Jeremy Warner's Outlook: Lambasting the Europeans won't help dig the UK economy out of the hole it is falling into

The video iPod: free publicity to die for; BP may be denied Chinese takeaway
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The Independent Online

I don't disagree, but perhaps he should first address the wake-up call coming from his own backyard. The latest OECD forecast shows the UK economy expanding at just 1.7 per cent this year, which though likely to be a little bit better than the eurozone as a whole, hardly sets the economy Mr Brown has some control over apart from one he doesn't.

Mr Brown blames the shortfall roundly on rising oil prices, which are squeezing disposable incomes, and on stagnation in Europe, yet this is plainly only part of the story. As for the rest, that's down to the build-up under this Chancellor of private and public debt. The consequences are now apparent in fast-slowing consumption and a sharp deterioration in the public finances, the latter of which gives little scope for further fiscal stimulus to counter the former.

What's more, despite making improvement in Britain's lamentably poor productivity record a key aim of public policy, the Chancellor has yet to deliver anything meaningful. Throughout his eight years at Number 11, productivity growth has failed to lift significantly beyond trend. With the economy now slowing but still close to full employment, we can only assume that over the past year it must have fallen beneath it.

All this makes the Chancellor's strictures on Europe seem somewhat hollow. No doubt his European counterparts will remind him of it when he meets them in China for the G20. Obviously, it is important to Britain that Europe makes progress on economic reform. Like it or not, we are joined at the hip to the euro-economy. It is hard for us to be strong if the European economy is weak.

Yet while liberalisation of labour and capital markets in Europe is proceeding at a snail's pace, it is at least edging in the right direction. Britain, by contrast, seems to be hurtling at break-neck speed the other way. Many of the Government's priorities on social policy are in direct conflict with its efforts to make the economy more competitive.

The Chancellor refused to rule out more tax increases in a radio interview yesterday just before he flew off to China, and it is easy to see why. Projections for tax collection this year are still based on a forecast for economic growth of 3 to 3.5 per cent. The boom in corporate profits means that despite the shortfall on growth, corporation tax will still come in higher than expected. Sky-high oil prices and another record bonus season in the City should help too.

Yet no one other than the Chancellor himself now believes he can meet the golden rule - which dictates he can only borrow to invest across the economic cycle - without raising taxes or cutting spending. He'd be mad to tax the consumer further, since that would only further undermine domestic demand. The banking and oil sectors, where profits have been booming, should steel themselves for more stealth taxes.

The video iPod: free publicity to die for

No amount of money could have bought the publicity Steve Jobs, the chief executive of Apple, has achieved over the past few days for his latest gizmo, the video iPod. Not since the launch of Microsoft's Windows in the mid-1990s, which ironically nearly sunk Apple as it then was, have I seen a product generate so much free press. Even Harry Potter struggles to match the ubiquitous Mr Jobs, the ultimate showman and now a powerful rival to Bill Gates for the title of world's greatest living entrepreneur, in the anticipation he creates.

Yet despite the marketing hype, this great outpouring of free publicity was, I think, entirely justified. This is not because of Mr Jobs' achievement in creating a modern fashion icon. There are plenty of those around and most of them last little more than five minutes. Rather, it is because he is at the forefront of a genuine media and entertainment revolution which is changing both the way we live and the way the business landscape is organised.

The original iPod was not such a revolution. Though the iPod utilises the new technology of internet downloads, it is in effect little more than a souped-up Sony Walkman, the latter of which has been around for more than 30 years. The video iPod, by contrast, is a genuine first, offering the possibility of watching your favourite TV programme or movie while on the move. It is of course only an intermediate technology, in that it will soon be possible to do the same, real time as it were, over your mobile phone. Yet it is the first of its kind, a sort of Stevenson's rocket of the internet age.

The significance is hard to exaggerate. It won't entirely destroy traditional broadcast television, but by allowing the consumer to pay for his content when and where he wants it, it is bound over time to eat deep into these once core media markets. Companies such as ITV, which rely for their revenues on delivering a mass market to advertisers, will have to rethink their business models. Advertising-funded content will increasingly be replaced by paid-for content.

The video iPod is only a part of the revolution in media being brought about by broadband. Broadband is the pipe down which the video downloads are delivered. No industry is unaffected by this revolution in communications, but the media is in its vanguard. The brave new world dreamt of by the early dot.comers is finally becoming a reality, and it is forcing everyone to change.

Many even of the most savvy business leaders failed to appreciate by quite how much. A year ago, I asked James Murdoch, the chief executive of BSkyB, what threat broadband posed to his business. His answer was that broadband provided the opportunity of another distribution channel, but no more than that. Now, it emerges, he's fast changing his tune. Interestingly it was Mr Murdoch Snr, Rupert, who experienced the blinding flash on the road to Damascus, evidence, if evidence were needed, that futuristic thinking is not always confined to the young.

Sky is planning to become a direct provider of broadband services as part of a strategy aimed at creating a rounded, general entertainment business, capable of delivering not just pay TV, but interactivity, telephony, downloads and anything else the consumer might fancy. Media is fast moving from a "provider decides" to a "consumer makes the choice" model. Ever the visionary, Mr Jobs has positioned himself at the forefront of this revolution.

BP may be denied Chinese takeaway

If BP's Lord Browne thought negotiating with the Russians was tough enough, his experience with the inscrutable Chinese must seem doubly so. Along with just about everyone else in business, he'd very much like a decent foothold in the world's fastest-growing economy. Since China already consumes twice as much oil as it produces, you might have thought the Chinese would welcome him with open arms.

Yet attempts to buy into one of China's largest oil-refining businesses, Sinopec, have proved far from easy. If it happens at all, it will be years away, and even then BP would in all probability be confined to a minority stake.

BP still uses the slogan "beyond petroleum" in its corporate advertising, yet outside a solar energy business, there's very little evidence of such long-term, forward thinking. With peak oil production no more than 10 to 15 years off, possibly sooner if China keeps growing as it is, Lord Browne might do better to plan for and invest in a future without oil than move further into a business ultimately doomed to wither and die. China is for the Chinese. Foreign prospectors would do well to remember this dictum.

j.warner@independent.co.uk

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