Fragility of the economy still evident

Dec 7 2009 by Kevin Rowan, The Journal

TWO decisions last week should contribute further thinking to this week’s Pre-Budget Report from the Chancellor.

The first, the decision to undertake the major privatisation of the Tyne and Wear Metro, will rob the exchequer of significant revenue. The taxpayer will still be funding the £300m investment needed to upgrade the Metro; there will still be a Government subsidy to run the Metro; but any surpluses made will now be repatriated to Deutsche Bahn as profits, instead of being reinvested in improving this public service.

The second decision, to mothball Teesside Cast Products by Tata Corus, with a potentially catastrophic impact on the community and economy of Teesside, is an indicator of how far we still have to go before we can start talking about coming out of recession.

There is much to remain positive about: there are still more people in work in the North East than has ever been the case before and we do have a genuinely more diverse economy than when coming out of previous recessions. And it is the case that the region is well-placed to accelerate back into economic growth when there is more buoyancy and activity around, especially in a range of low carbon developments. (There is an obvious irony that these developments will generate unprecedented demand for steel which will not be met by North East steel makers).

In finalising the PBR this week, Alistair Darling should take into account the continuing fragility of the UK economy. There is an absolute certainty that the fiscal stimulus measures promoted by this Government have been the difference between a serious and deep recession and a fundamental meltdown of our economy. Many people believe the worst is over, that we will not see further decline and that in early to mid-2010 there should be signs of growth. But even if this is accurate, it is vulnerable to any kind of economic shock. Withdrawing public sector investment now could significantly jeopardise future growth and, in fact, extend the recession.

Kevin Rowan Regional Secretary – Northern TUC