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UK budget to tackle wrong sort of growth

Wednesday, March 19, 2014 - 03:03

Mar 19 - The UK economy may be recovering faster than expected but the government won’t abandon its tough plan to fix the public finances. Joanna Partridge reports on Britain’s latest budget proposals.

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UPSOUND "Ironing board covers, we've sold about 25 million of these over the last 10 or 15 years." He built an international empire from his basement. Now John Mills - who founded consumer products brand JML - is focussing on the pound. He believes sterling is too strong and is chairing The £ Campaign. It wants the pound to be allowed to fall, to boost GDP and reduce unemployment. SOUNDBITE: John Mills, JML Chairman and Chair of The £ Campaign, saying (English): "It's manufacturing which is the main primary driver of exports and we need more manufactured goods to be able to pay for the imports we want. You have to make it really profitable, and the only way of doing that is to get the cost base in the UK right down and the only way of doing t hat is to have a much lower exchange rate, probably a third lower than we've got at the moment. Manufacturing as a proportion of GDP which was about a third in the 1970s is now barely 10%." He's previously donated millions to the opposition Labour party. Now he wants the government to listen to alternatives. With elections in just over a year it just might be more willing to listen. Finance Minister George Osborne certainly had voters in mind when he presented his annual budget plan. SOUNDBITE: George Osborne, British Finance Minister, saying (English): "We're putting Britain right, but the job is far from done. Our country still borrows too much, we still don't invest enough, export enough, or save enough." Osborme's been boosted by the recovery. It's been stronger than expected and Britain's forecast to grow quicker this year than many other developed economies. But - the government's still sticking to austerity to reduce the budget deficit. The budget includes a higher income tax threshold, cheaper beer and a £7 billion package to cut manufacturers' energy bills. He's also keen to increase exports. SOUNDBITE: George Osborne, British Finance Minister, saying (English): "Britain's got 20 years of catching up to do, so today we back businesses which invest and export. Yes, manufacturing is growing again, as my honourable friend for Pendle just reminded us, and jobs are being created across the country." PTC It's no surprise that hardly any of these products are manufactured in the UK. British firms such as JML say they'd like to export more which is made in Britain. The government also wants to rebalance the economy back towards more manufacturing. But there are also concerns the strength of the pound could any hopes of exports boosting the recovery. The government is doubling the amount of lending available to exporters to £3 billion. But making the economy less reliant on the service industry will take time, says Tom Vosa from National Australia Bank. SOUNDBITE: Tom Vosa, Head of Market Economics Europe, National Australia Bank, saying (English): "We were told in 2008 we'd have a rebalanced economy, one more reliant on net export growth and business investment, that hasn't materialised. I think it's very hard to rebalance an economy, even over a six-year period, we haven't seen much movement in that direction." There are also concerns Britain's experiencing the wrong kind of growth. Rising house prices and consumer spending do little to reduce debt.

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UK budget to tackle wrong sort of growth

Wednesday, March 19, 2014 - 03:03