Things really are getting better


What are we to make of the UK Autumn Statement? The recovery is stronger than predicted, unemployment has fallen faster than anyone can remember, inflation is lower, interest rates are falling... the government is going into an election with the best economic figures in memory. All of that, the strong pound, growth in the 2-3% range, earnings up, inflation down - all of that should help the Conservatives, come the general election on May 8th.

The deficit is still a problem...bigger than forecast. But interest rates have been kept low, so borrowing has not been a strain: the bond markets have not been spooked.

As for the next election – and the Autumn Statement is very much a political thing – it looks like a large number of MPS, maybe 80 or more,, will be neither Conservative nor Labour, a big change on previous governments. The worst prospect is for a government with several coalition partners. One coalition partner is manageable – two or three, not so.

An unstable coalition partnership of several parties would be a disaster. The markets would just go into a tailspin. Ho hum. Right now, the government is benefiting from ultra-low interest rates. Again, if that does not last - and how can it - things might look much messier. The Conservatives want to cut public spending to more like 35% of GDP, the lowest it has been in decades. But if there is a complicated coalition arrangement, that is a no-hoper.

The eurozone remains the biggest trhreat to the UK. It is flatlining, going nowhere. That is one reason why the Office for Budget Responsibility has downgraded its growth forecast.

The bad news is that those on low income have seen almost no rise in their earnings since the financial crash. Those on top incomes have seen wages rise 20%. This is not a very even recovery.

Meanwhile, people have been lured off benefits and into jobs, thanks to the rise in tax thresholds that the Adam Smith Institute was promoting long before the Liberal Democrats thought about it – isn't it crazy that folk on the minimum wage should pay tax at all?

Ho hum, indeed. It's the economy, stupid. The Tories should have done a lot more to balance the books. But they may have done enough to convince us that things really are getting better.