Protecting economic growth is crucial

Sep 16 2009 by James Ramsbotham, The Journal

PARTY conference season is upon us, a time when the battle lines will be drawn for next year’s General Election.

A running theme will undoubtedly be the monumental size of the UK’s public debt and how the political parties would deal with it should they get elected.

Every private sector business is currently looking at ways to eliminate waste and cut costs.

The same has to be true in the public sector if the Government is to redress the debt chasm that has been created over the past 18 months.

Recent rhetoric would suggest that we now have both main political parties facing up to this reality, although neither will reveal where they plan to make cuts for some time yet.

The TUC general secretary Brendan Barber and Business Secretary Lord Mandelson locked horns on Monday over the manner and depth of any planned cuts.

We cannot avoid the fact that there is a growing division between the pay and benefits in the private and public sectors.

Businesses have been forced to close final salary pension schemes and recent wage settlements have been minimal or even reduced in some cases.

Given the scale of the public debt, we are increasingly in danger of creating a two-speed society.

Mr Barber warned yesterday that swingeing cuts in the public sector could lead to riots, but he must also recognise that unless action is taken to trim the public purse to suit the current climate the only people likely to be rioting are those in the private sector.

Spending cuts are inevitable. However, the dilemma for parties of every colour to grapple with are the decisions over where those cuts will come. There are critical choices to be made between good spending and bad spending.

We cannot afford to make cuts to areas of planned spending that will have a significant positive impact on economic growth.

We need to maintain certain investments, such as transport, to make sure the wealth-creating side of the economy is capable of getting goods and services to market.

Another vital area where funding must be maintained is the support given to companies trading abroad.

NECC and the Journal jointly launched the Go Global campaign this month to highlight the impact global trade will have on our region’s future economy. The domestic economy is sluggish, but other countries are picking up pace.

We need to trade with these countries because the demand for goods and services will be stronger.

There will be no magic wand to solve the UK’s debt crisis, but protecting those areas that actively encourage economic growth has to be the starting point.

James Ramsbotham is chief executive of the North East Chamber of Commerce