Rebalancing revisited

In an earlier article (http://bit.ly/rSpLMJ), following The Chancellor's 'March of the Makers' Budget speech, I noted at that time that between 2010 and 2015, both private and government consumption was set to fall as a share of GDP, according documented Budget figures – by about 1.8% and almost 4% respectively, with investment and exports predicted to grow on the same basis by almost 3% and almost 2.5% respectively. I said then that "it is clearly the 'march of the makers' that is calculated to deliver what little growth there is set to be in the UK economy". But things have changed, haven't they? And as the BBC's economics correspondent, Stephanie Flanders, pointed out, following Mr Osborne's latest statement: "We're not just going to grow more slowly, our growth is going to be more imbalanced." This observation is based on figures in the Treasury's Green Book, which indicates that net exports and investment have been revised down for 2012, 2013 and 2014, whereas the forecasts for public consumption have been revised up for those years, while household consumption in 2014 and 2015 has also been marked up. Nevertheless, the Autumn Statement does say: "In addition to fiscal consolidation and monetary activism, the Government will accelerate its supply side reforms to build a stronger and more balanced economy in the medium term." Rebalancing remains a mantra. And the statement adds that work has already begun on the 137 commitments laid out in the 'Plan for Growth' issued earlier this year. The underlying pillars for this plan, reiterated in the Chancellor's recent statement, are: encouraging investment and exports as a route to a more balanced economy; creating a more educated workforce that is the most flexible in Europe; making the UK the best place in Europe to start, finance and grow a business; and, creating the most competitive tax system in the G20. Slower growth, then, but rebalancing is still the word on Downing Street, as it should be. If the finance sector-driven boom and bust was greater than first calculated for the UK, then the need to rebalance the economy is merely further amplified with this revelation. Happily, as our Speaking of Success entries indicate (p35 - see online issue), the 'rebalancers' have been hard and successfully at it this year, and they anticipate a healthy 2012, too. First published in Machinery, December 2011