Cameron falls down on his economic balancing act

The majority of British manufacturers said in a recent poll that David Cameron's government have the wrong strategy on rebalancing the economy.

David Cameron’s attempts to “rebalance” the economy have been criticised by British manufacturers, the majority of whom, in a recent poll, said the government have the wrong strategy. The survey of 1,000 manufacturers showed 54 per cent believe the government has the wrong strategy, with the same percentage saying the government is performing badly when it comes to manufacturing.

Only 12 per cent thought the government were performing well on the issue.

The prime minister has previously criticised the British economy on the grounds that “our fortunes (are) hitched to a few industries in one corner of the country, while we let other sectors like manufacturing slide”, stating that we need: 

“A massive rebalancing of our economy… We have got to be more reliant on manufacturing and investment.”

There is some question over whether Cameron even knows what his strategy is. Quizzed by the Commons Liaison Committee last Tuesday by his own party member, Andrew Tyrie, the Tory chairman of the Commons Treasury Committee, on how he would define success in his attempts to “rebalance the British economy”, Cameron could provide no concrete answers.

Here are excerpts of the exchange:

AT: “You have referred repeatedly to re-balancing the economy, I wonder if you could give us a little more detail on exactly what you really mean… Rebalancing could become a strawman if we are not careful… What do you think the correct level (private to public balance) for a balanced economy is?”

DC: “I have never believed you should target a particular level of GDP…”

AT: “So on that you don’t have a target…what would be a long run savings ratio in a balanced economy?”

DC: “…We have not set out, sort of, targets or ambitions on other figures (other than the deficit targets).”

AT: “You have talked today about rebalancing between manufacturing and services, at the moment according to ONS figures, (2010) financial services contribute around 8 per cent of GDP and manufacturing around 13 per cent, what would be, broadly speaking, the correct figures for a balanced economy?”

DC: “What I want to see is a rebalancing of the economy so that we are less reliant on one part of the country…”  

AT: “I want to get a feel for what that actually means, you want more manufacturing doesn’t take us too far, what we really need to know is what balance between these two constitutes a rebalanced economy. You have used this language of balance..many times, I am trying to get a feel for what it actually means?

DC: “What it means is that the growth in the economy has got to come from the sources of growth that it didn’t come from in the past as it were…

AT: “We haven’t managed to get a target on any of those.”

In conclusion Mr Tyrie even said:

“I can’t say we have had much of substance.”


John Wood, president of the Institution of Mechanical Engineers, who commissioned the survey, said: 

“This report shows that, worryingly, a majority of manufacturers think the government has the wrong strategy to make this happen.
“Manufacturers want to see the government’s rhetoric translated into action. This means introducing incentives for businesses to create new products and investing in the engineering skills that are crucial for Britain’s future.”

As with other government failures of late this appears to be a PR problem as much as a policy one.  The initial poll was coupled with a separate ICM poll of the general public.

Findings from both show that while there is strong support for rebalancing the economy – 98% of industry and 81% of the public would like to see a manufacturing increase in share of UK GDP, the majority – 73% of manufacturers and 70% of the public – believe the government is more committed to the finance sector than to manufacturing.

Mr Cameron’s experience lies in PR, though with bad policies, and a lack of detail, that appears to be of little use.

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