Friendly advice
Governor Bailey of the Bank of England is not helping the Chancellor very much by pointing out that the hope that eventually productivity will rebound to pre Credit Crunch levels is looking increasingly unlikely.
It has been hardwired into the OBR’s predictions for a long time now and you have to admit that if it hasn’t happened yet then it is seems unlikely to just emerge of its own accord. Since much of Rachel Reeve’s maths on future tax and spend is based on the OBR’s calculations this is not good news for her.
But then the Governor does point out that things like AI might be the boost to productivity that we are all looking for. Which given Labour is investing in that and other things like an industrial policy, infrastructure, training and science, is good news for the government’s plans.
At least Labour can say that it has improved on the last government’s McAwberish policy of just hoping that something will turn up.
But is it doing enough, quickly enough? It as 4 years now to make things better and in terms of investment, building and research that is a very short time frame.
Which is why the OBR’s optimism was quite useful, because if it changes its mind the government is going to have to find a lot more money from somewhere else, as it is it is very close to having to do that anyway but the OBR is providing it with some much needed cover.
Which is why the Chancellor would probably much prefer it if Mr. Bailey told her about his doubts in private.
From Jonty Bloom Media Ltd
Economics, trade and Brexit, not necessarily in that order but the dog always comes first.