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The Economy (Supporting Business)

I do accept that, but I want to make the point that there is a big difference between how the whole issue has been treated from start to finish by the local media, which in a sense depend on local industry, and by national media, such as the BBC, which do not. I simply point that out. The effect of that may be marginal, but it is nevertheless real. Mark Vitner, senior economist of Wachovia, recently commented on the fragile recovery in business confidence in the US and warned that:""People's expectations were built on such things as newspaper headlines."" Let me turn now to the main subject of our debate: the expectations of business. We are going through tough times, and there is an expectation that Government will help. In good times, good business does not need any help, but most businesses currently do. Genuine attempts to help have been made; the Minister listed some of them. The Government have pressured banks to lend and also to maintain credit, which is very important. They are also trying to create a more benign tax environment; there is some evidence of that in the current Finance Bill. They are spreading business rate payments, too, and increasing advice. More national and European grants are coming forward as well. However, much of the help is rushed, poorly communicated and, at times, ineffectual. It also does not address real and reasonable requests. One of them has already been mentioned: the automatic small business rate relief would not cost the Treasury anything, but it would be enormously beneficial to many local businesses. Businesses also notice that the help they are being given is incommensurate with the help being given to banks, who were the authors of the general misfortune in the first place, and who still pressure viable businesses rather more than businesses that are likely to default. In other words, they put pressure on businesses that are doing reasonably well and tighten their access to credit, because they know that if they put pressure on businesses that are likely to fail, they themselves will be the losers. Expectations are not being met, therefore, but then few expectations are being met these days. Few people expected the current economic mess, or the scale of it; few expert economists, global pundits or parliamentarians did so. However, that has not stopped everybody now rushing in to make further predictions with the same confidence as in the past. The best of the predictions do little more than encapsulate current trends. The CBI recently said:""Although we were deep in recession, the rate of contraction is slowing markedly."" That still augurs that we are going to have increased unemployment, more bankruptcies, more pressure on public finances and a painful clawing back to prosperity. Fiscal stimulus, or natural retrenchment, may efficiently—or haphazardly—be working as an economic brake, although we recognise that there is a cost to that in terms of the public finances. The big problems, however, are structural, on both an international and a national, British, basis. China and the USA remain trapped in a Faustian pact whereby the productivity of one requires the indebtedness and refinancing of the other. The world financial system requires a remarkable revision, but it does not have the capacity to implement it. The British economy has similar major structural problems. Unlike Sweden and the Czech Republic, we have not learned to protect our manufacturing base. We are also grossly dependent on the footloose service and financial industries. We have not been filling the skills gap either, and there has not been any real attempt to square the circle, so to speak, of matching increased prosperity with diminishing social inequality. We are in a fix, and it is a structural fix. Unless we address these fundamental issues, we will find ourselves in a deeper fix still.