export increasing meaningfully in the foreseeable.

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