Just six weeks after the Chancellor delivered a Budget designed to inspire confidence and induce the private sector to invest and create jobs, the signs are that it has had precisely the opposite effect, at least so far as the "real economy" is concerned.
Every recent survey shows that business and consumer confidence has sagged dangerously – as a direct result of the Budget, its rhetoric and the measures themselves. Mortgage approvals have slipped back again, as has bank lending to business and the export-led recovery is yet to materialise. Yet confidence is the magic ingredient that no economy can thrive without.
In some ways the Budget did bolster confidence – in the City. Crucially, it is fair to say that the immediate risk of a catastrophic British sovereign debt crisis has been averted. Investors, for now, are content, though that may not last if the economy undergoes a nasty "double-dip" recession next year, which will itself push borrowing higher. The risks of another downturn are put by the Office for Budget Responsibility at about one-in-five – uncomfortably high. What the economists call "the downside" is expanding.
Not least in the jobs market. The brutal truth is that the UK will be fortunate to avoid 3 million jobless in the next few years, with all the hardship and pain that implies. The Chartered Institute of Personnel and Development is just the latest body to warn that the 600,000 jobs to be lost in the public sector by 2015 will not be matched by a commensurate rise in private sector employment. It should not be surprising. Without that magic ingredient, confidence, employers will simply not take on staff, preferring instead to meet any (usually modest and probably temporary) rise in business to be met by their existing workforces.
Besides, they are not expecting much of an upturn anyhow, whatever George Osborne says. Without confidence, firms will not invest in new plant, machinery and technology, and longer-term productivity and growth will be correspondingly depressed. And even if the private sector did create lots of new jobs in places such as Guildford and Cambridge, they will be in the wrong places and call for the wrong skills from unemployed, ex-public service workers in Newcastle and Coventry.
A few weeks ago the chatter among economists was of the UK enduring a "jobless recovery": with few jobs and not much of a recovery, that looks increasingly like an absurdly rosy scenario.Reuse content