The Mirage Of Economic Success Under Labour

By 2002/3 New Labour were breaking new records for economic cronyism and incompetence – it was a period in which they pushed supercasinos, 24 hour pub opening and broke free from Tory spending plans. I recall routinely bumping into public sector managers trying to find ways to spend unnecessary budget increases - the period that followed left Labour seeking new ways to disguise falls in public sector productivity. Meanwhile, economic researchers were already wondering aloud whether the productive part of the economy was operating on borrowed time.

UK Personal Lending 2003 – Published December 2002 by Datamonitor

With the UK’s troubled manufacturing sector continuing to underperform, a full blown recession is only being avoided by exceptionally strong consumer credit and soaring house prices, which, in turn, are only possible due to low interest rates and low inflation. However, if consumer confidence fails there is a distinct possibility that the UK economy could slip into recession once again.

UK Personal Lending 2004 – Published December 2003 by Datamonitor

The consumer credit market has defied expectations and produced another record year in 2003, helped on by low base rates, low levels of unemployment and a strong housing market… leaving many to wonder whether the current levels of personal debt are sustainable.

ISN’T IT NOW CLEAR WHAT LABOUR DID?

Labour decided to “avoid recession” by stoking unsustainable levels of personal debt. In the long term, you can only create economic success by improved productivity. This is underpinned by building a cohesive society where work and enterprise is rewarded. Anything else is a mirage. Labour’s policies amount to the same as ever – pure protectionism – the main difference this time is how long they sustained the heresy. Eventually, Labour always wrecks the economy.

UK Personal Lending Reports

Datamonitor produce an annual report on personal lending in the UK. I was having a tidy up and came across their reports for 2003 and 2004. Authoritative tomes, they provide bone-crushing evidence that the "UK credit crunch" was predicted and predictable from way back.

British Banking System - Get Well Soon

RIP or get well soon? Let me give you a personal perspective.

At the age of 26 in 2001, I arrived in the Czech Republic for a two year secondment with Deloitte. On my first day there, an American boss pulled me into his office to tell me the lay of the land. Amongst other things, he informed me that, in his opinion, the Czech government’s woeful/criminal (?) management of the banking sector had cost every taxpayer the equivalent of a year’s salary.

During the 1990s the Czech government had ‘liberalised’ the banking sector without actually privatising it, therein blocking necessary modernisation of the bloated banks and resulting in (ahem) leniency for politically favoured customers. Naturally, this situation eventually led to a pretty nasty banking/currency crisis in 97/8 followed by several “Austerity” budgets.

Fortunately, the Czech Republic did take firm action to restore confidence in the banking sector – ringfencing distressed assets and selling off the large state-owned banks to reputable foreign banks. On a personal level, it was a great opportunity for me as I worked closely with some of these banks attempting to change the organisational culture and develop the skill set to compete in the free market. At the micro level, here are some of the measures the newly private banks took to improve their efficiency.

- Zero-based budgets (i.e. budgets that are based on what needs to be done rather than what was spent last year)
- Staff training on credit management to improve credit decisions, credit valuation and Workout effectiveness.
- Removed time-servers/blockers
- Encouraged entrepreneurial thinking and customer focus
- Changed back office functions from cost centres to profit centres.
- Improved financial reporting
- Enhanced management information (e.g. KPI suites etc)

Look at the Czech Republic’s economic growth data series

1997 0.3%
1998 -2.3%
1999 0.5%
2000 3.6%
2001 2.5%
2002 1.9%
2003 3.6%
2004 4.5%
2005 6.4%
2006 6.4%
2007 6.5%

One of the main lessons I learnt from my first work experience in Czech was that a properly functioning capital market/banking sector is a pre-requisite for a strong economy – almost more important than anything else. This is why when our government takes major stakes in the four major UK banks (apart from the worrying implications/unintended consequences for the rest of the UK banking sector), immediately I want to hear about the states’ exit/re-privatisation strategy. I haven’t heard a thing. People may like to read and learn from this report. If there is an appetite to get the UK back on its feet it may become very relevant in the nearish future.

Broker Updates

PS - The carnage has only just begun.

Proudest Moments

Being a proud Conservative and a proud Brummie I was keen to see that the Conservative conference in Birmingham would reveal both groups in a good light. Thankfully, it has. Daniel Hannan and Matthew Parris showered the city with compliments and the local meeja gave the Tories more coverage than I could have imagined... but what's my proudest recent moment. Finding out that to counter mischievous Tory bloggers Labour Home screen out Prague residents. I am not joking.

Cameron - Pragmatic or Ideological?

A friend of mine is embarking on an interesting piece of research on whether Dave is pragmatic or ideological since becoming leader. Obviously, actions speak louder than words, but I mentioned to him that he has 400,000 words to plough through. I have my own views, but I'd be interested in what readers think.

People Of Faith Not Welcome?

As you can see from their fringe listings, the Conservative Party play host to "prayer breakfasts" during conference - a long tradition, I believe. Go to Labour's fringe listings and marvel at their "no prayer breakfast". It should be an uncontroversial idea that people of all faiths should feel comfortable in all the mainstream parties.

But with the departure of Des Browne and Ruth Kelly from the Labour front-bench, it appears that Labour's leading anti-Catholic MEP Mary Honeyball has got her wish. I'm fairly open-minded on these things (grins), but how can a person of faith possibly support the Labour Party?

Tory Conference Update

I promised some pictures during conference - unfortunately a bag containing my camera was stolen on the Saturday night. It was a successful conference on a personal level - Mark Wadsworth should know what I mean, but everything is a bit of a jumble, so I might blog once I have organised my thoughts.