Who Should We Believe?

Depending on which set of figures you look at for the economy, you could be verging on the suicidal to the ecstatic. Certainly, we seem to be clutching at straws if we think Britain has emerged from its recession yet.

In the week, I highlighted The Sunday Times Appointments Section as being devoid of private sector jobs and full of public sector senior appointments, arguing this was a bad sign. Yet for the second month on the trot, there has been a marginal increase in the number of appointments available generally according to Government figures. Encouraging, if fragile.

But, the National Institute of Economic and Social Research (NIESR) has calculated that our GDP did not rise a jot in this last quarter. This falls in line with the worrying industrial output figures reported for August which were sharply down on July. True, we could argue it's holiday time but the level of drop, some 2.5%, surprised most economists. Bizarrely, the Government's response was to say that this prediction of stagnated GDP showed that the Government's policies are working.

We have also heard that house prices are now nearly back to levels experienced in 2008 - certainly there are plenty more placards up in my area - but this is still some 15-20% down on prices in July 2007. The number of mortgages being approved has risen but we know that lending to small businesses, despite Government indications to the contrary, is reckoned by the Bank of England to be £14.7bn down on last year. Are we putting the credit in the wrong places, you might ask?

Bank profits and bonuses are sharply rising, the price of gold has hit a peak (perhaps I should have followed those persuasive TV adverts), car sales are up 11.4% from this September to last, inflation has fallen to 1.6%, and the Services sector, such as restaurants, showed expansion for the 5th successive month and is now at a two year high - trashing my comment on empty tables for pre-theatre meals in London last Saturday. Or so it would seem.

The figures are all slightly baffling. The reality we see is a great deal of uncertainty as we face a great many cuts to public services no matter who gets into power which will inevitably hit jobs after 12 years of growth in bureaucracy in the public sector that now accounts for 1 in every 4 jobs in the UK. Our population is rising faster than expected due a new birth rate explosion, 25% of that growth coming from couples not born in the UK as immigration takes its toll on the UK. Unemployment continues to rise to nearly 2.5m and there are predictions of over 3m by this time next year which is well above 7% of the working population.

The budget deficit continues to rise and at a greater rate predicted by the Chancellor, indicating that it may well be getting out of control, which will see Britain borrow an extra £175bn this year - and rising. Many predict, contrary to Government promises to halve it by 2015, that borrowing will be nearly 99% of GDP by 2014. As we are faced with a rising Welfare bill due to more people on the dole claiming benefits, and greater immigration numbers than ever predicted, and therefore a shortfall in tax revenue, the squeeze is on. And there will be a need, due to the heavy borrowing, to find big cuts, some 10%, to try and manage the situation down.

I find the whole situation baffling but the one thing I believe to be true is that we are paying for 12 years of unsustainable and unreal economic growth that was based on a flawed financial system that relied on the unchecked ascent of asset values and the instruments which relied upon that principle. And we have set up the remedies to start the exact same cycle again, despite posturing to the contrary - banks are once again out of control.

It seems that even if we halt the decline this quarter, we are a full 6 months behind our competitor nations in recovering despite all reassurances to the contrary before we hit the recession - the one that we were reassured that we would not hit - and I believe we are focusing on the wrong areas to manage the situation. Time will tell, but the comedy of errors by the Government, Investment Banks and the FSA in calculating a bailout of the financial system literally over a few late nights and some pizzas will haunt us for a generation. Last Sunday's article in the Times was meant to reassure us that the parties took the banks on and dressed them down for 10 years of excess. What it showed was that having ignored the banks for 10 years, they suddenly became experts in their business to save them.

If you believe that, then you will believe that little green men have invaded Uxbridge and put up the price of rail tickets.