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Business as usual

Many people will be returning to work today having enjoyed a welcome respite from the pressures and strains of a difficult year. Sadly, there is little evidence that the year ahead is going to provide a source for much optimism. The new year began with further confirmation that the best that can be expected is a year of very little, if any, economic growth, declining confidence in the Chancellor or the broader economic strategy of the government, even early mentions of the possibility of a 'triple-dip' recession.

As if to confirm these shaky predictions, activity in the service sector fell in December for the first time in two years, reinforcing nervousness about what the next few months holds and reducing the odds that the UK economy will contract again this year.

At an individual level families will feel even more squeezed. Despite predictions from the Bank of England that inflation would soon be back on target, wages continue to fall well behind the current rate. Average earnings rises are running at about 1.3 per cent, around half of the current inflation rate, although some specific costs, like energy, food and rail fares, are increasing at a higher rate than that, significantly diminishing the spending power of ordinary working families. In addition, house prices are continuing to fall, threatening the spectre of negative equity for many home owners once again.

The NE Chamber of Commerce were right last week to suggest that the north east could significantly boost UK growth. The region has under-performed for more than a couple of generations and is well placed for significant private sector growth in areas where there are key strengths here, advanced manufacturing, offshore renewable energy, automotive and sub-sea engineering, as well, of course from the introduction of train manufacturing in County Durham.

However, significant growth in these areas is predicated on a dramatic change of policy from the government. Despite high levels of unemployment, growth in many of the sectors above is retarded by skills shortages. The government's response is to reduce the role of the public sector in skills provision and instead rely on individuals and employers to fund their skills development. Transport infrastructure in the region remains woefully inadequate, but the vast majority of public spending in this area is concentrated in the south east. Unless there are significant policy changes in these areas it is highly unlikely that there will be any step change in private sector performance in the north east. And where there are decent levels of good quality employment, in the public sector, these are likely to be further reduced as the austerity programme is maintained and accelerated, despite the obvious negative impact on the local and national economy.

Persistent degradation of the quality of life for families right across the income spectrum cannot go unchecked. The government will not convince anyone they are on the right track just by saying they are, major policy changes are needed now.

Kevin Rowan

Regional Secretary

Northern TUC

Briefing document (600 words) issued 7 Jan 2013