What kind of economy do we want, or can we have?

Alongside the publication of the unemployment figures, a number of related news items have caught my eye in the past week or so.

The one was the prediction from the Chartered Institute of Personnel and Development (CIPD) in the same news report from the BBC that mentioned Barnardo's views about youth unemployment in my last blog.  What the CIPD were saying (based on a quarterly survey of 1,000 employers) is that the UK jobs market faces a 'slow, painful contraction'.  It suggests we are entering a period where there is a 'lull' in business activity that means that few firms intend to recruit as they follow a 'wait and see' policy towards the economy.

This means that there is little prospect of the jobs that are being lost from the public sector being replaced by new private sector jobs.  The only upside seems to be that there may be fewer private sector redundancies although this could worsen if the eurozone crisis turns into a recession.  There seems to be no immediate sign of labour market conditions improving in the short or medium term, which makes any proposals for growth Mr Osborne may have in his Autumn Statement on 29 November all the more important.

Another article Whatever happened to full employment? also caught my eye.  When I learnt economics, full employment was reckoned to be a rate of around 3% which included those who would never work (very few) and those who were between jobs, but would quickly be back at work.  That was in the 1970s when unemployment was still pretty low but inflation was high.  Soon after that the priority became inflation, which I think it has been ever since.  The Bank of England's Monetary Policy Committee's only official aim is to keep inflation within +/- 1% of 2%, though I believe the Fed in the US is also supposed to have regard to unemployment in setting interest rates.  Many of us might believe that reducing the misery of unemployment should be an important aim (some would argue the controlling inflation is the best way of doing this) but to do so would mean changes to a number of economic policy options.

A third article that caught my eye was a report on the latest regional household financial stress index from PriceWaterhouseCooper.  This shows that London is little hurt by the recession compared with Wales, the West Midlands and northern regions. Outside London and the South East slow wage growth, rising taxes, public sector cuts and personal insolvencies are putting pressure on households.  A separate report by Begbies Traynor (who call themselves business rescue and recovery - i.e. insolvency - specialists) says that amid public spending cuts companies in the North East, North West, Yorkshire, the Midlands the east of England and Wales face mounting financial pressure, while London and the South East were escaping relatively lightly.

Whilst we are talking about regions as a whole here, and the West Midlands is far from monochrome, these reports add to a long-standing awareness that not only do we need to rebalance the UK economy away from an over-reliance on finance towards something more productive, we also need to rebalance away from the over-heating, over-crowded South East towards a country where prosperity is more equally shared around.

Again, when I learnt economics, there were car factories built in Scotland (now long closed) as part of a regional policy that is now regarded by many as discredited, and yet somehow, Nissan has built a highly successful car factory in the North East.  Equally, we cannot rely on market forces or we will all move to the South East until it grinds to a halt through over-crowding.  We have had a kind of regional policy again more recently with the regional development agencies.  And whilst the recently closed Advantage West Midlands had some successes the so-called 'output gap' got worse during its existence rather than better.  I remain to be persuaded that the Local Enterprise Partnerships that we now have in place of regional development agencies, with significantly less resources, most of which they have to bid for, will be any more successful.

So where does this leave Worcestershire?  The county is no more monochrome than the West Midlands region but in overall terms we have lower unemployment but also lower incomes.  There is a considerable variation between districts in the county but one interesting fact is that the incomes of those who work in the county are lower than those who live in Worcestershire but work elsewhere.  We are clearly beyond the South East effect that runs out some way up the M40 around the Warwickshire border, though Warwickshire itself is still a wealthier county than Worcestershire, not least because of the Warwick, Coventry, Solihull triangle.

I was struck though, by reading a draft of the Hereford and Worcestershire Chamber of Commerce comments on the South Worcestershire Development Plan.  There are a number of points where it says that there should be clearer and easier ways for businesses to build and grow.  This could put short-term expediency over longer-term sustainability (in the broadest sense of that word) and also alter our priorities for development, such as ending the preference for brown-field sites before allowing new development on green-field sites.

This is part of a philosophical difference with what has been existing planning policy, which the government has changed with the Localism Act that has just received the Royal Assent, but also with many residents who wish to resist any kind of development, whether it is commercial or residential.  In the end, the question is: 'What kind of County do we want to live in?'  I'm not sure I agree with the Chamber of Commerce, but neither do I want to live in some kind of back-water where we bumble along gently trying to preserve what we have and the reality is steady decline.