Excuse me one moment while I have a rant. Am I the only one who thinks that there is something profoundly unsavoury about the wolfish gleam in the eye of the Boy-Chancellor as he seeks to impose some of the deepest spending cuts in a generation? The wallpaper heir gives the impression of thoroughly enjoying administering nasty medicine to what you and I may think of as the middle class but which the multimillionaires of the Cabinet probably think of as the poor.
The austerity measures announced in the Spending Review last month may not be as brutal as some were expecting but are likely to most severely affect those least responsible for the global financial crisis which has precipitated them. As the public sector anticipates huge job losses, greater even than those of the Thatcher era, and a retrenchment of front-line services in health, education, the police and justice, the banks are recovering fast, rebuilding their balance sheets and preparing to shell out billions in bonuses. Seemingly immune to public anger, the banks' lending to business is shrinking as loan approval rates for SMEs fall sharply. Despite being the beneficiaries of huge amounts of state aid to enable them to weather a crisis of their own making, the banks are conspicuously failing to do their bit to help the economic recovery. The Coalition may rage but the banker boys are calling the shots as much as they ever did.
There, I feel better for getting that off my chest, so now for some glimmers of good news. The main one is that it could be worse; we could be Greece. Or France. So far we haven't had armed police using tear-gas to quell rioting strikers and students in our streets and national monuments. It is surprising how stoical most people are being in the face of rising unemployment, slowing economic activity and real reductions in income and standards of living. Perhaps the tactic of trumpeting the need for immediate and harsh measures to cut the 'massive' deficit and preparing us for the worst means that we are grateful when it turns out to be merely bad. However the endless predictions of doom and gloom, which sap consumer confidence and risk becoming self-fulfilling prophecies, do real damage.
The truth is that compared with much of the world we are not in bad shape. The UK is the sixth biggest economy in the world and with the right economic policies has the potential to grow over the next few years. The national debt in the UK is 79% of GDP compared with 94% in the US and 114% and rising in Greece. In addition, our debt is relatively cheap and easy to finance. In March of this year the FT noted the average maturity of UK gilts was 14 years, longer than almost anywhere else in the world. We have never defaulted on our borrowing and retain our AAA rating so that we pay about 3.5% for our debt compared with the more than 9% that Greece, which has defaulted several times, must pay.
I do not wish to be Pollyannaish in these tough times but the UK has real potential in the global economy. It is fifth in the World Bank ranking of the best places to do business. It has a relatively skilled and flexible workforce, a mature and stable democracy, a business-friendly regulatory environment and world-class law, accountancy and insurance services. Although bank debt is hard to come by at present, there are other sources of funding and London is one of the best places in the world in which to raise money to buy or expand a business. And we are ideally placed by time zone, able to do business with the East in the morning and the West in the afternoon.
The international language of business is English, in which most of us are fluent, although there is an interesting trend in some parts of the world towards the adoption of 'Globish', a simple, idiom-free version of English with a much-reduced vocabulary. Nevertheless, throughout much of the world, legal and business activity is conducted in English and our familiarity and ease with the language is a huge advantage, not least because we share it with what is still the most powerful economy in the world.
Above all, we have London, one of the biggest and most interconnected cities of the world. It is the engine of growth for the whole country, a centre of cultural diversity, innovation and enterprise. I have recently visited the amazing Olympic Park, rising out of its previously derelict and abandoned site. The energy, optimism and constructive endeavour of all those involved is an example of how we can rise to a challenge.
Of course, everyone is agreed that our budget deficit is too high, hovering around the 11% mark, according to Treasury figures, when EU rules suggest it should be no more than 3% of GDP. Clearly public spending must be reduced. However, to do so too precipitously and in a way that leads to a rapid rise in unemployment will surely have the effect of cutting people's ability to spend on the very goods and services which are the lifeblood of the economy as well as depressing the spirit of enterprise. The pros and cons of how much and how fast to cut have been debated endlessly and are boringly familiar by now to even the most economically illiterate. The challenge remains to steer a delicate course between the Scylla and Charybdis of stagnation and escalating public debt in order to reach the Golden Fleece of the modern economy: sustainable growth.
It is time to lift our eyes from the floor of cuts and retrenchment and focus on a more optimistic strategy for economic stimulus, growth and development.
- Baroness Kingsmill CBE has been a non-executive director of various private and public boards. She is a non-executive director of British Airways and Korn/Ferry International.