GEORGE OSBORNE AND THE POUND SHOP

My last post concluded with an expression of concern about the UK becoming the economic equivalent of a "Pound Shop", and I shall probe this comparison further today, but first some reference must be made to those "Events", dear boys and girls.

I refer, of course, to "News of the World's End" - and having purchased yesterday's final edition shall allude to this further -together with the re-entry of the "C-Word", or "Corruption", into the British political lexicon. Needless to say, some will feel that the four letter C-word may best describe some of the parties involved, but this blog won't devalue itself by resorting to such language.

It will, nevertheless, remind readers that it was George Osborne, as shadow chancellor, who recommended to David Cameron the appointment of Andy Coulson as his party's head of communications, following the departure of the latter from the News of the World. Readers should also be aware that Mr Osborne's judgement in the choice of some of his friends is no better, and possibly worse, than that of the Prime Minister. The role of a former Eton friend in the 2008 "Yachtgate Affair" is a case in point.

Indeed, I would strongly caution both the Prime Minister and the Chancellor of the Exchequer against the appointment of people they might think of as friends to positions of power, and opt instead for relationships with colleagues of the kind described by former Conservative deputy prime minister Lord Heseltine in BBC Radio 4's "Meeting Myself Coming Back" series.

Returning to the currency issue, yesterday's News of the World did in fact carry a rather good article on the financial advantages of holidaying in Blackpool this Summer: something the Osborne family might like to consider. The particular reason for Blackpool being an increasing destination of choice is the weakness of the pound, particularly against the Euro.

The weakness of the pound is, however, very much a double-edged sword where the British economy is concerned because of our heavy reliance upon imports. Even manufacturing, widely regarded as being a beneficiary of the present situation, is disadvantaged because the raw materials and components of production are increasingly purchased abroad.

Moreover, the situation is made worse because much of Britain's manufacturing amounts to little more than assembly, something to which the Chancellor and Business Secretary Vince Cable should attend more. In effect, much of the UK is now the branch office/plant economy once used to describe the fate of the West Midlands.

The response of Mr Osborne and his colleagues to "re-balancing the economy" seems to consist mainly of policies to re-stimulate the construction sector, albeit that funding for projects - such as some grants made through the Regional Growth Fund (of which Lord Heseltine is Chairman) - is dressed up as support for manufacturing. The identification of "growth" with the development of greenfield sites is also reminiscent of planning policy during the Thatcher governments.

In short, much of the Coalition's efforts to date on economic policy hark back to the major regional infrastructure and construction programmes of the second half of the twentieth century. These palpably failed to support endogenous productive enterprise, and ultimately led to the retreat from these activities which characterised the New Labour regime in the first decade of the present millennium.

Instead, the Coalition should be focused on the creation of an added-value economy with a currency which reflects this. The nearest approximation to this economic state of affairs is Germany, and, notwithstanding the very real problems of the Eurozone, the relative strength of the Euro compared to UK Sterling reflects this situation. As noted in an earlier post, the Euro also has the advantage of its reserve currency status.

So what should the Chancellor of the Exchequer do about the Great British "Pound Shop"? Government policy should recognise that whilst bargain basements do have a role, these do not provide a model for sustainable economic development, as evidenced in any UK high street. The Chancellor must, therefore, act against practices within the financial sector which are currently undermining the value of UK plc, at the cost of making London less attractive to certain types of speculator.

Whether the present incumbent of Number 11 is up to this task is the question. I still favour "Big Beast" Ken Clarke for the role of chancellor. The sadly disgraced David Laws might have been up to the job, but probably not (again sadly) Vince Cable, for reasons I shall almost certainly cover in a future post. Ironically, however, failure on the current Chancellor's part could render British membership of the Euro a real option.